Consolidated Financial Statements >
CONSOLIDATED FINANCIAL STATEMENTS AND EXPLANATORY NOTES
176
| 2012 annual report prysmian group
B.11
TRADE AND OTHER RECEIVABLES
B.12 INVENTORIES
B.13 CONTRACT WORK-IN-PROGRESS
Trade and other receivables are initially recognised at fair
value and subsequently valued on the basis of the amortised
cost method, net of the allowance for doubtful accounts.
Impairment of receivables is recognised when there is
objective evidence that the Group will not be able to recover
the receivable owed by the counterparty under the terms of
the related contract.
Objective evidence includes events such as:
(a) significant financial difficulty of the issuer or debtor;
(b) ongoing legal disputes with the debtor relating to
receivables;
(c) likelihood that the debtor enters bankruptcy or starts other
financial reorganisation procedures;
Inventories are recorded at the lower of purchase or production
cost and net realisable value, represented by the amount
which the Group expects to obtain from their sale in the
normal course of business, net of sale costs. The cost of
inventories of raw materials, ancillaries and consumables, as
well as finished products and goods is determined using the
FIFO (first-in, first-out) method.
The exception is inventories of non-ferrous metals (copper,
aluminium and lead) and quantities of such metals contained
Contract work-in-progress (hereafter also “construction
contracts”) is recognised at the value agreed in the contract, in
accordance with the percentage of completion method, taking
into account the progress of the project and the expected
contractual risks. The progress of a project is measured by
reference to the contract costs incurred at the reporting date in
relation to the total estimated costs for each contract.
When the outcome of a contract cannot be estimated reliably,
the contract revenue is recognised only to the extent that the
costs incurred are likely to be recovered. When the outcome of
a contract can be estimated reliably, and it is probable that the
contract will be profitable, contract revenue is recognised over
the term of the contract. When it is probable that total contract
costs will exceed total contract revenue, the potential loss is
(d) delays in payments exceeding 30 days from the due date.
The amount of the impairment is measured as the difference
between the book value of the asset and the present value
of future cash flows and is recorded in the income statement
under “Other expenses”.
Receivables that cannot be recovered are derecognised with a
matching entry through the allowance for doubtful accounts.
The Group occasionally factors trade receivables without
recourse. These receivables are derecognised because such
transactions transfer substantially all the related risks and
rewards of the receivables to the factor.
in semi-finished and finished products, which are valued using
the weighted average cost method.
The cost of finished and semi-finished products includes
design costs, raw materials, direct labour costs and other
production costs (calculated on the basis of normal operating
capacity). Borrowing costs are not included in the valuation of
inventories but are expensed to the income statement when
incurred because inventories are not qualifying assets that
take a substantial period of time to get ready for use or sale.
immediately recognised in the income statement.
The Group reports as an asset the gross amount due from
customers for contract work-in-progress for which the costs
incurred, plus recognised profits (less recognised losses),
exceed the billing of work-in-progress; such assets are reported
under “Other receivables”. Amounts invoiced but not yet paid
by customers are reported under “Trade receivables”.
The Group reports as a liability the gross amount due to
customers for all contract work-in-progress for which billing of
the work in progress exceeds the costs incurred plus recognised
profits (less recognised losses). Such liabilities are reported
under “Other liabilities”.
