- Inventories are valued at the lower of cost and net realizable value (IFRS) based on the most reliable evidences available at the date of the estimation.
- Impairment of inventories in case of:
- Damage;
- Obsolescence;
- Sales price fall;
- Increase of necessary cost for completion or sale.
- Impairments are posted in the fiscal year the event occurs and as well the reversals.
- Impairments for slow moving are not accepted unless it can be proved that sales prices decrease in line with age or movements of products (IFRS).
- No impairment for strategic materials and for materials with unit value > 15000 € and lifetime > 12 months (= tangible assets).
- No automatic posting in accounting (we keep the unit gross value of each material).
- Periodicity: mandatory once in a year but more usually quarterly.
- Possible to group materials similar or linked together (e.g. same product line), but not appropriate to group a whole activity sector or geographical zone.
| Expand | ||
|---|---|---|
| ||
A) There are two types of flow that are function of the materials: 1) For the industrial supplies: The program edits a proposition of the stock depreciation, based on a search notion of the last effective issue date of the stock. 2) The other materials: Primary goods, merchandises, half-finished products and end products, packaging. The system proceeds in three phases to execute the proposition of the depreciation: a) Calculate depreciation based on the coverage rate, b) Calculate depreciation based on the market price, c) Edit a proposition that uses those 2 calculations.
B) There are 2 types of Inventory Impairment: 1) Rotation Depreciation : Calculation of a percentage of impairment based on a) Last consumption date or last “first acquisition” date for industrial supplies, b) Monthly average consumption on the analysis period for other materials, Only if: Range of coverage > 0. Percentage of inventory value at Material Price (MP)
2) Financial Depreciation: It is based on the Market Value or Net Realizable Value (NRV_S) of the last 12 months. Calculation based on COPA:
Only used for finished products (Z150) and trading goods (Z130). Only if: Net Realizable Value (NRV_S) < Material Price “end of period of reference” (MP). Financial Impairment = (MP – NRV_S) x Inventory Quantity.
Calculation of Provisions for Inventory Impairment Financial depreciation = 0
Rotation depreciation = 0
Rotation depreciation > Financial depreciation
Rotation depreciation < Financial depreciation
|
| Expand | ||
|---|---|---|
| ||
There are 2 types of Inventory Impairment: 1) Rotation Depreciation : Calculation of a percentage of impairment based on a) Last consumption date or last “first acquisition” date for industrial supplies, b) Monthly average consumption on the analysis period for other materials, Only if: Range of coverage > 0. Percentage of inventory value at Material Price (MP)
2) Financial Depreciation (LCM): It is based on the Market Value or Net Realizable Value (NRV_S) of the last 6 12 months.
|