What is LIFO valuation procedure in SAP FIN-BAC-INV - Inventory Accounting?

SAP Term: LIFO valuation procedure

• Component: FIN-BAC-INV

• Component Name: Inventory Accounting

• Description: Method of valuating similar inventory assets which assumes that the most recently acquired assets are disposed of first. Acquisition of new inventory does not affect the value of older inventory. When prices are rising, the LIFO method avoids overvaluation of older inventory and the creation of inventory profits. There are two types of LIFO valuation: Quantity-based Value-based

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• Key Concepts: 
  LIFO (Last In, First Out) valuation procedure is a method of inventory valuation used in SAP's FIN-BAC-INV Inventory Accounting component. It is based on the assumption that the last items purchased are the first items sold. This method is used to determine the cost of goods sold and the value of inventory on hand. 
  
  How to use it: 
  In order to use the LIFO valuation procedure, you must first set up a valuation class in the system. This class will define the parameters for how the LIFO valuation procedure will be applied. Once this is done, you can assign this class to each material in your inventory. When you post goods receipts and goods issues, the system will automatically calculate the cost of goods sold and inventory value based on the LIFO valuation procedure. 
  
  Tips & Tricks: 
  When setting up a valuation class for LIFO, it is important to consider how long you want to keep track of your inventory history. The longer you keep track of your inventory history, the more accurate your cost of goods sold and inventory value calculations will be. 
  
  Related Information: 
  For more information about setting up a valuation class for LIFO, please refer to SAP Help documentation at https://help.sap.com/viewer/product/SAP_ERP_Central_Component/6.0/en-US/f3d8f9a7c2b04d8a9f3e7c2b8e9f3d8f.html