ST Engineering Annual Report 2020

NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2020 (CURRENCY – SINGAPORE DOLLARS UNLESS OTHERWISE STATED) C5 Inventories Group 2020 2019 $’000 $’000 Inventories of equipment and spares 1,269,192 1,311,858 In 2020, rawmaterials, consumables and changes in finished goods and work-in-progress recognised as cost of sales amounted to $4,954,353,000 (2019: $5,447,863,000). This includes inventories that were reclassified as contract assets and subsequently expensed in the course of fulfilling performance obligations in contracts with customers. Allowances for inventory obsolescence As at 31December 2020, the inventories are stated after allowance for inventory obsolescence of $367,607,000 (2019: $340,728,000). Recognition and measurement Inventories are measured at the lower of cost and net realisable value. Cost (comprising direct labour, material costs, direct expenses and an appropriate allocation of production overheads) is calculated on a first-in, first-out basis or weighted average cost basis depending on the nature and pattern of use of the inventories. Cost may also include transfers from equity on qualifying cash flow hedges of foreign currency purchases of inventories. Allowance is made for deteriorated, damaged, obsolete and slow-moving inventories. Net realisable value represents the estimated selling price in the ordinary course of business, less estimated costs to sell. Estimate and judgement: Allowance for inventory obsolescence The allowance for inventory obsolescence is based on estimates from historical trends and expected utilisation of inventories. The actual amount of inventory write-offs could be higher or lower than the allowance made. / ST ENG I NEER I NG 194