diff --git a/cypress/e2e/inventory/instance/new-formatting-of-stat-codes-field-on-instance-create-edit-screen.cy.js b/cypress/e2e/inventory/instance/new-formatting-of-stat-codes-field-on-instance-create-edit-screen.cy.js
new file mode 100644
index 0000000000..8cb1b9b30b
--- /dev/null
+++ b/cypress/e2e/inventory/instance/new-formatting-of-stat-codes-field-on-instance-create-edit-screen.cy.js
@@ -0,0 +1,82 @@
+import { Permissions } from '../../../support/dictionary';
+import InstanceRecordEdit from '../../../support/fragments/inventory/instanceRecordEdit';
+import InstanceRecordView from '../../../support/fragments/inventory/instanceRecordView';
+import InventoryInstances from '../../../support/fragments/inventory/inventoryInstances';
+import TopMenu from '../../../support/fragments/topMenu';
+import Users from '../../../support/fragments/users/users';
+import getRandomPostfix from '../../../support/utils/stringTools';
+
+describe('Inventory', () => {
+  describe('Instance', () => {
+    const testData = {
+      instanceTitle: `AT_C400652_Instance_${getRandomPostfix()}`,
+      statisticalCode1: 'ARL (Collection stats):    books - Book, print (books)',
+      statisticalCode2: 'ARL (Collection stats):    ebooks - Books, electronic (ebooks)',
+      filterValue: 'ARL',
+    };
+
+    before('Create test user and login', () => {
+      cy.getAdminToken();
+      cy.createTempUser([Permissions.inventoryAll.gui]).then((userProperties) => {
+        testData.user = userProperties;
+
+        cy.login(testData.user.username, testData.user.password, {
+          path: TopMenu.inventoryPath,
+          waiter: InventoryInstances.waitContentLoading,
+        });
+      });
+    });
+
+    after('Delete test data', () => {
+      cy.getAdminToken().then(() => {
+        Users.deleteViaApi(testData.user.userId);
+        InventoryInstances.deleteInstanceByTitleViaApi(testData.instanceTitle);
+      });
+    });
+
+    it(
+      'C400652 Check the new formatting of Statistical codes field on Instance create/edit screen (folijet) (TaaS)',
+      { tags: ['extendedPath', 'folijet', 'C400652'] },
+      () => {
+        // Step 1: Go to Inventory -> Actions -> New
+        const NewInstance = InventoryInstances.addNewInventory();
+
+        // Step 2: Click "Add statistical code" -> "Select code" dropdown appears
+        NewInstance.clickAddStatisticalCodeButton();
+
+        // Step 3: Open "Select code" dropdown -> "Filter options list" + all codes present
+        NewInstance.openStatisticalCodeDropdown();
+        NewInstance.verifyStatisticalCodeDropdown();
+
+        // Step 4: Filter by value -> list updated accordingly
+        NewInstance.filterStatisticalCodeByName(testData.filterValue);
+        NewInstance.verifyStatisticalCodeListOptionsFilteredBy(testData.filterValue);
+
+        // Step 5: Select a value -> shown in dropdown, no error
+        NewInstance.filterStatisticalCodeByName(testData.filterValue);
+        NewInstance.selectStatisticalCode(testData.statisticalCode1);
+        NewInstance.checkErrorMessageForStatisticalCode(false);
+
+        // Steps 6-7: Fill required fields
+        NewInstance.fillRequiredValues(testData.instanceTitle);
+
+        // Step 8: Save & close
+        NewInstance.clickSaveAndCloseButton();
+
+        // Step 9: Actions -> Edit instance
+        InstanceRecordView.edit();
+        InstanceRecordEdit.waitLoading();
+
+        // Step 10: Repeat steps 3-5 on edit screen
+        NewInstance.clickAddStatisticalCodeButton();
+        InstanceRecordEdit.openStatisticalCodeDropdown(1);
+        InstanceRecordEdit.verifyStatisticalCodeDropdown();
+        InstanceRecordEdit.filterStatisticalCodeByName(testData.filterValue);
+        InstanceRecordEdit.verifyStatisticalCodeListOptionsFilteredBy(testData.filterValue);
+
+        InstanceRecordEdit.chooseStatisticalCode(testData.statisticalCode2);
+        InstanceRecordEdit.checkErrorMessageForStatisticalCode(false);
+      },
+    );
+  });
+});
diff --git a/cypress/support/fragments/inventory/instanceRecordEdit.js b/cypress/support/fragments/inventory/instanceRecordEdit.js
index 18d6fbd30b..6f492dfe65 100644
--- a/cypress/support/fragments/inventory/instanceRecordEdit.js
+++ b/cypress/support/fragments/inventory/instanceRecordEdit.js
@@ -38,6 +38,8 @@ const previoslyHeldCheckbox = Checkbox({ name: 'previouslyHeld' });
 const setForDeletionChecbox = Checkbox({ name: 'deleted' });
 const instanceStatusTerm = Select('Instance status term');
 const addStatisticalCodeButton = Button('Add statistical code');
+const statisticalCodeFieldSet = rootSection.find(FieldSet('Statistical code'));
+const statisticalCodeSelectionList = SelectionList();
 const addNatureOfContentButton = Button('Add nature of content');
 const addFormatsButton = Button('Add format');
 const addParentInstanceButton = Button('Add parent instance');
@@ -84,6 +86,35 @@ export default {
   addFormats,
   clickAddStatisticalCodeButton,
   chooseStatisticalCode,
+  openStatisticalCodeDropdown(index = 0) {
+    cy.do(Button({ name: `statisticalCodeIds[${index}]` }).click());
+  },
+  verifyStatisticalCodeDropdown() {
+    cy.expect(statisticalCodeSelectionList.has({ placeholder: 'Filter options list' }));
+    cy.then(() => statisticalCodeSelectionList.optionCount()).then((count) => {
+      expect(count).to.greaterThan(0);
+    });
+  },
+  filterStatisticalCodeByName(name) {
+    cy.do([statisticalCodeSelectionList.filter(name)]);
+  },
+  verifyStatisticalCodeListOptionsFilteredBy(name) {
+    cy.get('[class^=optionSegment-]').each(($option) => {
+      cy.wrap($option).invoke('text').should('include', name);
+    });
+  },
+  checkErrorMessageForStatisticalCode(isPresented = true) {
+    if (isPresented) {
+      cy.expect(statisticalCodeFieldSet.has({ error: 'Please select to continue' }));
+    } else {
+      cy.expect(
+        FieldSet({
+          buttonIds: [including('stripes-selection')],
+          error: 'Please select to continue',
+        }).absent(),
+      );
+    }
+  },
   dateTypePlaceholderOption,
   close: () => cy.do(closeButton.click()),
   waitLoading: () => {
diff --git a/cypress/support/fragments/inventory/inventoryNewInstance.js b/cypress/support/fragments/inventory/inventoryNewInstance.js
index 925eecb81d..7de67b8575 100644
--- a/cypress/support/fragments/inventory/inventoryNewInstance.js
+++ b/cypress/support/fragments/inventory/inventoryNewInstance.js
@@ -27,6 +27,8 @@ const descriptiveDataSection = rootSection.find(Accordion('Descriptive data'));
 const cancelButton = rootSection.find(Button('Cancel'));
 const saveAndCloseButton = rootSection.find(Button('Save & close'));
 const selectStatisticalCodeButton = Button({ name: 'statisticalCodeIds[0]' });
+const statisticalCodeFieldSet = rootSection.find(FieldSet('Statistical code'));
+const statisticalCodeSelectionList = SelectionList();
 
 const deafultResouceType = 'text';
 
@@ -271,10 +273,30 @@ export default {
     cy.do(Button('Add statistical code').click());
     cy.expect(selectStatisticalCodeButton.exists());
   },
+  openStatisticalCodeDropdown() {
+    cy.do([statisticalCodeFieldSet.find(Selection()).find(Button()).click()]);
+  },
+  verifyStatisticalCodeDropdown() {
+    cy.expect(statisticalCodeSelectionList.has({ placeholder: 'Filter options list' }));
+    cy.then(() => statisticalCodeSelectionList.optionCount()).then((count) => {
+      expect(count).to.greaterThan(0);
+    });
+  },
+  filterStatisticalCodeByName(name) {
+    cy.do([statisticalCodeSelectionList.filter(name)]);
+  },
+  verifyStatisticalCodeListOptionsFilteredBy(name) {
+    cy.get('[class^=optionSegment-]').each(($option) => {
+      cy.wrap($option).invoke('text').should('include', name);
+    });
+  },
   chooseStatisticalCode(code) {
     cy.do(selectStatisticalCodeButton.click());
     cy.do(SelectionList().select(code));
   },
+  selectStatisticalCode(code) {
+    cy.do(SelectionList().select(code));
+  },
   clickCancelButton() {
     cy.do(cancelButton.click());
     cy.expect(rootSection.absent());