- You maintain the Perpetual Cost Method Moving Average for an externally procured material.
- You purchase this material always for the same price of X,XX LC (X,XX represents the purchase price, LC stands for Local Currency).
The same cash discount of Y% (Y represents the percentage amount) was applied for the respective payments.
- You expect that the inventory cost would never drop under or rise above the purchase price minus the cash discount: X,XX LC - Y %= lowest inventory cost.
- Yet, you notice that the Goods Receipt/Invoice Receipt Clearing (GR/IR) run has caused the inventory cost to drop lower than this expected amount in period MMM.YYYY (MMM.YYYY represents the accounting period).
SAP Business ByDesign
Reproducing the Issue
- In the Inventory Valuation work center navigate to the Master Data view and here to the Materials subview.
- In the Find field type in the material ID and press Go.
- Select the respective material - business residence combination.
- Press View Cost History.
- Navigate to the respective period MMM.YYYY.
- You notice that the Business Transaction of type Goods Receipt/ Invoice Receipt Clearing caused the inventory cost to drop lower than the material purchase price minus the applied cash discount.
In general, the inventory cost of an externally procured material with the moving average cost method is being updated either by Goods Receipts from Supplier or by the GR/IR clearing run considering purchase order-related processes of goods receipt and invoice receipt.
For the GR/IR run ONLY the proportional variation still covered by the inventory quantity is calculated for the inventory.
This is intended to guarantee that the inventory cost is correct. The remainder of the variances is included in the price differences, meaning they are being directly posted to the profit and loss accounts defined for price differences.
This becomes significant when the GR/IR clearing run has to consider numerous clearings of goods receipts and invoice receipts for which price differences have been detected. For each clearing the GR/IR clearing run considers the existing stock on the day of the run.
This means that the value of this same stock is being repeatedly reduced causing the inventory cost to drop much lower than expected.
The GR/IR clearing run has not only an affect on the postings of the selected period but also on the values that were posted after this period. This way the inventory cost can drop even more.
It is recommended to post consumptions which reduce the inventory quantity only after the GR/IR clearing run.
It should also be ensured that repeated clearings are not be performed on the same inventory quantity as this can result in a highly reduced inventory cost but also a highly inflated inventory cost (in case of positive price differences detected by the GR/IR clearing run).
This is, however, not always feasible.
Then it is possible to exclude certain price differences from being capitalized on the material/Inventory Ledger:
- In the Business Configuration, find the Generally Accepted Accounting Principles Fine Tune activity, either from the Overview or via the Activity List of the Implementation project.
- Select the Posting Control Profiles for Procurement Processes link.
- To edit the settings, you need to add a new Posting Control Profile by copying the existing profile: Press Copy.
- Enter a profile ID starting with Z and an appropriate description.
- Navigate to the Procure to Stock tab.
- Here you can deselect all the price differences which shall not be capitalized anymore on the inventory cost, e.g. 1- Cash Discount.
- Press Save and Close.
- Now click the Generally Accepted Accounting Principles link.
- Select your newly created Posting Control Profile for all the relevant Accounting Principles.
- Press Save and Close.
The price differences between goods receipt value and invoice receipt value will now be posted to an Inventory Difference account.
From now on these difference will have to be manually posted on the respective balance sheet accounts at the end of the accounting period.
2621145- GR/IR Clearing is Posting to Purchase Price Difference Account
1911776- Using the moving average cost for material valuation
Moving Average, Purchase Price Difference, GR/IR Clearing , KBA , SRD-FIN-INV , Inventory , How To