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Material valuation is one of the ³must-known´ topics for all SAP Material Management
(MM) learners, especially for MM consultant, FI consultant, and FI & MM administrator in a
company. In a company, the material valuation procedure must be determined together with
accounting department. It determines, among other things, how a material transaction
recorded in accounting journal.

The first thing that we should know in material valuation is the Valuation Area. It is the
organizational level at which material is valuated. In SAP R/3 system, there are two possible
organizational level at which material is valuated:

1.Ê Plant.
When stock is valuated at plant level, we can valuate a material in different plants at
different prices. Valuation must be at this level in the following cases:

„Ê If we want to use the application component Production Planning (PP) or

Costing
„Ê If our system is a SAP Retail system

2.Ê Company Code.

When stock is valuated at company code level, the valuation price of a material is the
same in all of a company's plants (that is, in a company code).

SAP recommends that we set material valuation at Plant level.

We can define the valuation level in configuration process with T-Code SPRO and will be
valid for whole client. The configuration process can be seen at these screen shots:
If we¶ve never defined this before, the ³Valuation Level´ screen will be editable, but in this
example it is not editable because it has been defined before. Defining the valuation level in
Configuring is a fundamental setting, and is very difficult to reverse.

The transactions in Inventory Management that can affect the valuation price of material in
accounting record (depending on the type of price control) are:

îÊ [oods Receipts.
îÊ [oods Issues.
îÊ Transfer Postings (for example, a stock transfer between two plants or a transfer
posting from one material to another).
 îÊ Postings in Invoice Verification.

We must create the accounting data for each valuation area for all valuated materials so the
above transactions can be carried out for those materials. In the accounting view of material
master data, we can get an overview of the present valuation.

Valuation of goods receipts depends on the price control procedure we set in the material
master record. In the R/3 System, material valuation can be carried out according to the
moving average price procedure (V price) or the standard price procedure (S price).

In the •

 procedure ( 

 
 ), the system carries out all stock postings
at a price defined in the material master. Variances are posted to price difference accounts.

In the 

 
   procedure (  
 
 ), the system valuates goods
receipts with the purchase order price and goods issues with the current moving average price.
The system automatically calculates the latter upon every goods movement by dividing the
total value by the total stock quantity. Differences between the purchase order price and the
invoice are posted directly to the relevant stock account if there is sufficient stock coverage.