Introduction to revaluation
In an earlier post I talked about doing physical inventory in Business Central. In this post we will talk about doing item revaluation.
Item revaluation is typically used when you have the need to adjust the cost price that is used to calculate your inventory value. It can be done for a single batch of stock or for the total qty. on hand for a specific item.
Be aware that there might be regulatory provisions that can affect when and how you are allowed to adjust the value of your inventory. So please remember to check the provisions that is valid in your region.
From the Business Central side it is recommend that you run the “Adjust Cost – Item Entries” batch job before you start doing your item revaluation. If you are not familiar with the “Adjust cost – Item Entries” batch job. You can read my post Cost adjustment in Microsoft Dynamics 365 Business Central before you proceed.
You should also be aware that if you needs to revaluation because you get a refund or any kind of compensation from your vendor you should post that through a credit memo instead of using the Item Revaluation process.
What quantity can be revalued?
The quantity that can be revalued is the quantity that is remaining on inventory at a given date. And that can even be calculated back in time if you need to do revaluation of goods that is already sold. That is a very powerful functionality that you need to understand the effect of if you chose to use it.
Let’s look at an example of how this works in Business Central. I have created a new Item with Item No. “1994-W” and Description “LILLEHAMMER Waffel Iron”. As you can see from the Item Ledger Entries below I have made one purchase and one sales of my item so far.
The 2nd of January 2021 i purchased a quantity of 10 at a direct unit cost of 10. per. unit. And the 10th of January 2021 i sold 5 pieces at a sales price of 20 each. So my current inventory should now be 5 and my inventory value should be 5 x 10 = 50.
So lets say that we now for some reason needs to revalue the inventory for this item. In Business Central we do that in the “Item Revaluation Journals”. This is a special kind of journal that does not allow us to type in the item information manually.
The journal lines is populated when we run the batch job “Calculate Inventory Value” and you will find that under “Process” in the ribbon.
The first thing that happens when we start the batch job is that Business Central presents us with this warning:
Business Central is warning us that we should run the “Adjust Cost – Item Entries” batch job before we proceed. This is to make sure that we do not revalue or inventory based on a cost that is not accurate. If you have run the cost adjustment right before we enter the revaluation journal you can just proceed by clicking the “Yes” option. This will take you to the request page for the “Calculate Inventory Value” batch job.
There is a lot of options that can be set in this request page.
The “Posting Date” is the date that will be used for calculating the inventory that can be revalued. So here i have set the date to the last day of January 2021. So that will be after the last transaction i had on my “1994-W” Item.
We also need to add a “Document No.” that will be used for posting the journal.
One really important setting is the “Calculate Per” option. Here we can decide if we want to calculate the inventory value for each Item Ledger Entry or per Item. If you have individual transactions you want to revalue you should use the per Item Ledger Entry option. And that is what i will use in my example here. That will give us one journal line per Item Ledger Entry as opposed to one line per Item.
I have also set a filter on Item No. so the batch job will only process the item i have selected.
The result i am getting now gives me the opportunity to revalue the 5 units currently in my inventory.
If i run the batch job again now – but this time with a posting that that is after my purchase of 10 units but before i sold the 5 units – i will get a different result.
I did not delete the first line from the journal before i did the second run of the batch job. So now after a warning from Business Central i end up with 2 lines in the journal. One for each of the data i have chose for the batch job runs.
But as you can see now the second run with the date 5th of January 2021 gave me the inventory as it was on that date. So Business Central calculate supports calculating the available inventory back in time and let you revalue at any given time. You can of course not post back to a fiscal year that is no longer open in the system. You should however be aware that you can not revalue expected cost that origins from shipped or received items that are not fully invoiced. The exception to that is if you have items configured with the standard costing method.
In the journal we can now revalue the items by entering a new value in the “Unit Cost (Revalued)” field.
In my example i have now deleted one of the lines and only doing the revaluation for the items i have in inventory on the 31st of January 2021. I set the Unit cost to 7.50 as you can see below.
After posting the Journal we can see on the Item Card that the average cost is now 7,50 – corresponding with the revaluation we just posted.
And looking at the value entries we can now see that our revaluation is included so we can track the changes in our unit cost and inventory value.
There are a lot more details to this procedure that can be useful to know if you run more complex warehouse and inventory operations than i did in my example. But i hope this gave you a good introduction to the revaluation functionality and then we can did deeper into more complex scenarios in coming blog posts.