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[IMP] Inventory valuation method (FGI review)
Spec: - In accounting doc remove the last three topics and replace them by the memento. They all head to the old memento. - add links to new memento in following page: https://www.odoo.com/documentation/user/9.0/inventory/routes/strategies/removal.html - The following doc topic "What costing method should you use? (standard, average, fifo)" heads to the former memento https://www.odoo.com/documentation/functional/valuation.html#costingmethod This memento does not answer this complex question at all actually. Please remove it. - The introduction text should be before "Costing Method" title: Every year your inventory valuation has to be recorded in your balance sheet. This implies two main choices: the way you compute the cost of your stored items (Standard vs. Average vs. Real Price); the way you record the inventory value into your books (Periodic vs. Perpetual). - New definition for FIFO (right side): For Real Price (FIFO, LIFO, FEFO, etc), the costing is further refined by the removal strategy set on the warehouse location or product's internal category. The default strategy is FIFO. With such method, your inventory value is computed from the real cost of your stored products (cfr. Quantitative Valuation) and not from the cost price shown in the product form. Whenever you ship items, the cost price is reset to the cost of the last item(s) shipped. This cost price is used to value any product not received from a purchase order (e.g. inventory adjustments). FIFO is advised if you manage all your workflow into Odoo (Sales, Purchases, Inventory). It suits any kind of users. - Add definition for LIFO method: For Real Price (FIFO, LIFO, FEFO, etc), the costing is further refined by the removal strategy set on the warehouse location or product's internal category. The default strategy is FIFO. With such method, your inventory value is computed from the real cost of your stored products (cfr. Quantitative Valuation) and not from the cost price shown in the product form. Whenever you ship items, the cost price is reset to the cost of the last item(s) shipped. This cost price is used to value any product not received from a purchase order (e.g. inventory adjustments). LIFO is not permitted outside the United States. - New definition for Average Price: The Average Price method recomputes the cost price as a receipt order has been processed, based on prices defined in tied purchase orders: FORMULA (see here attached) The average cost does not change when products leave the warehouse. From an accounting point of view, this method is mainly justified in case of huge purchase price variations and is quite unusual due to its operational complexity. Your actually need a software like Odoo to easily keep this cost up-to-date. This method is dedicated to advanced users. It requires well established business processes because the order in which you process receipt orders matters in the cost computation. - In Continental memento: If the stock value decreased, he makes it upside down. -> If the stock value decreased, the "Inventory" account is credited and the "Inventory Variations" debited. - Remove "[1] products leaving the stock have no impact on the average price." Now added to average price definition. - At the botton, add links to following docs: What is a removal strategy (FIFO, LIFO, FEFO, Specific Indentification): https://www.odoo.com/documentation/user/9.0/inventory/routes/strategies/removal.html Impact on the average price valuation when returning goods: https://www.odoo.com/documentation/user/9.0/accounting/others/inventory/avg_price_valuation.html How to integrate landed costs in the cost of the product? https://www.odoo.com/documentation/user/9.0/inventory/routes/costing/landed_costs.html
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‎accounting/others/inventory.rst

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:titlesonly:
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inventory/avg_price_valuation
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What is the impact of standard price, average price, FIFO and LIFO? <https://www.odoo.com/documentation/functional/valuation.html#costingmethod>
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How is periodic inventory valuation working? <https://www.odoo.com/documentation/functional/valuation.html#periodicinventoryvaluation>
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What is the impact of perpetual inventory valuation? <https://www.odoo.com/documentation/functional/valuation.html#perpetualinventoryvaluation>
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../../../inventory/management/reporting/valuation_methods_continental
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../../../inventory/management/reporting/valuation_methods_anglo_saxon
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‎inventory/management/reporting/valuation_methods_anglo_saxon.rst

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How to do an inventory valuation? (Anglo-Saxon Accounting)
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==========================================================
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Costing Method
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==============
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Every year your inventory valuation has to be recorded in your
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balance sheet. This implies two main choices:
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- the way you record the inventory value into your books
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(periodic vs. Perpetual).
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Costing Method
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==============
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.. rst-class:: alternatives doc-aside
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Standard Price
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- 12
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- +4*€16
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- €144
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* - Deliver 10 Products [#average-removal]_
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* - Deliver 10 Products
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- €12
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- 2
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- | -10*€12
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- +2*€6
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- €36
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The **Average Price** method recomputes the cost price as a
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receipt order has been processed, based on prices defined in
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tied purchase orders. This method is mainly justified in case
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of huge purchase price variations and is quite unusual due to
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its operational complexity. Your actually need a software like
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Odoo to keep this cost up-to-date.
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The **Average Price** method recomputes the cost price as a receipt order
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has been processed, based on prices defined in tied purchase orders:
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FORMULA (see here attached)
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This method is dedicated to advanced users. It requires well
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established business processes because the order in which you
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process receipt orders matters in the cost computation. Moreover
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if you mistakenly process such an order, there is no way to
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reset the cost price at its initial value.
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The average cost does not change when products leave the warehouse.
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From an accounting point of view, this method is mainly justified in
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case of huge purchase price variations and is quite unusual due to its
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operational complexity. Your actually need a software like Odoo to
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easily keep this cost up-to-date.
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This method is dedicated to advanced users. It requires well established
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business processes because the order in which you process receipt orders
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matters in the cost computation.
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FIFO
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.. rst-class:: values-table
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- +2*€6
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- €44
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For **Real Price** (FIFO, LIFO, FEFO, etc), the costing is
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further refined by the removal strategy set on the warehouse
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location or product's internal category. The default strategy
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is FIFO. With such method, your inventory value is computed
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from the real cost of your stored products (cfr. Quantitative
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Valuation) and not from the cost price shown in the product
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form. Whenever you ship items, the cost price is reset to the
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cost of the last item(s) shipped. This cost price is used to
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value any product not received from a purchase order (e.g.
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inventory adjustments).
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For **Real Price** (FIFO, LIFO, FEFO, etc), the costing is further
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refined by the removal strategy set on the warehouse location
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or product's internal category. The default strategy is FIFO. With
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such method, your inventory value is computed from the real cost
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of your stored products (cfr. Quantitative Valuation) and not from
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the cost price shown in the product form. Whenever you ship items,
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the cost price is reset to the cost of the last item(s) shipped.
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This cost price is used to value any product not received from a
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purchase order (e.g. inventory adjustments).
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Such a method is advised if you manage all your workflow into
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Odoo (Sales, Purchases, Inventory). It suits any kind of users.
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FIFO is advised if you manage all your workflow into Odoo (Sales,
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Purchases, Inventory). It suits any kind of users.
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LIFO (not accepted in IFRS)
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.. rst-class:: values-table
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- +2*€6
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- €32
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For **Real Price** (FIFO, LIFO, FEFO, etc), the costing is further
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refined by the removal strategy set on the warehouse location
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or product's internal category. The default strategy is FIFO.
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With such method, your inventory value is computed from the
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real cost of your stored products (cfr. Quantitative Valuation)
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and not from the cost price shown in the product form. Whenever
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you ship items, the cost price is reset to the cost of the last
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item(s) shipped. This cost price is used to value any product
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not received from a purchase order (e.g. inventory adjustments).
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LIFO is not permitted outside the United States.
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Odoo allows any method. The default one is **Standard Price**.
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To change it, check **Use a 'Fixed', 'Real' or 'Average' price
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costing method** in Purchase settings. Then set the costing
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.. placeholder
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.. [#average-removal] products leaving the stock have no impact on the average price.
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.. raw:: html
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<hr style="float: none; visibility: hidden; margin: 0;">
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- Price Difference: to set in product's internal category or in product
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form as a specific replacement value
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.. seealso::
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* :doc:`../../routes/strategies/removal`
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* :doc:`../../../accounting/others/inventory/avg_price_valuation`
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* :doc:`../../routes/costing/landed_costs`

‎inventory/management/reporting/valuation_methods_continental.rst

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How to do an inventory valuation? (Continental Accounting)
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==========================================================
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Costing Method
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==============
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Every year your inventory valuation has to be recorded in your
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balance sheet. This implies two main choices:
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- the way you record the inventory value into your books
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(periodic vs. Perpetual).
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Costing Method
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==============
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.. rst-class:: alternatives doc-aside
2020

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Standard Price
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- 12
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- +4*€16
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- €144
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* - Deliver 10 Products [#average-removal]_
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* - Deliver 10 Products
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- €12
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- 2
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- | -10*€12
@@ -103,18 +103,20 @@ Average Price
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- +2*€6
104104
- €36
105105

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The **Average Price** method recomputes the cost price as a
107-
receipt order has been processed, based on prices defined in
108-
tied purchase orders. This method is mainly justified in case
109-
of huge purchase price variations and is quite unusual due to
110-
its operational complexity. Your actually need a software like
111-
Odoo to keep this cost up-to-date.
106+
The **Average Price** method recomputes the cost price as a receipt order
107+
has been processed, based on prices defined in tied purchase orders:
108+
FORMULA (see here attached)
112109

113-
This method is dedicated to advanced users. It requires well
114-
established business processes because the order in which you
115-
process receipt orders matters in the cost computation. Moreover
116-
if you mistakenly process such an order, there is no way to
117-
reset the cost price at its initial value.
110+
The average cost does not change when products leave the warehouse.
111+
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From an accounting point of view, this method is mainly justified in
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case of huge purchase price variations and is quite unusual due to its
114+
operational complexity. Your actually need a software like Odoo to
115+
easily keep this cost up-to-date.
116+
117+
This method is dedicated to advanced users. It requires well established
118+
business processes because the order in which you process receipt orders
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matters in the cost computation.
118120

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FIFO
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.. rst-class:: values-table
@@ -156,19 +158,18 @@ FIFO
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- +2*€6
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- €44
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For **Real Price** (FIFO, LIFO, FEFO, etc), the costing is
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further refined by the removal strategy set on the warehouse
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location or product's internal category. The default strategy
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is FIFO. With such method, your inventory value is computed
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from the real cost of your stored products (cfr. Quantitative
164-
Valuation) and not from the cost price shown in the product
165-
form. Whenever you ship items, the cost price is reset to the
166-
cost of the last item(s) shipped. This cost price is used to
167-
value any product not received from a purchase order (e.g.
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inventory adjustments).
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For **Real Price** (FIFO, LIFO, FEFO, etc), the costing is further
162+
refined by the removal strategy set on the warehouse location
163+
or product's internal category. The default strategy is FIFO. With
164+
such method, your inventory value is computed from the real cost
165+
of your stored products (cfr. Quantitative Valuation) and not from
166+
the cost price shown in the product form. Whenever you ship items,
167+
the cost price is reset to the cost of the last item(s) shipped.
168+
This cost price is used to value any product not received from a
169+
purchase order (e.g. inventory adjustments).
169170

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Such a method is advised if you manage all your workflow into
171-
Odoo (Sales, Purchases, Inventory). It suits any kind of users.
171+
FIFO is advised if you manage all your workflow into Odoo (Sales,
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Purchases, Inventory). It suits any kind of users.
172173

173174
LIFO (not accepted in IFRS)
174175
.. rst-class:: values-table
@@ -210,6 +211,18 @@ LIFO (not accepted in IFRS)
210211
- +2*€6
211212
- €32
212213

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For **Real Price** (FIFO, LIFO, FEFO, etc), the costing is further
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refined by the removal strategy set on the warehouse location
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or product's internal category. The default strategy is FIFO.
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With such method, your inventory value is computed from the
218+
real cost of your stored products (cfr. Quantitative Valuation)
219+
and not from the cost price shown in the product form. Whenever
220+
you ship items, the cost price is reset to the cost of the last
221+
item(s) shipped. This cost price is used to value any product
222+
not received from a purchase order (e.g. inventory adjustments).
223+
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LIFO is not permitted outside the United States.
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213226
Odoo allows any method. The default one is **Standard Price**.
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To change it, check **Use a 'Fixed', 'Real' or 'Average' price
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costing method** in Purchase settings. Then set the costing
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Expenses: Inventory Variations X
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===================================== ===== ======
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If the stock value decreased, he makes it upside down.
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If the stock value decreased, the **Inventory** account is credited
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and te **Inventory Variations** debited.
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.. raw:: html
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.. placeholder
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.. [#average-removal] products leaving the stock have no impact on the average price.
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.. raw:: html
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<hr style="float: none; visibility: hidden; margin: 0;">
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category
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- Inventory: to set as Stock Valuation Account in product's internal category
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.. seealso::
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* :doc:`../../routes/strategies/removal`
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* :doc:`../../../accounting/others/inventory/avg_price_valuation`
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* :doc:`../../routes/costing/landed_costs`

‎inventory/routes/costing.rst

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.. toctree::
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:titlesonly:
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What costing method should you use? (standard, average, fifo) <https://www.odoo.com/documentation/functional/valuation.html#costingmethod>
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costing/landed_costs

‎inventory/routes/costing/fifo_lifo.rst

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‎inventory/routes/strategies/removal.rst

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.. image:: media/removal11.png
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:align: center
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.. seealso::
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* :doc:`../../management/reporting/valuation_methods_continental`
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* :doc:`../../management/reporting/valuation_methods_anglo_saxon`

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