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Consolidated Financial Report |
EXPLANATORY NOTES
2014 Annual Report
Prysmian Group
148
Sales of goods and
Finance income (costs)
services/Raw materials,
consumables used and
goods for resale
Exchange rate risk on construction contracts or orders
Exchange rate risk on intercompany financial transactions
Interest rate risk
B.11 TRADE AND OTHER RECEIVABLES
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 recei-
vables;
(c) likelihood that the debtor enters bankruptcy or starts
other financial reorganisation procedures;
(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 makes use of without-recourse factoring of trade
receivables. These receivables are derecognised because
such transactions transfer substantially all the related risks
and rewards of the receivables to the factor.
B.12 INVENTORIES
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 selling 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
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.
When the economic effects of the hedged items occur, the gains and losses from the hedging instruments are taken to the
following lines in the income statement: