Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell. Costs,
which comprise direct production costs, are based on the method most appropriate to the type of
inventory class, but usually on a first-in-first-out basis. Overheads are charged to profit or loss as
incurred. Net realisable value is based on the estimated selling price less any estimated completion or
selling costs.
When stocks are sold, the carrying amount of those stocks is recognised as an expense in the period in
which the related revenue is recognised. The amount of any write-down of stocks to net realisable value
and all losses of stocks are recognised as an expense in the period in which the write-down or loss occurs.
The amount of any reversal of any write-down of stocks is recognised as a reduction in the amount of
inventories recognised as an expense in the period in which the reversal occurs.
Work in progress is reflected in the accounts on a contract by contract basis by recording revenue and
related costs as contract activity progresses.