Valuation Structures and Valuation Units

Valuation structures and valuation units define the granularity level at which the cost of an item is maintained. You can maintain the cost calculation at any combination of the Project, Task, Lot ID, Serial ID, and Item levels.

The average cost for an item can span more than one inventory organization. Standard Cost Planning supports items assigned with a cost profile that uses a valuation structure at the Inventory Organization or Cost Organization level. It doesn't support costs maintained in a more granular valuation structure, such as at the Subinventory or Lot level.

Valuation Structures

A valuation structure defines the level at which item costs are maintained. It contains the costing attributes that are used to segregate costs. Valuation structure is one of the attributes of an item cost profile. When a cost profile is assigned to an item, the cost processor uses the valuation structure of the cost profile to determine how to calculate the item cost.

The flexfield structure defines the costing attributes that are enabled for a valuation structure. The costing attributes include Cost Organization (mandatory), Inventory Organization, Subinventory, Locator, Country of Origin, Project, Task, Lot, Serial, and Grade. The costing attributes must be consistent with the inventory attributes, and can't be at a lower level of granularity than the inventory on hand.

The lowest node of the costing attributes in valuation structure determines the level at which the cost is maintained. For example, if the item cost would be different for different inventory organizations, then the costing attributes of the valuation structure can be at the Cost Organization - Inventory Organization level. However, if the item needs to be costed with the same cost for all inventory organizations, then the costing attributes of the valuation structure can be at the Cost Organization level.

Similarly, if the item cost needs to be maintained for each subinventory or locator, then the costing attributes of the valuation structure can be at Cost Organization – Inventory Organization – Subinventory or Cost Organization – Inventory Organization – Subinventory – Locator levels respectively.

Note:

If you set the cost method as standard cost or periodic average cost in the cost profile, then the costing attributes of the valuation structure set on the cost profile can be only at the Cost Organization level or the Cost Organization – Inventory Organization level. For these cost methods, you can’t maintain costs at a more granular level.
The Project and Task costing attributes are applicable only if you have opted-in for and set up Project-Driven Supply Chain.
After transactions are performed against a valuation structure, you must not change the valuation structure by adding or deleting costing attributes. Doing so could cause unpredictable results, especially if some transactions are already costed using the original valuation structure.

Valuation structures can be of these types:

Asset - An asset valuation structure is used for receipts of items that are valued as inventory on the balance sheet. A cost profile with an asset valuation structure is an asset cost profile.
Expense - An expense valuation structure is used to account for receipts to inventory of items that are expensed rather than treated as assets on the balance sheet. A cost profile with an expense valuation structure is an expense cost profile.
Consigned - A consigned valuation structure is used to account for consigned inventory transactions. A cost profile with a consigned valuation structure is a consigned cost profile.

Create a Valuation Structure

You can define the level at which items costs must be calculated in the application by creating valuation structures and setting them on the cost profiles.

In the Setup and Maintenance work area, go to the following:
- Offering: Manufacturing and Supply Chain Materials Management
- Functional Area: Cost Accounting
- Task: Manage Valuation Structures
Click Create in the Actions menu to create a valuation structure.
In the Create Valuation Structure dialog, select the Valuation Structure Set.

Because valuation structures are defined at the set level, they have the advantages of set-level definitions for sharing and segregation.
Select the Valuation Structure Type.

The applicable types are Asset, Expense, and Consigned.
Enter a code and an optional description for the valuation structure.
Select the Valuation Structure Mode.

The mode determines whether the valuation units are created manually, or automatically by the cost processor, or both. The applicable values are:
- Auto - Use this option for valuation structures that tend to be unlimited and unknowable in advance, such as lot IDs and serial IDs. The cost processor automatically creates a new valuation unit code as transactions for new lot IDs or serial IDs are processed. For consigned valuation structures, the mode can only be Auto.
- Manual - Use this option for valuation structures that tend to have a finite list of possibilities, such as subinventories. When you use this option, the transactions that don't meet one of the expected possibilities will trigger an error condition.
- Both auto and manual - Use this option for cases where you can either define the anticipated valuation units before they enter the processor, or you can let the processor automatically create the valuation units if you haven't already created them manually.
Select the appropriate Flexfield Structure.
Click Save and Close.

Valuation Units

A valuation unit defines a set of values for the costing attributes defined in the corresponding valuation structure. For example, valuation unit V1 comprises cost organization A and lot L1, and valuation unit V2 comprises cost organization B and lot L2. The processor calculates two different costs for an item, a cost for valuation unit V1 and a cost for valuation unit V2.

The cost processor automatically generates the valuation units if the valuation structure mode is set to Auto or Both auto and manual. You can also manually create valuation units under a valuation structure by using different combinations of the corresponding costing attributes.

Based on the valuation structure type, the valuation unit can be an asset valuation unit, expense valuation unit, or consigned valuation unit.

Create a Valuation Unit

You can create valuation units for a cost organization and cost book combination to define the set of values for the costing attributes that are used to cost the items.

In the Setup and Maintenance work area, go to the following:
- Offering: Manufacturing and Supply Chain Materials Management
- Functional Area: Cost Accounting
- Task: Manage Valuation Units
Click Create in the Actions menu to create a valuation unit.
On the Create Valuation Unit page, select the Cost Organization and Cost Book.

The valuation unit is used to cost the items in this cost organization and cost book combination.
Enter a name and an optional description for the valuation unit.
Select the Valuation Structure Code that the valuation unit must use.
Click Actions > Add Row and enter the segment values.

You can add multiple rows to define the segment values for which the valuation unit will be applicable.
Click Save and Close.