Hunting PLC – Annual report – 31 December 2016
Industry: oil and gas
- Principal Accounting Policies (extract)
- Inventories are stated at the lower of cost and net realisable value.
- Cost is determined using the first-in-first-out method and net realisable value is the estimated selling price less costs of disposal in the ordinary course of business. The cost of inventories includes direct costs plus production overheads.
2. Critical Accounting Estimates and Judgements (extract)
The net inventory balance comprises $202.4m of inventory carried at cost (2015 – $303.2m) and $57.3m of inventory carried at net realisable value (2015 – $28.0m).
The Group expects that $177.5m (2015 – $259.8m) of the Group’s inventories of $259.7m (2015 – $331.2m) will be realised within 12 months of the balance sheet date and $82.2m (2015 – $71.4m) will be realised after 12 months.
In 2016 a $12.1m impairment against the Group’s inventory carrying values was booked (2015 – $11.4m). During the year the Group reversed $1.8m (2015 – $2.1m) of a previous inventory impairment as the goods were sold during the year for an amount greater than their carrying value. The net amount of $10.3m (2015 – $9.3m) has been included in cost of sales in the income statement. $2.9m (2015 – $0.9m) of the provision was utilised during the year and, after foreign exchange gains of $0.6m (2015 – $0.4m), the provision for impairment of inventories at the year end was $26.7m (2015 – $19.9m).
As a result of the amendments to the Group’s financial covenants over the bank facility in 2016, security has been granted over inventories in certain subsidiaries in the UK, US and Canada, which have a gross value of $166.9m (2015 – $nil).
- Loss from Continuing Operations (extract)
The following items have been charged in arriving at loss from continuing operations: