Annual Report 2013

Notes to the consolidated statement of
financial position

(6) Inventories

In accordance with IAS 2, reported under inventories are those assets that are intended to be sold in the ordinary course of business (finished products and merchandise), those in the process of production for such sale (unfinished products) and those to be utilized or consumed in the course of manufacture or the rendering of services (raw materials and supplies). Payments on account made for the purpose of purchasing inventories are likewise disclosed under the inventories heading.

Inventories are measured at the lower of cost and net realizable value.

Inventories are measured using either the “first in, first out” (FIFO) or the average cost method. Manufacturing cost includes not only the direct costs but also appropriate portions of necessary overheads (for example goods-in department, raw material storage, filling, costs incurred through to the finished goods warehouse), production-related administrative expenses, the costs of the retirement pensions of people who are employed in the production process, and production-related amortization/depreciation. The overhead add-ons are calculated on the basis of average capacity utilization. Not included, however, are interest expenses incurred during the manufacturing period.

The net realizable value is determined as an estimated selling price less costs yet to be incurred through to completion, and necessary selling and distribution costs. Write-downs to the net realizable value are made if, at year-end, the carrying amounts of the inventories are above their realizable fair values. The resultant valuation allowance amounted to 125 million euros (previous year: 119 million euros). The carrying amount of inventories recognized at fair valuefair value
Amount at which an asset or a liability might be exchanged or a debt paid in an arm’s length transaction between knowledgeable, willing parties.
less costs to sell amounted to 260 million euros. The carrying amount of inventories pledged as security for liabilities amounted to 30 million euros.

Analysis of inventories
in million eurosDecember 31, 2012December 31, 2013
Raw materials and supplies471431
Work in progress6256
Finished products and merchandise9421,000
Payments on account for merchandise3 7
Total 1,4781,494

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