Inventory Accounting Policy
Inventories are valued at the lower of cost and net realisable value, primarily on a weighted average cost basis. Average costs are calculated by reference to the cost levels experienced in the relevant month together with those in opening inventory. Cost for raw materials and stores is purchase price and for partly processed and saleable products is generally the cost of production. For this purpose the costs of production include:
- labour costs, materials and contractor expenses which are directly attributable to the extraction and processing of ore;
- the depreciation of mining properties and leases and of property, plant and equipment used in the extraction and processing of ore; and
- production overheads.
Stockpiles represent ore that has been extracted and is available for further processing. If there is significant uncertainty as to when the stockpiled ore will be processed it is expensed as incurred. Where the future processing of this ore can be predicted with confidence, eg because it exceeds the mine's cut off grade, it is valued at the lower of cost and net realisable value. If the ore will not be processed within the 12 months after the statement of financial position date it is included within non-current assets and net realisable value is calculated on a discounted cash flow basis. Work in progress inventory includes ore stockpiles and other partly processed material. Quantities are assessed primarily through surveys and assays.
Source: Rio Tinto PLC, Annual Report
Inventory Disclosure
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Rio Tinto PLC, Statement of Financial Position, Inventory
Source: Based on data from Rio Tinto PLC Annual Reports
| Item |
Description |
The company |
| Raw materials and purchased components |
Carrying amount as of the balance sheet date of unprocessed items to be consumed in the manufacturing or production process. Also includes purchased parts that will be used as components of a finished product. |
Rio Tinto PLC's raw materials and purchased components increased from 2009 to 2010 and from 2010 to 2011.
|
| Work in progress |
Carrying amount as of the balance sheet date of merchandise or goods which are partially completed, are generally comprised of raw materials, labor and factory overhead costs, and which require further materials, labor and overhead to be converted into finished goods, and which generally require the use of estimates to determine percentage complete and pricing. |
Rio Tinto PLC's work in progress declined from 2009 to 2010 but then increased from 2010 to 2011 exceeding 2009 level.
|
| Finished goods and goods for resale |
Carrying amount as of the balance sheet date of merchandise or goods held by the company that are readily available for sale. |
Rio Tinto PLC's finished goods and goods for resale declined from 2009 to 2010 and from 2010 to 2011.
|
| Inventories |
Carrying amount (lower of cost or market) as of the balance sheet date of inventories less all valuation and other allowances. Excludes noncurrent inventory balances (expected to remain on hand past one year or one operating cycle, if longer). |
Rio Tinto PLC's inventories declined from 2009 to 2010 but then increased from 2010 to 2011 exceeding 2009 level.
|
