16. Inventories
Accounting policies
Inventories are measured at acquisition cost or cost of conversion based on the weighted average method. If the sales products’ market price or fair value based on net realizable value is lower, the sales products are written down to this lower value. The net realizable value is the estimated price in the ordinary course of business less the estimated costs of completion and the estimated selling costs. Inventories may be impaired if the prices of the sales products decline, or in cases of a high rate of days sales of inventory (DSI). Write-downs on inventories are reversed if the reasons for them no longer apply.
In addition to direct costs, cost of conversion includes an appropriate allocation of production overhead costs based on normal utilization rates of the production plants, provided that they are related to the production process. Pensions, social services and voluntary social benefits are also included, as well as allocations for administrative costs, provided they relate to the production. Borrowing costs are not included in cost of conversion.
The exception made by IAS 2 for traders is applied to the measurement of precious metals. Accordingly, inventories held for trading purposes are measured at fair value less costs to sell and recognized in the precious metal trading item under miscellaneous current assets. All changes in value are immediately recognized in the statement of income.
Explanation of inventories
|
Dec. 31, 2023 |
Dec. 31, 2022 |
|---|---|---|
Raw materials and factory supplies |
4,543 |
5,255 |
Work in progress, finished goods and merchandise |
9,257 |
10,686 |
Advance payments and services in progress |
75 |
87 |
Inventories |
13,876 |
16,028 |
Work in progress, finished goods and merchandise are combined into one item due to production conditions in the chemical industry. Services in progress mainly relate to services not invoiced as of the balance sheet date.
Cost of sales included inventories recognized as an expense amounting to €37,222 million in 2023, and €48,836 million in 2022.
Write-downs on inventory were recognized in the amount of €5 million in 2023, and in the amount of €84 million in 2022.
The carrying amount of precious metal inventories held for trading purposes was €1,139 million as of December 31, 2023 (December 31, 2022: €1,939 million).