Annual report - HSE

5.5.7.7 Inventories
Inventories are carried at the lower of the two: historical cost or net realisable value.
Historical cost includes cost that is composed of purchase price, import duties and direct
costs of purchase. The purchase price is reduced by discounts received. Direct costs of
purchase are costs of transport services, costs of loading, cargo handling and unloading,
costs of monitoring of goods and other costs that can be attributed to directly obtained
merchandise, materials and services. Purchase price discounts comprise discounts
indicated in the invoice, as well as discounts that are received subsequently and refer to
individual purchase.
The value of finished products and work in progress includes total production costs in
the narrow sense, which comprise direct costs of materials, direct costs of services,
direct labour costs, direct depreciation/amortisation costs and general production costs.
General production costs are costs of materials, services, salaries and amortisation/
depreciation, which are charged in the framework of production process, but cannot be
directly connected to developing business effects. A part of production costs in total costs
(materials, services, labour costs and depreciation) is established once per year on the
basis of data from the previous year.
If the prices of the items that are purchased anew in the accounting period differ from the
prices of inventory items of the same class, the first-in first-out (FIFO) method is applied to
decrease the quantities of inventories during the year.
Net realisable value is assessed on the basis of selling price in the normal course of
business reduced by the estimated costs of completion and sales. The write-downs of
damaged, expired and useless inventories are regularly performed during the year by
individual items.
At least once per year, namely as at the date of preparation of annual financial statements,
the evidence on impairment of inventories is assessed. The impairment of inventories is
assessed for each individual type of inventories. Individual types of inventories are classified
as groups of inventories with similar characteristics on the basis of time component of
changes in inventories. In the assessment of impairment for an individual group, the criteria
of professional assessment, further utilisation or sale are used.
5.5.7.8 Impairment of assets
5.5.7.8.1 Financial assets
A financial asset is considered impaired if there is objective evidence from which it is
evident that, due to one or more events, the expected future cash flows arising from this
assets that can be reliably measured have been decreased.
Objective evidence on the impairment of financial assets can be: non-compliance or
violation by the debtor, deterioration of borrowers’ solvency, signs that the debtor will go
bankrupt and disappearance of active market for such instrument.
Impairment of receivables and loans granted
The Group individually assesses the evidence on impairment of receivables.
Whether it is assessed that the carrying amount of receivable has exceeded its fair value
(realisable value), the receivable is impaired.
Doubtful receivables from others are those which are not settled within 180 days after
their due date.
Disputed receivables are those which comply with one of the following conditions:
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• the legal collection procedure began at the court;
• the decision on beginning of enforced settlement, liquidation or bankruptcy is published.
For subsequent write-offs of receivables relevant documents of proof are needed: legally
enforceable decisions of enforced settlement, bankruptcy proceeding, court ruling or
other relevant document.