Notes to the group financial statements l Note 4.1

4

WORKING CAPITAL
4.1 Inventories
 

Inventories mainly comprise handsets, SIM cards, accessories held for sale and consumable items.

Inventories are measured at the lower of cost and net realisable value. The cost of inventory is determined using the weighted average method. Cost comprises direct materials and, where applicable, overheads that have been incurred in bringing the inventories to their present location and condition. Net realisable value represents the estimated selling price in the ordinary course of business, less applicable variable selling expenses.

As the functional currencies of MTN South Sudan Limited and MTN Syria (JSC) are the currencies of hyperinflationary economies, inventories relating to these subsidiaries are measured at the lower of the restated cost and net realisable value.
 
   2017 
Rm  		       2016 
Rm 		   
Finished goods – at cost  3 840        5 053    
Handsets  2 658        3 110    
SIM cards and access  1 182        1 943    
Consumables  61        71    
Less: Write-down to net realisable value1  (901)       (1 152)   
   3 000        3 972    

1 The write-down of inventories to net realisable value mainly relates to handsets.

Scancom Limited (MTN Ghana) has secured facilities through the pledge of its inventories amounting to R56 million (2016: R227 million) (note 6.1).

Reconciliation of write-down of finished goods

   At the 
beginning 
of the 
year 
Rm 		 Additions1
Rm 		 Reversals1
Rm 		 Utilised 
Rm 		 Exchange 
and other 
movements 
Rm 		 At the 
end 
of the 
year 
Rm 		   
2017                      
Movement in write-down  (1 152) (297) 135  376  37  (901)   
2016                      
Movement in write-down  (1 190) (303) 264  58  19  (1 152)   
1 A net write-down on inventories of R162 million (2016: R39 million) was recognised in the current year. This amount is included in other operating expenses in profit or loss (note 2.4).

Notes to the group financial statements l Note 4.1