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(BQ) Part 2 book "Financial accounting - An introduction" has contents: Current assets, current liabilities, provisions and non-current (long-term) liabilities, ownership interest, ratio analysis, reporting corporate performance, reporting cash flows. | www.downloadslide.com Chapter 9 Current assets REAL WORLD CASE Current assets of a manufacturing company This case extracts information from the annual report of Cadbury plc to show how the company explains its management of current assets. Current assets: balance sheets at 31 December 2008 Note 821 2 1,197 41 493 46 2,600 2007 £m 228 92 447 255 69 497 767 27 767 247 1,067 35 251 268 2008 £m 20 Inventories Short-term investments Trade and other receivables Tax recoverable Cash and cash equivalents Derivative financial instruments 2007 £m 2,635 19 2008 £m 821 Annual report 2008, p. 84. 19. Inventories Raw materials and consumables Work in progress Finished goods and goods for resale The cost of inventories recognised as an expense for the period ended 31 December 2008 total £2,870 million (2007: £2,504 million). Annual report 2008, p. 109. Accounting policy note (r) Inventories Inventories are recorded at the lower of average cost and estimated net realisable value. Cost comprises direct material and labour costs together with the relevant factory overheads (including depreciation) on the basis of normal activity levels. Amounts are removed from inventory based on the average value of the items of inventory removed. Annual report 2008, p. 94. www.downloadslide.com Chapter 9 Current assets Accounting policy note – transactional exposures The Group is exposed to changes in prices of its raw materials, certain of which are subject to potential short and long-term fluctuations. In respect of such commodities the Group enters into derivative contracts in order to provide a stable cost base for marketing finished products. The use of commodity derivative contracts enables the Group to obtain the benefit of guaranteed contract performance on firm priced contracts offered by banks, the exchanges and their clearing houses. In principle these derivatives may qualify as ‘cash flow hedges’ of future forecast transactions. To the extent that the hedge is