1. Objective and Scope

1.1. Objective of this Operation

The purpose of this document is to explain how to reverse the automatic Inventory Revaluation done by the system in the current period and repost the inventory revaluation in previous period split it into Variable / Fixed / Depreciation in COPA.

1.2. Scope

This procedure is applicable to all WP2 companies.

2. Definitions

See Finance - Glossary

3. Tasks description

3.1. Periodicity

This procedure should be executed in the monthly closure on D2. For December yearly closure, a specific procedure must be followed (see I perform the year-end Inventory revaluation reverse).

At period-end closing, stocks are reevaluated on the 1st day of the month after the closure (calculation of new Standard Cost Estimate).

This revaluation must be transferred to the period of the closing, and split into VC/FC/DEP (Variable Cost / Fixed Cost / Depreciation Cost).

As result, Stock revaluation in the Profit & Loss Statement is done by material / plant / Profit Center (deriving into IECRA) & divided into VC/FC/DEP on the period of the closing, instead of just into VC in the following month.

3.2. Responsibilities

SBS Finance Operations: 

• After calculating and releasing the standard price for period M+1 via CK40N, the revaluation postings are reversed in month M+1 and re-posted in month M, divided into VC/FC/DEP.

Management Accounting Service Unit Expert Costing: 

• Responsible to validate the posting scheme in table ZWFAT151. IS will update this table in the ERP after PE validation.

3.3. I run the inventory valuation reverse

The costing run (CK40N) release generates a revaluation variance (difference between the new and the old standard cost), which is posted as variable cost variance in the new month, and updates the cost of inventory in stock. But this is not the ideal solution:

• Some variances are due to changes in standard fixed cost and depreciation (due to changes in routing or product version, for instance), not just VC, so the standard solution might lead to distortion in Contribution and EBITDA analysis;
• The inventory revaluation is posted on the new month, when group procedures establish having an updated inventory cost at month’s closing;

Therefore, the following actions must be ensured:

1. Maintain posting scheme table: ZWFAT151 (by Management Accounting Service Unit Expert Costing).
2. Processing Stock revaluation reverse: ZWFA100A – always in background.

Which are divided in 3 phases:

• Reverse of Revaluation of stock issued from Costing run (in period M+1)
• Posting on Revaluation of stock into period M (100% VC)
• Split of the revaluation of stock into VC/FC/DEP in period M

3.4. I control the result of the calculation