Inventories are recognised at cost less any write-downs due to a lower net realisable value (for example due to risks of unsaleability):
-
The cost of inventories comprises the purchase or production cost and other costs incurred to bring the inventories to their present location and condition. In addition to acquisition costs and direct production costs, the production cost also includes an allocation of indirect production costs on the basis of normal production capacity and attributable borrowing costs.
-
The net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated selling costs.
The production costs of strategic land positions are limited to the purchase costs of the land, including attributable ‘buyer’s costs’. For land positions that remain under development for a prolonged period for ultimate use or sale, interest and development costs are also capitalised as part of the production costs.