Inventories are stated at the lower of cost and net realizable value.
Inventories mainly comprise crude oil, fuels and petrochemicals and consumable inventories (spares and supplies).
The cost of crude oil is the production costs, including transportation costs.
The cost required to bring the pipeline into working order, is treated as part of the related pipeline.
The cost of other inventories is determined based on the weighted average cost method, which includes acquisition costs (deducting commercial discounts, rebates and other similar items), transformation, and other costs incurred to bring inventory to their current location and condition, such as transportation costs.
Consumable inventories (spares and supplies) are recognized as inventory and then charged to expense, maintenance or project to the extent that such items are consumed.
Ecopetrol estimates the net realizable value of inventories at the end of the period. When the circumstances that previously caused inventories to be written down below cost no longer exist, or when there is clear evidence of an increase in the net realizable value because of a change in economic circumstances, the amount of the write-down is reversed. The reversal cannot be greater than the amount of the original write-down, so that the new carrying amount will always be the lower of the cost and the revised net realizable value.
