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CONSOLIDATED FINANCIAL REPORT | EXPLANATORY NOTES
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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.
B.13 CONSTRUCTION CONTRACTS
Construction contracts (hereafter also "contracts") are 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 immediately recognised in the income statement.
The Group reports as an asset the gross amount due from customers for construction contracts, where 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 construction contracts where billing
of work-in-progress exceeds the costs incurred plus recognised profits (less recognised losses). Such
liabilities are reported under "Other liabilities".