15. Inventories

Inventories are assets held for sale in the ordinary course of business, in the process of production for sale, or in the form of materials or raw materials consumed in the production process or in the rendering of services.

Inventories comprise:

• materials
• products
• work in progress
• energy origin rights – purchased rights of origin for energy produced from renewable energy sources, rights of origin for energy relating to energy generated in cogeneration and rights to energy efficiency certificates,
• goods (especially CO₂ emission allowances intended for re-sale).

Inventories (except for CO₂ allowances acquired to generate profits) are valued at the lower of purchase price / cost to manufacture and net realisable value.

CO₂ emission allowances acquired in order to realise profits from fluctuations in market prices are measured at fair value less costs of disposal.

Cost of usage of inventories is determined as follows:

• materials and goods (except for CO₂ emission allowances) – using the FIFO method;
• CO₂ emission allowances – using specific identification,
• Energy origin rights – using the specific identification method.

As at reporting date, the cost of inventories cannot be higher than net realisable value. Impairment losses on inventories are recognised in operating expenses. When the realisable value of a specific item of inventory is recovered fully or partially, its carrying amount is adjusted by decreasing revaluation adjustment.

Companies in which backlog and redundant stocks constitute a significant item may, on the basis of specific instructions, apply more detailed rules for calculating and writing down their value. Write- downs of backlog and redundant inventory may be recognised in other operating activities