Understanding Inventory Adjustments for Raw Materials and Resale Goods

You must run the inventory inflation adjustments for raw materials annually at year end. The processes are based on these assumptions:

• The stock of raw materials or resale products existing at the end of the balance is adjusted to its replacement cost to the specified date.

• The stock of raw materials must be set up in the system by Method 02 (weighted average cost) as the primary costing method.

  Goods must be valued by the weighted average cost as required by government regulations.

• The replacement cost calculation is treated differently for domestic and imported origin raw material or resale products.

• All companies define the business year as January through December.