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ePaper created 2015-05-06, 08:22:31 | version 1.38.0
57HERAEUS | FINANCIAL REPORT 2014 | CONSOLIDATED FINANCIAL STATEMENTS d) Inventories – excluding precious metals Materials and supplies, commodities, work in progress, and finished goods are measured at the lower of cost and net realizable value. Advances paid on inventories are recognized at the amount paid. Pursuant to IAS 2, cost of conversion includes the proportion of materials and overheads attributable to production as well as direct costs (production material and wages). Cost is determined on the basis of weighted average costs. Write-downs of inventories are recognized if the net realizable value is lower than the recognized cost. Risks are also taken into account on a case-by-case basis. e) Precious metals Precious metal inventories are broken down into three categories, depending on their use. The classifications below determine how the carrying amounts of precious metal inventories are measured: Inventory held in stock consists of precious metals used in production processes and precious metals held permanently within the Group for strategic reasons. These inventories are measured at their weighted average historical cost. A review is carried out at each balance sheet date to determine whether their carrying amount is higher than their net realizable value. If so, a write-down is recog- nized. If the reasons for recognizing a write-down cease to exist, it is reversed up to a maximum of original cost. Inventory held on demand represents the stock of precious metals that is held temporarily in the Group and is needed to fulfill customer orders as well as to cover peaks in demand in the production process that exceed the precious metals held in stock. If applicable, precious metals for inventory held on demand are measured at the contractual purchase price agreed for the customer (attributable cost of purchase). The remaining precious metals are recognized at the lower of average cost and net realizable value (market price as of the balance sheet date). The trading inventory consists of precious metals that are held by the trading companies in the Group. It is generally recognized at the lower of average cost and net realizable value. Obligations to cover forward purchases already entered into that are due to be settled after the balance sheet date are recognized in the amount required to meet the obligations as of the balance sheet date. The FIFO method is used to determine the cost of some precious metals inventories.