Integrated Annual Report 2014

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19. Inventories

PLN ’000 Dec 31 2014
Dec 31 2013
Jan 1 2013
Finished goods 1,184,960 1,755,310 1,800,560
Semi-finished products and work in progress 556,424 671,636 751,935
Merchandise 223,540 284,497 256,875
Materials 1,952,205 3,017,441 3,153,657
Total 3,917,129 5,728,884 5,963,027
including inventories measured:      
at cost 469,201 5,722,868 5,957,532
at net realisable value 3,447,928 6,016 5,495

Inventories are measured at the lower of cost or cost less write-downs to net realisable value less costs to sell.

Following a decline in prices of crude oil and refining products, the Group recognised a write-down on inventories as at December 31st 2014 to reflect their net realisable value (see Note 19.1).

As at December 31st 2014, the value of inventories serving as collateral for the Parent's liabilities under the inventory refinancing and financing facility discussed in Note 27.1 was PLN 3,330,652 thousand (December 31st 2013: PLN 5,032,009 thousand).

19.1 Change in inventory write-downs

PLN ’000 Year ended
Dec 31 2014
Year ended
Dec 31 2013
At beginning the period 2,919 1,407
Recognised 451,551 (1) 2,651
Exchange differences on translating foreign operations 1 -
Used (892) (265)
Reversed (170) (874)
At end of the period 453,409 2,919
Finished goods 200,340 311
Semi-finished products and work in progress 40,913 2
Merchandise 5,834 68
Materials 206,322 2,538

(1) Following a decline in prices of crude oil and refining products, the Group recognised a PLN 450,891 thousand write-down on inventories to adjust their carrying amount to net realisable value in accordance with IAS 2.

The effect of revaluation of inventories is taken to cost of sales.

19.2 Mandatory stocks

The Group maintains mandatory stocks as required by the following acts:

  • Act on Stocks of Crude Oil, Petroleum Products and Natural Gas, and on the Rules to be Followed in the Event of Threat to National Fuel Security or Disruptions on the Petroleum Market of February 16th 2007 (Dz.U. of 2007, No. 52, item 343, dated March 23rd 2007, as amended).
  • Regulation of the Minister of Economy, Labour and Social Policy, on fuel stocks at power utility companies, dated February 12th 2003 (Dz.U. No. 39, item 338, as amended).

These regulations define the rules for creating, maintaining and financing stocks of crude oil, petroleum products and fuels at power utility companies. 

The Group’s mandatory stocks include crude oil, petroleum products (liquid fuels), LPG and coal. In the downstream segment, mandatory stocks are maintained mainly by the Parent. As at December 31st 2014, the carrying amount of mandatory stocks was PLN 2,243,655 thousand (December 31st 2013: PLN 4,250,530 thousand).

The Notes to the consolidated financial statements are an integral part of the statements.
(This is a translation of a document originally issued in Polish)