4.6 Inventories
Inventories comprise assets (goods) which:
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Are held for sale in the ordinary course of business (finished goods); or |
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Are in the process of production for such sale (work in progress); or |
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Will be consumed in the production process or in the rendering of services (raw materials and spare parts). |
Inventories are stated at the lower of acquisition or production cost and net realizable value. The cost of each inventory item is generally calculated as follows:
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Raw materials, spare parts and other consumables and replacement parts: the lower of weighted average acquisition cost and net realizable value. |
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Work in progress and finished and semi-finished goods: the lower of production cost (which includes the cost of materials, labor costs, direct and indirect manufacturing expenses) or net realizable value in the market. |
Obsolete, defective or slow-moving inventories have been reduced to net realizable value.
Net realizable value is the estimated selling price less all the estimated costs of selling and distribution.
The amount of any write-down of inventories (as a result of damage, obsolescence or decrease in the selling price) to their net realizable value and all losses of inventories are recognized as expenses in the year in which the write-down or loss occurs. Any subsequent reversals are recognized as income in the year in which they arise.
The consumption of inventories is recognized as an expense in “Cost of sales” in the consolidated income statement in the period in which the revenue from their sale is recognized.