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Inventory Valuation and Fixed Assets. Lawson User Association AGM. Helen Davis Solution Design helen.davis@au.lawson.com. Fixed Assets. Register Asset. Record Asset . Define Depreciation. Activate Asset. Register Asset. Record Asset . Define Depreciation. Activate Asset.

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inventory valuation and fixed assets

Inventory Valuation and Fixed Assets

Lawson User Association AGM

Helen Davis

Solution Design helen.davis@au.lawson.com

slide3

Register Asset

Record Asset

Define Depreciation

Activate

Asset

slide4

Register Asset

Record Asset

Define Depreciation

Activate

Asset

slide5

- xxxxxxxx -

- xxxxxxxx -

- xxxxxxxx -

General ledger

Register Asset

Purchase Receipt

Accounts payable

Supplier

invoice

Invoices

1. From entry of supplier

invoices or journal entries

2. Manual entry

in assets book

Asset book

3. Activation of

assets in progress

Project accounting

slide6

Register Asset

Record Asset

Define Depreciation

Activate

Asset

slide7

Straight line

Asset book

Declining

Internal

Book

Tax Book

User defined

Depreciation types

Depreciation types

Depreciation types

Define Depreciation

  • External
  • Internal
impairment of assets ias36
Impairment of Assets – IAS36
  • What

the value of a tangible fixed asset in the balance sheet (carrying amount) cannot exceed its estimated economic worth (recoverable amount).

  • When

If there is any indication on the balance sheet date that a tangible fixed asset has diminished in value, the company should analyze whether the fixed asset must be impaired. Otherwise, the analysis must be done as a part of the company’s year-end routines.

Companies must impair their fixed assets even when the recoverable amount is only temporarily lower than the carrying amount.

impairment of assets ias3614
Impairment of Assets – IAS36
  • What

IAS 36 applies to all fixed assets in the following categories:

    • Land
    • Buildings
    • Machinery and equipment
    • Investment property carried at cost
    • Intangible assets
    • Goodwill
    • Investments in subsidiaries, associates and joint ventures
    • Assets carried at revalued amounts under IAS 16 and 38.
  • Consequently, IAS 36 does not apply to:
    • Inventories (see IAS 2)
    • Fixed assets arising from construction contracts (see IAS 11)
    • Deferred tax assets (see IAS 12)
    • Assets arising from employee benefits (see IAS 19)
    • Financial assets (see IAS 39).
impairment of assets ias3615
Impairment of Assets – IAS36
  • How

1. Identify the Recoverable Amount

    • Fair value less selling costs (net selling price); or
    • Present Value of future cash flows
    • Calculations done outside of M3

2. Update Recoverable Amounts in M3

    • Update manually in FAS003; or
    • Use Annual Run Open to calculate replacement cost based on cost of capital method held in M3.

3. Run a report identifying assets where carrying value > recoverable amount

slide19

If the extraordinary depn value is entered, the replacement value will be calculated as the remaining value less extraordinary depreciation.

If you enter a replacement value, the extra depreciation amount is calculated automatically as the residual value less the replacement value.

slide20

The field indicates how depreciation will continue when an extraordinary depreciation has been made.

Alternatives

1 = Depreciations continue in the same way as before. This means that the fixed asset will be fully depreciated faster than it would have been without extraordinary depreciation.

2 = The depreciation will continue as long as planned, but with a lower amount each year. The extraordinary depreciation is stored in a specific value type.

inventory valuation23
Inventory Valuation
  • What:
    • Lower of Cost and NRV
  • Why:
    • AASB 102
    • IAS 2
    • GAAP
  • When:
    • Anyone preparing General

Purpose Financial reports

(other than agricultural producers &

Commodity traders)

  • How in M3:
inventory revaluation cas180
Inventory Revaluation – CAS180
  • Use CAS180 to create an inventory valuation “round”
  • Creating:
    • Valuation proposal showing FIFO, average, actual and recommended inventory amounts
    • Print of sales value, adjusted sales value, replacement cost and recommended actual value
    • Variance Print categorised by facilities, product groups, accounting rules etc
    • Accounting proposal with proposed adjustments to inventory
slide25

Use CAS025 to define settings for different inventory groups by:

- Division

- Facility

- Item Group

- Item Number

slide26

The field indicates which method to be used for calculating the acquisition cost of the inventory.

Alternatives

1 = FIFO

2 = LIFO

3 = Average.

slide27

Price list indicates the price list with manually entered inventory values for items.

You can choose to automatically update the inventory value of the item in the price list if you enter an inventory value manually in CAS196/E - Inventory Valuation. Enter Manually

slide28

The Obsolete field indicates the percent of the inventory value considered as obsolete during inventory valuation.

slide29

If you choose to use the Net Sales Method

The search path indicates the sequence in which the net sales value is searched.

Alternatives

1 = From the price list

2 = From the item's basic data

3 = From preferred acquisition cost method.

Example:

Value 21 means that the price is first searched for in the item file. If there is no value there, the search continues in the specified price list.

slide30

If you choose to use the Net Sales Method

The Percent Share Inventory Value field indicates the percent of the price from the price list or item file used when calculating inventory value.

slide32

If you choose to use the Replacement method

  • The field indicates how the replacement cost is defined, with or without applying a purchase costing model.
  • Alternatives
  • 0 = No replacement cost.
  • 1 = Purchase price from the agreement file
  • 2 = Purchase price from the item/supplier file
  • 3 = Purchase price from the item master file.
  • 4 = Average cost.
  • 5 = Price on the latest invoice in the purchasing statistics
  • = The lowest alternative of 4 and 5.
  • = Replacement cost is to be set equal to a specific costing type and subtotal
slide34

Every inventory item has the FIFO, LIFO, Net Sales and Replacement Sales value calculated for it.

slide36

Depreciation is calculated by forecasting future demand based on historical usage split into “buckets”.

Depreciation for each bucket is calculated as follows:

(Quantity per bucket) x (Unit price) x (Percentage per bucket)