10. Working capital
Note 10.1 Inventories
| Accounting policies | Significant estimates and assumptions |
|---|---|
| The Group measures inventories at cost, not higher than the sales price less costs of completing production and costs to sale. Inventory disposals are measured at weighted average cost. | In the consolidated financial statements the amount of those inventories of the KGHM INTERNATIONAL LTD. Group which arise from the leaching process, is determined based on the estimated recovery of metal from ore. The nature of the process of leaching copper from ore limits the precision of monitoring the level of inventories arising during this process. In subsequent reporting periods, adjustments are made to the estimated recovery of copper from the leaching of ore in a given reporting period to the level of production achieved in the subsequent period. As at 31 December 2017 the provisionally-set value of inventories amounted to PLN 47 million (as at 31 December 2016, PLN 106 million). In 2017 there was no adjustment of inventories arising from the leaching process whose value was provisionally set in the previous reporting periods (in 2016 an adjustment amounted to PLN 18 million). |
| | 2017 | 2016 |
|---|---|---|
| Materials | 722 | 650 |
| Half-finished goods and work in progress | 3 104 | 2 012 |
| Finished products | 561 | 541 |
| Merchandise | 175 | 294 |
| Total net carrying amount of inventories | 4 562 | 3 497 |
| Note 4.4 | Write-down of inventories during the reporting period | 2017 | 2016 |
|---|---|---|---|
| Write-down recognised in cost of sales | ( 37) | ( 83) | |
| Write-down reversed in cost of sales | 5 | 7 |
Maturities of inventories
| | 2017 | 2016 |
|---|---|---|
| Maturity over the 12 months from the end of the reporting period | 126 | 180 |
| Maturity of up to 12 months from the end of the reporting period | 4 436 | 3 317 |
Note 10.2 Trade receivables
Accounting policies |
|---|
| Trade receivables are initially recognised at fair value. After initial recognition, these receivables are measured at amortised cost while taking into account impairment allowance. Trade receivables with maturity dates of less than 12 months are not discounted. |
| | 2017 | 2016 |
|---|---|---|
| Current trade receivables | 1 522 | 1 292 |
As at 31 December 2017 as well as in 2016, there were no significant amounts of overdue trade receivables. Impairment allowances on trade receivables (cumulatively and recognised in a given period) are immaterial for the current and comparable reporting periods. The impairment allowance in 2017 on trade receivables amounted to PLN 21 million (in 2016, PLN 5 million).
The Group is exposed to the credit risk and currency risk arising from trade receivables. Credit risk management and assessment of the credit quality of receivables is presented in Note 7.5.2.3. Information on currency risk is presented in Note 7.5.1.3.
The fair value of trade receivables approximates the carrying amount.
Note 10.3 Trade payables
Accounting policies |
|---|
| Trade payables are initially recognised at fair value and are measured at amortised cost at the end of the reporting period. Trade payables with maturity dates of less than 12 months are not discounted. |
| | 2017 | 2016 |
|---|---|---|
| Non-current trade payables | 172 | 180 |
| Current trade payables | 1 823 | 1 433 |
| Trade payables | 1 995 | 1 613 |
The item trade payables contains payables due to the purchase and construction of fixed assets and intangible assets which, as at 31 December 2017, amounted to PLN 163 million in the non-current part and PLN 398 million in the current part (as at 31 December 2016, respectively PLN 170 million and PLN 350 million).
The Group is exposed to currency risk arising from trade payables and liquidity risk. Information on currency risk is presented in Note 7.5.1.3 and the liquidity risk in Note 8.3.1.
The fair value of trade payables approximates the carrying amount.
Note 10.4 Changes in working capital
| Inventories | Trade receivables | Trade payables | Total working capital | |
|---|---|---|---|---|
| As at 31 December 2016 | (3 497) | (1 292) | 1 613 | (3 176) |
| As at 31 December 2017 | (4 562) | (1 522) | 1 995 | (4 089) |
| Change in the statement of financial position | ( 1 065) | ( 230) | 382 | ( 913) |
| Exchange differences from translation of foreign operations statements with a functional currency other than PLN | ( 66) | ( 64) | 30 | ( 100) |
| Depreciation/amortisation recognised in inventories Liabilities due to purchase of property, plant and equipment and intangible assets | 64 | - | - | 64 |
| Other | - | - | ( 8) | ( 8) |
| Adjustments | ( 2) | ( 64) | ( 17) | ( 83) |
| Change in the statement of cash flows | (1 067) | (294) | 365 | (996) |
| Inventories | Trade receivables | Trade payables | Total working capital | |
|---|---|---|---|---|
| As at 31 December 2015 | (3 382) | (1 541) | 1 598 | (3 325) |
| As at 31 December 2016 | (3 497) | (1 292) | 1 613 | (3 176) |
| Change in the statement of financial position | ( 115) | 249 | 15 | 149 |
| Exchange differences from translation of foreign operations statements with a functional currency other than PLN | 27 | 27 | ( 12) | 42 |
| Depreciation/amortisation recognised in inventories | 5 | - | - | 5 |
| Liabilities due to purchase of property, plant and equipment and intangible assets | - | - | 138 | 138 |
| Other | 2 | - | ( 6) | ( 8) |
| Adjustments | 30 | 27 | 120 | 177 |
| Change in the statement of cash flows | ( 85) | 2761 | 135 | 326 |