FIFO/LIFO Costing on the Inventory Adjustment Worksheet
You enter an inventory adjustment worksheet that includes an adjustment for an item that uses on FIFO or LIFO costing. NetSuite recalculates costs for those items using average costing, not FIFO/LIFO.
For example, if you do not receive and build an item prior to fulfilment, the item can become underwater. You fulfill and invoice an item in January. You receive and build the item in February. Costs are understated for January, but overstated for February.
When the inventory level is negative, costs are understated because NetSuite estimates the cost based on the last transaction cost while above water. When inventory goes back above water, a cost adjustment accounts for the period of costing to bring inventory to an above water state. This results in NetSuite reports showing understated or overstated costs during these two periods.
When the cost is calculated using Average costing, the worksheet sells the items and then buys them back based on the cost input. When this happens, all FIFO/LIFO history is lost.
Best Practices
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Use the inventory adjustment worksheet only for items that do not use the FIFO or LIFO costing methods.
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Avoid using the inventory adjustment worksheet for an item that is underwater. In such a case, the worksheet is used to create links to the negative items.
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Use the Inventory Count page for updating the physical count, rather than an inventory adjustment worksheet. You can also use an inventory adjustment.
For more information, see Inventory Adjustments.