2019 Annual Integrated Report

Accounting policy

Cost of inventories includes the purchase, conversion and other costs incurred in bringing the inventories to their present location and condition. The cost of inventories is determined by using the weighted average cost or first-in, first-out (FIFO) method. Inventories having a similar nature and use are measured using the same cost formula.

Inventories are measured at the lower of purchasing cost (raw materials and merchandise) or production cost (work in progress and finished goods) and net realizable value. Net realizable value represents the estimated selling price, less all estimated costs of completion and the estimated costs necessary to make the sale.

CO2 emission rights

With respect to the mechanism set up by the European Union to encourage manufacturers to reduce their greenhouse gas emissions, carbon dioxide (CO2) emission rights are granted to the Group for free. The Group is also involved in Clean Development Mechanism (CDM) under the Kyoto protocol. Under these projects, the Group has deployed facilities in order to reduce greenhouse gas emissions at the relevant sites in return for Certified Emission Reductions (CER).

In the absence of any IFRS regulating the accounting treatment of CO2 emission rights, the Group applies the Trade/Production model, according to which CO2 emission rights are presented as inventories if they will be consumed in the production process or as derivatives if they are held for trading. Energy Services is involved in CO2 emission rights’ trading, arbitrage and hedging activities. The net income or expense from these activities is recognized in “other operating gains and losses” (a) for the industrial component, where Energy Services sells the excess CO2 emission rights generated by Solvay or where a Group deficit is recognized, as well as (b) for the trading component, where Energy Services acts as a trader/broker with respect to those CO2 emission rights.

In light of its centralized CO2 emission rights’ portfolio management, for emission rights that are substitutable between subsidiaries, the Group’s financial statements reflect the Group’s net position. If this net position is negative, a provision is recognized, measured based on the market price of the CO2 emission rights at reporting date.

Energy savings certificates (ESCs)

Energy savings certificates are presented as inventory items. They are measured at weighted average cost. As their cost is not separately identifiable, and as they are a by-product, they are measured at their net realizable value upon initial recognition.

In € million



Finished goods



Raw materials and supplies



Work in progress









Net total