■ 4.4 Inventories
■ 4.5 Accounts receivable and other receivables
Accounting principles Inventories are measured at the lower of acquisition cost or net realisable value. In measuring inventories, the FIFO principle is observed or, alternatively, the weighted average price method, depending on the nature of the inventories. The acquisition cost of finished products acquired comprises all purchase costs, including direct transport, handling and other expenses. The acquisition cost of finished and semi-finished products of own manufacture includes raw materials, direct production costs, and the systematically allocated portion of variable manufacturing overheads and fixed overheads at the normal level of operation. Borrowing cost is not included in the acquisition cost. Net realisable value is the estimated sales price in ordinary business operations less the estimated cost of completion and the necessary sales costs. Key estimates and judgements The Group regularly reviews its inventories for situations where the inventories contain non-marketable items or items with net realisable value below the acquisition cost. When necessary, the Group reduces the book value of the inventories accordingly. This review requires the management’s estimates of the sales prices of products, the cost of completion and the costs necessary to make the sale. Any changes in these estimates might lead to an adjustment in the book value of the inventories in future periods.
Accounting principles Accounts receivables are initially measured at fair value and later at amortised cost, taking into account impairment. The Group applies a model based on expected credit losses to the determination of the impairment of trade receivables. Provisions are furthermore set up on a case-by-case basis when there is a justifiable reason to assume that the Group will not receive payment for the invoiced amount according to the original terms. Key estimates and judgements The evaluation of the recognition criteria and the amount of impairment losses requires the management’s judgement. If customers’ financial position weakens so that it affects their solvency, further impairment losses may need to be recognised in future periods. The impacts of Russia’s military aggression and corona pandemic on determining the impairment of sales receivables is discussed in Note 5.6, Management of financial risks, counterparty risk.
Accounts receivable and other non-interest bearing receivables
From Group companies Accounts receivable
Other receivables Prepayments and accrued income
2022 211.6 276.1
2021 162.3 211.7
Raw materials and consumables
From associated companies and joint ventures Accounts receivable
Advance payments Inventories total
From others Accounts receivable
In 2022 or 2021, no write-downs were recorded for inventory.
Prepayments and accrued income
From others total
Accounts receivable and other receivables total
Receivables from Group companies are receivables from parent company Metsäliitto Cooperative and from other subsidiaries of the parent company. Derivative receivables are from Metsä Group Treasury Oy, a wholly owned subsidiary of Metsäliitto Cooperative. As a consequence of the discontinuation of Russian business operations, the Group made a write-down of all its accounts receivables and other receivables related to operations in Russia, totalling EUR 0.1 million.
Consolidated financial statements | METSÄ BOARD ANNUAL AND SUSTAINABILITY REPORT 2022
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