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  • integrated report 2019

6.2.1. INVENTORIES

Accounting policies

The Group’s most material inventory items include:

  • gas fuel and fuels for electricity and heat generation,
  • certificates of origin for electricity obtained in connection with electricity production and certificates of origin for electricity purchased in order to be surrendered for cancellation in connection with the Group’s obligation under the Energy Law,
  • energy efficiency (energy) certificates, purchased by the Group in order to be surrendered for cancellation and obtained in connection with efficiency enhancing measures taken under the Energy Efficiency Act,
  • consumables used in investment projects and at oil and gas production facilities,
  • Spare parts that do not qualify as property, plant and equipment (Note 6.1.1.) and are used or may be used in different facilities.

 

Inventories are initially measured at cost. As at the reporting date, inventories are measured at the lower of cost and net realisable value.

 

Gas fuel at storage facilities is measured jointly for all storage units, at the average weighted cost. Changes in the inventories of gas fuel stored in the Underground Gas Storage Facilities for sale and own consumption, as well as balance-sheet differences, are measured at the average weighted cost, which includes in particular: costs of purchase of gas fuel from all sources together with an appropriate portion of costs of system and transaction charges, actual costs of its production from domestic sources, costs of nitrogen removal and regasification.

 

Changes in the inventories of spare parts are measured using the weighted average method. Spare parts are recognised in profit or loss as at the date of their use.

 

The Group is obliged to obtain and surrender for cancellation certificates of origin for electricity and energy efficiency certificates corresponding to the volume of electricity sold to end customers. Property rights granted to the Group in connection with the production of electricity as well as energy efficiency certificates are disclosed as inventories at market value (in correspondence with revenue) when their receipt becomes probable. Purchased certificates of origin and energy efficiency certificates are recognised at cost. Changes in the certificates are measured using the weighted average method. Certificates of origin for electricity and energy efficiency certificates are accounted for at the time of their cancellation in correspondence with the relevant provision (Note 6.3.2.).

 

Material estimates

Inventory write-downs
If the cost of inventories is not recoverable, the Group recognises a write down to net realisable value.

 

An exception is spare parts, which are not written down to net realisable value if they are planned to be used.

 

Certificates of origin for electricity and energy efficiency certificates are written down based on a comparison between their carrying amounts and their net realisable values derived from an active market.

 

Write-downs of non-perishable inventories are determined by way of a case-by-case assessment of their usefulness, based on the following assumptions:

 

Inventories of purchased materials which are idle for a period of:

Write-down rate
1–5 years
Generally, a write-down of 20% is recognised; where the case-by-case assessment of usefulness, the possibility of using a category of materials, and their cycle structure, is taken into account, the Group may recognise write-downs of 5% and 10% of the value of the materials
5–10 years
20%−100%
More than 10 years
100% for materials which are useless and intended for sale or scrapping

 

Inventories
2019
2018
Initial value
Write-down
Net carrying amount
Initial value
Write-down
Net carrying amount
Materials, including:
 4,265
 (454)
 3,811
 3,282
 (149)
 3,133
 Gas fuel
 3,397
 (376)
 3,021
 2,532
 (71)
 2,461
 Fuels for electricity and heat generation
 359
 -
 359
 284
 -
 284
 crude oil
 19
 -
 19
 15
 -
 15
 Other materials 
 490
 (78)
 412
 451
 (78)
 373
Certificates of origin for electricity
 222
 (1)
 221
 216
 (50)
 166
CO2 emission allowances
 -
 -
 -
 57
 -
 57
Other inventories
 11
 (1)
 10
 9
 (1)
 8
Total
 4,498
 (456)
 4,042
 3,564
 (200)
 3,364

Changes in write-downs
2019
2018
Write-downs at beginning of the period
 (200)
 (191)
Taken to profit or loss, including:
 
 
 Recognised write-downs taken to profit or loss
 (385)
 (136)
 Write-down reversal taken to profit or loss
 127
 125
Used
 2
 2
Write-downs at end of the period
 (456)
 (200)

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6.1. Non-current property, plant and equipment and intangible assets
6.2.2. Receivables