Jaguar Land Rover Automotive plc – Annual report – 31 March 2020
2 Accounting policies (extract)
Inventories are valued at the lower of cost and net realisable value. Costs of raw materials and consumables are ascertained on a first-in, first-out basis. Costs, including fixed and variable production overheads, are allocated to work-in-progress and finished goods, determined on a full absorption cost basis. Net realisable value is the estimated selling price in the ordinary course of business less estimated cost of completion and selling expenses.
Inventories include vehicles sold subject to repurchase arrangements. These vehicles are carried at cost to the Group and are amortised in changes in stocks and work-in-progress to their residual values (i.e. estimated second-hand sale value) over the term of the arrangement.
Inventories of finished goods include £466 million (2019: £484 million, 2018: £436 million) relating to vehicles sold to rental car companies, fleet customers and others with guaranteed repurchase arrangements.
Cost of inventories (including cost of purchased products) recognised as an expense during the year amounted to £16,902 million (2019: £18,086 million, 2018: £19,152 million).
During the year, the Group recorded an inventory write-down expense of £28 million (2019: £52 million, 2018: £55 million), excluding a reversal of a write-down recorded in a previous period in relation to the Tianjin incident of £nil (2019: £nil, 2018: £1 million). This included the impact of COVID-19 as part of the Group’s inventory provisioning methodology. The write-down excluding the reversal is included in “Material and other cost of sales”.
33 Commitments and contingencies (extract)
Inventory of £127 million (2019, 2018: £nil), trade receivables with a carrying amount of £nil (2019: £114 million, 2018: £155 million), property, plant and equipment with a carrying amount of £nil (2019, 2018: £nil) and restricted cash with a carrying amount of £nil (2019, 2018: £nil) are pledged as collateral/security against the borrowings and commitments.