What is Parallel Inventory Valuation?
Multiple valuation approaches of inventory and cost of goods manufactured is the latest business requirement to meet the IFRS requirement and multiple valuations with respect to transfer pricing requirements, in system we can have following parallel valuation approaches:
- Legal valuation
- Group valuation
- Profit centre valuation
Valuation of inventory in SAP system normally available in only one currency i.e. local currency (company code currency) with application of material ledger the inventory valuation can be made available in two more additional currencies.
After activation of multiple currencies for every material master the inventory value and prices can be made available in three currencies.
This feature is very useful for getting the inventory value in group currency and in any hard currency in parallel to the local currency.
Multiple Valuation and Transfer Pricing Concepts:
Parallel Inventory Valuation approach for multiple valuations using material ledger would be as under;
- Legal valuation would be required for preparing the financials for legal and statutory purpose.
- Group valuation would be required for preparing the consolidated financials at a group level.
- Profit centre valuation would be required for deriving the profitability of each profit centre, in order to do this it also require facility of transfer pricing. It refers to the treatment of each profit centre as independent entity within the company code.
Any transfer of material from one profit centre to other will be with a mark up value, so that the sender profit centre will get profit out of the supply and the receiver profit centre can consider the marked up cost as real purchase cost for received materials.
For further details and an in-depth guide, please download the PDF given below.
- Preliminary study of the existing business process in terms of functional and technical aspects is required for preparation of “Preliminary Study Report”(PSR)
- 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
- 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)
- Measurement of performance w.r.t. agreed KPIs as a part of “Business Value Realization Report” (BVRR)
For further details and correspondence, please send an inquiry to Infocost.