Parallel Currency Inventory valuation (Only for MNC)2018-08-17T14:03:24+00:00

sap-parallel-inventory-valuation-methods-material-management-multiple-valuation-transfer-pricingWhat is Parallel Inventory Valuation?

  • The concept of Parallel Inventory Valuation is very much relevant for Multi National Companies where there is a need to report the financials in Co. Code Currency and in Group Currency.
  • Normally we report the financials in Group currency just by applying the conversion rate at the date of reporting (i.e. Qtr. End or Year End Exchange rate)
  • With this all the other GL Accounts Balances gets converted into the Group currency from Local currency easily without any difficulties, Except the Inventory and Consumption of Inventory GL accounts.
  • Hence we should seek the solution for Inventory and consumption amount in Group currency for reporting purpose. It is explained with the help of an example…

The reason for this can be understood with the help of an Example:

The Inventory balance is NIL on 11th Mar’17 in terms of quantity and value in INR (i.e. Local currency) but it is not NIL in Group Currency, in current practice of conversion.

The Inventory balance is NIL on 11th Mar’17 in terms of quantity and value in INR (i.e. Local currency) and in Group Currency as well, due to the parallel valuation of inventory in USD (i.e. MAP being computed in USD after each transaction same as it is being computed for INR)

The Inventory balance is NIL on 11th Mar’17 in terms of quantity and value in INR (i.e. Local currency) and in Group Currency as well, due to the parallel valuation of inventory in USD (i.e. MAP being computed in USD after each transaction same as it is being computed for INR)

Current Practice of Valuation Proposed Practice of Valuation

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  1. Preliminary study of the existing business process in terms of functional and technical aspects is required for preparation of “Preliminary Study Report”(PSR)
  2. Depending on the PSR following factors would be derived and documented as a part of “Final Study Report” (FSR).
    • Feasibility of solution.
    • Key performance indicators.
    • Effort estimations & timelines.
    • Broad solution approach document
  3. Depending on the broad solution approach document the agreed solution will be implemented by following the regular process of implementation ( i.e. blueprinting of requirement, realization & testing of solution in test system, final preparation for production system and GO Live in production system)
  4. Measurement of performance w.r.t. agreed KPIs as a part of “Business Value Realization Report” (BVRR)

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