Note 7 – Inventories
Accounting principles
Inventories are recognized at the lower of cost and net realizable value. Cost is determined using the first in, first out method (FIFO). The cost of finished goods and work in progress consists of design expenses, raw materials, direct salaries, other direct expenses and associated indirect manufacturing expenses (based on normal production capacity). Loan expenses are not included. The net realizable value is the estimated sales price in operating activities, less applicable variable selling expenses.
Estimated returned goods are recognized at their gross amounts. Sales decrease and a provision for returns is recognized in the balance sheet. As a result, the cost of sold goods with respect to the recognized returned goods increases inventories.
| Group | Parent Company | |||||
| SEK m | 2019 | 2018 | 2019 | 2018 | ||
| Koncernen | Moderbolaget | |||||
| MSEK | 2019 | 2018 | 2019 | 2018 | ||
| Raw materials and consumables | Råvaror och förnödenheter | 163 | 174 | – | – | |
| Work in progress | Varor under tillverkning | 79 | 7 | – | – | |
| Finished goods and goods for resale | Färdigvarulager och handelsvaror | 479 | 559 | 92 | 97 | |
| Advance payments to suppliers | Förskott till leverantörer | 60 | 31 | 11 | 8 | |
| Total | Summa | 780 | 771 | 103 | 105 | |
The change in inventories is reported under the item “Costs of goods sold” and, for the Group, amounted to SEK 3,835 m (2018: 3,833). The corresponding item for the Parent Company amounted to SEK 800 m (2018: 798).
The Group’s impairment write-down of inventory to the net realizable value amounted to SEK 15 m (2018: 6). The Parent Company’s recognized impairment losses on inventory amounted to SEK 4 m (2018: SEK 3 m). Impairment losses have been reversed in 2019 in the amount of SEK 1 m (2018: 1).