19. Inventories

  NOTE  31/12/2014  31/12/2013
(restated data) 
Raw materials   3,636 5,615
Work in progress   958 1,121
Finished goods   4,219 5,540
Merchandise   559 1,021
Spare parts   457 452
Inventories, net   9,829 13,749
Impairment allowances of inventories to net realisable value 19.1 949 202
Inventories, gross   10,778 13,951
 

19.1 Change in impairment allowances of inventories to net realizable value 

 20142013
 (restated data)
At the beginning of the period 202 194
Recognition 872 269
Reversal (83) (79)
Usage (69) (175)
Acquisition of subsidiary 7  - 
Foreign exchange differences 20 (7)
  949 202

Additional information regarding inventories, which were used as pledge for the Group’s liabilities is presented in note ‎30

19.2  Mandatory reserves

Obligation to maintain of mandatory reserves of crude oil and oilderivative products in European Union (EU) is defined by Council Directive 2009/119/WE of 14 September 2009, which requires Member States to hold the minimum level of mandatory reserves.     

In Poland and in Lithuania regulations regarding mandatory reserves require an obligation to held the mandatory reserves between entities producing or importing the crude oil and fuels and the specialized state agencies. In the Czech Republic maintaining and gathering mandatory reserves obligation is carried out only by the Government.

The ORLEN Group uses solutions developed in the previous years, that include sale of the part of the mandatory reserves to the third party and outsourcing keeping the mandatory reserves in favour of PKN ORLEN while ensuring the possibility of storing them in the current locations. These transactions each time obtained the approval from The Material Reserves Agency. The selling prices and the repurchase prices of reserves are determined basing on the market quotations. PKN ORLEN concluded transactions hedging future prices of crude oil in case of repurchase of mandatory reserves – detailed information is presented in note 32.4.  

Hedging crude oil price expressed in USD, the ORLEN Group uses commodity swaps and currency forwards. As at 31 December 2014 positive valuation of currency forwards was recognized in other financial assets of PLN 141 million (note 21), whereas negative value of commodity swaps was recognized in other financial liabilities, both long- and short-term  (note 26 and 29) of PLN (1,530) million. Net effect of PLN (1,125) million of the above mentioned valuations after consideration of deferred tax impact was recognized in equity in the position: hedging reserve (note 23.3).

As at 31 December 2013 the Group recognized in other financial assets, both short- and long-term (note 17 and 21) positive valuation of commodity swaps of PLN 169 million, whereas the negative value of currency forward was recognized in other financial liabilities (note 29) of PLN (12) million. Net effect of the above mentioned valuations after consideration of deferred tax impact of PLN 127 million in equity in the position: hedging reserve (note 23.3).

In the period from 1 January 2013 till the publication of the foregoing consolidated financial statements, the following contracts of sale/repurchase of mandatory reserves were concluded:

No.transaction dateparties of the transactionvalue of the transaction
sellerbuyermillion USDmillion PLN*
1 28 March 2013 Ashby PKN 404 1,318
including hedging transaction settlement
38 124
2 27 June 2013 PKN Neon 314 1,045
3 28 January 2014 Whirlwind PKN 385 1,189
including hedging transaction settlement
-11 -34
4 26 June 2014 PKN Cranbell 736 2,236
5 29 January 2015 Neon PKN 257 959
including hedging transaction settlement
112 419

* data translated with average exchange rate of the National Bank of Poland as at the transaction date

As at 31 December 2014 and as at 31 December 2013 the value of mandatory reserves  presented in consolidated financial statement amounted to PLN 4,024 million and PLN 7,219 million, respectively.