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,
- Energy efficiency certificates,
- 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 differences, are measured at the average actual cost, which comprises costs of purchase of gas fuel from all sources, together with an appropriate portion of costs of system and transaction charges, actual costs of production from domestic sources, and 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-moving inventories are determined by way of a case-by-case assessment of their usefulness, based on the following assumptions:
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| 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 |
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| Inventories | 2016 | 2015 | ||||
|---|---|---|---|---|---|---|
| Initial value | Write-downs | Net carrying amount | Initial value | Write-downs | Net carrying amount | |
| Materials, including: | 2,463 | (119) | 2,344 | 2,407 | (306) | 2,101 |
| gas fuel | 1,788 | (53) | 1,735 | 1,748 | (257) | 1,491 |
| fuels for electricity and heat generation | 255 | – | 255 | 278 | – | 278 |
| crude oil | 17 | – | 17 | 14 | – | 14 |
| spare parts | 66 | – | 66 | 73 | – | 73 |
| other materials | 337 | (66) | 271 | 294 | (49) | 245 |
| Certificates of origin for electricity | 157 | (5) | 152 | 79 | (3) | 76 |
| Other inventories | 18 | (4) | 14 | 52 | – | 52 |
| Total | 2,638 | (128) | 2,510 | 2,538 | (309) | 2,229 |
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| Changes in write-downs | 2016 | 2015 |
|---|---|---|
| Write-downs at beginning of period | (309) | (113) |
| Taken to profit or loss, including: | ||
| Recognised write-downs taken to profit or loss | (82) | (267) |
| Write-down reversal taken to profit or loss | 264 | 73 |
| Used write-downs | 1 | – |
| Currency translation differences | (2) | – |
| Other changes | – | (2) |
| Write-downs at end of period | (128) | (309) |
