Porsche 2009 Annual Report Download - page 155

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Other receivables and financial assets
Other receivables and financial assets (excluding derivative financial instruments) are ac-
counted for at amortized cost. Appropriate allowance is made for known individual risks and general
credit risks.
Inventories
Inventories include raw materials, consumables and supplies as well as work in progress
and finished goods. Inventories are stated at the lower of cost or net realizable value as of the
reporting date.
The cost of inventories comprises all costs of purchase and other costs incurred in bring-
ing the inventories to their present location and condition. In addition to costs directly attributable,
the costs of conversion of the internally produced goods include an appropriate portion of incurred
materials and production overheads as well as production-related depreciation and other directly
attributable costs.
Net realizable value is the estimated selling price in the ordinary course of business less
the estimated costs of completion and the estimated costs necessary to make the sale.
If the carrying amounts are no longer realizable due to a decrease in prices, inventories are
written down accordingly.
Inventories of similar nature are generally measured using the weighted average cost method.
Long-term development contracts
Future receivables from long-term development contracts are recognized according to their
percentage of completion. The percentage of completion to be recognized per contract is calcu-
lated by comparing the accumulated costs with the total costs expected (cost-to-cost method). If
the result of a development contract cannot be determined reliably, income is only recognized at
the amount of the contract costs incurred (zero profit method). If the total of accumulated contract
costs and reported profits exceeds advance payments received, the development contracts are
recognized as an asset under trade receivables as future receivables from long-term development
contracts. Any negative balance is reported under trade payables. The principle of measuring as-
sets at the lower of carrying amount and net realizable value is taken into consideration.