This thesis was commissioned by a Finnish manufacturing company that is a parent company in a multinational group specializing in electronic components for industrial applications. The commissioning company was on the verge of a major system revamp and were also preparing to adapt the International Financial Reporting Standards. The timing seemed fit to re-evaluate their current methods of valuing inventory before the new system and standards took place.

The aim of this thesis was to put together a comprehensive theoretical framework, covering everything essential regarding inventory valuation for the commissioning company. Various valuation methods would then be taken into consideration based on their risk factors and functionalities. After establishing a set of applicable methods they would then be compared to the existing method of valuation. The end product of this thesis would be a view on the situation by the writer, along with a framework sufficient enough for the reader to make his or hers own conclusion on the matter.

This thesis was a practical development project that utilized qualitative research methods. Due to the nature of this thesis' subject, it was seen important for the source material to be as up-to-date as possible. Various regulations and laws make up for a major part of the theory. A portion of the regulations are cited directly from the issuer's official website such as the International Financial Reporting Standards. In case an official source was unavailable, an alternate source with credibility as high as possible was used instead. For example an online legislation database ran by Ministry of Justice was used to cite Finnish Accounting Standards. Articles written by professionals in the field of business administration along with books specifically written to be used for higher level education were also used as main sources for this thesis. Many of the authors of these books are acting professors with doctorates in economics. In addition to existing literature, three short theme-centered interviews were conducted to further define the scope of this thesis. The interviewees were working at the commissioning company as a business controller, an accountant and an ERP-specialist.

This thesis provides a thorough theoretical framework. Based on this framework the commissioning company can come to their own understanding on what to take in account when selecting a method for inventory valuation. This thesis also provides a suggestion for how to proceed and makes good groundwork for any follow-up research. Making this thesis turned out to be a great learning experience for the writer, giving more insight especially on business administration and business economics as a whole.