SAP Material Valuation Basics - 1
This series of articles give an overview of the determination of valuation levels for materials using the valuation area, and the two possible procedures for material valuation. These articles will also explain:
- The significance of the valuation area
- The function of the valuation class
- Material valuation with the moving average price
- Material valuation with the standard price
In a company, most of the externally procured materials are stored before they are required for production or sales. The warehouse stocks of materials must be updated on a quantity and value basis.
Material Valuation General
In most goods movements in Inventory Management, the stock quantity and therefore also the stock value vary. In goods receipts, the stock value increases; in goods issues, the stock value decreases. The quantity and value of the material stock and the material price (=valuation price) are updated in the material master record. You therefore also need a material master record for warehouse material. The material valuation determines and maintains the stock value of a material. The following formula is used to calculate the stock value:
Stock value = stock quantity * material price
From this formula it follows that the stock value changes when the stock quantity or material price changes.
During the valuation of a goods movement, not only the total value and, if necessary, the valuation price are updated in the material master record, but also the accounts in Accounting. Material valuation demonstrates a connection between Materials Management (MM) and Financial Accounting (FI) because material valuation accesses G/L accounts in Financial Accounting and updates them. Material valuation is essentially controlled by two factors:
- System setting (Customizing)
- Material Master Record
The material valuation is adjusted with SAP R/3 settings to meet the needs of your department. For system configuration, the following questions are defined:
- On which level are materials valuated?
- Which types of goods movements are relevant for valuation?
- Which accounts are posted to during a transaction?
The following sections cover the questions about the valuation level and the settings in the material master record. The movement type determines which types of goods movements are relevant for valuation. The settings for automatic account determination determine which accounts are posted to during a transaction.
Valuation Level
The valuation area is the organizational level at which material is valuated. You can decide whether the valuation area is determined at company code or plant level.
SAP MM Material Valuation Levels
Figure SAP MM Material Valuation Levels
Valuation area = company code
The valuation data of a material is created separately for each company code. The price control and valuation price of a material are valid for each company code. The material is therefore valuated consistently in all plants of a company code.
Valuation area = plant
The valuation data of a material is created for each plant. The price control and valuation price of a material are valid for each plant. The same material can therefore be valuated differently in different plants. SAP recommends that you valuate material at plant level. Valuation at plant level is mandatory if you want to use either the Production Planning or Product Cost Accounting components or if your system is a mySAP Retail system.
Defining the valuation level in Customizing is a fundamental setting, and is very difficult to reverse. (Customizing → Enterprise Structure → Definition → Logistics General→ Define Valuation Level)
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September 26, 2009
Tags: Customizing, Material Master Record, SAP Master Records, SAP Material Management (MM), SAP Material Valuation, SAP MM, Stocks, Valuation Area, Valuation Level Posted in: Material Management (MM), SAP Functional Modules
One Response
Hey ,
Its nice structured flow of articals here i am looking for more on subcontracting scenario, return scenario in MM
i read valuation series only
kaustubh
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