SAP provides two options for valuating material stocks. Through transaction code OX14, you can either value stock at the Plant level or at the Company level. One important thing to note is that the setting once chosen cannot be changed later on. So if you choose valuation at Plant level, you cannot go back to valuation at company level after 'Go Live'. SAP recommends Valuation of material stock at the plant level. Simply specaking, if you value material at the plant level, the plant is the valuation area and if you value material stock at the company code level,, the company code is the valuation area. I have attached a screenshot of T-code OX14 to give you a hands on example. You can see below that the valuation area chosen is Valuation at Plant level which is SAP recommended.