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Note 16 Inventories

Accounting principles


Inventories are reported at lower of cost and net realisable value with the cost determined by the first-in first-out (FIFO) method or, alternatively, by the weighted average cost where it approximates FIFO. The cost of finished goods and work in progress comprises raw material, direct labour, depreciation, other direct costs and related production overhead but excludes interest expenses. Net realisable value is the estimated selling price in the ordinary course of business, less the costs of completion and sale.

Where market conditions result in the manufacturing costs of a product exceeding its net realisable value, a valuation allowance is made. Valuation allowances are also made for old, slow moving and obsolete finished goods and spare parts. Such valuation allowances are deducted from the carrying value of the inventories in the Consolidated statement of financial position.


As at 31 December
EUR million 2017 2016
Materials and supplies 308 332
Work in progress 81 77
Finished goods 649 651
Spare parts and consumables 279 282
Other inventories 15 15
Advance payments and cutting rights 97 102
Obsolescence allowance - spare parts and consumables -94 -98
Obsolescence allowance - finished goods -10 -9
Net realisable value allowance -4 -6
Total 1 321 1 346

EUR 15 (EUR 14) million of inventory write-downs have been recognised as an expense. EUR 18 (EUR 7) million have been recognised as a reversal of previous write-downs.

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