Accounting Exercise 5

Exercse 5
This assignment asks you to examine the accounts receivable and inventory related
information for Reliance Steel (Reliance), a US-based steel company, and Gerdau SA
(Gerdau), a Brazil-based steel company. The questions refer to the financial statements and
notes in Exhibits 1 and 2.
1) For both Reliance and Gerdau, answer the following:
Reliance
Gerdau
How much did customers owe at
December 31, 2023?
Of the amount customers owe at
December 31, 2023, how much does
the company expect to collect?
Of the amount customers owe at
December 31, 2023, how much does
the company not expect to collect?
What was the 2023 bad debt
expense?
What was the days’ sales
outstanding for 2023?
What was the accounts receivable
turnover for 2023?
2) What do the above amounts suggest about differences in the companies’ credit
terms and expected creditworthiness of their customers? What factors might
explain the differences?
1
3) Compute the following inventory-related metrics for Reliance and Gerdau, both for
2023:
As-reported
Reliance
Adjusted to FIFO
Gerdau
Inventory days
Inventory
turnover
4) What do the above amounts suggest about differences in the companies’ efficiency
in terms of inventory levels? What factors might explain the differences? Which of
Reliance’s metrics – reported-basis or FIFO-basis – is more appropriate for
comparisons to Gerdau? Why or why not?
2
Exhibit 1 – Reliance Steel financial statements and notes
RELIANCE, INC.
CONSOLIDATED BALANCE SHEETS
(in millions, except number of shares which are reflected in thousands and par value)
Dec 31, 2023
Dec 31, 2022
$
$
ASSETS
Current assets:
Cash and cash equivalents
Accounts receivable, less allowance for credit losses of $24.9 at December 31,
2023 and $26.1 at December 31, 2022
Inventories
Prepaid expenses and other current assets
Income taxes receivable
Total current assets
Property, plant and equipment:
Land
Buildings
Machinery and equipment
Accumulated depreciation
Property, plant and equipment, net
Operating lease right-of-use assets
Goodwill
Intangible assets, net
Cash surrender value of life insurance policies, net
Other long-term assets
Total assets
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
Accrued expenses
Accrued compensation and retirement benefits
Accrued insurance costs
Current maturities of long-term debt and short-term borrowings
Current maturities of operating lease liabilities
Total current liabilities
Long-term debt
Operating lease liabilities
Long-term retirement benefits
Other long-term liabilities
Deferred income taxes
Total liabilities
Equity:
Common stock and additional paid-in capital, $0.001 par value
and 200,000 shares authorized
Issued and outstanding shares—57,271 at December 31, 2023 and 58,787 at
December 31, 2022
Retained earnings
Accumulated other comprehensive loss
Total Reliance stockholders’ equity
Noncontrolling interests
Total equity
Total liabilities and equity
1,080.2
1,173.4
1,472.4
2,043.2
140.4
35.6
4,771.8
1,565.7
1,995.3
115.6
36.6
4,886.6
281.7
1,510.9
2,700.4
(2,244.6)
2,248.4
231.6
2,111.1
981.1
43.8
92.5
$ 10,480.3
262.7
1,359.3
2,446.9
(2,094.3)
1,974.6
216.4
2,105.9
1,019.6
42.0
84.8
$ 10,329.9
$
$
410.3
118.5
213.9
44.4
0.3
56.2
843.6
1,141.9
178.9
25.1
64.0
494.0
2,747.5
0.1
7,798.9
(76.7)
7,722.3
10.5
7,732.8
$ 10,480.3
412.4
118.8
240.0
43.4
508.2
52.5
1,375.3
1,139.4
165.2
26.1
51.4
476.6
3,234.0
0.1
7,173.6
(86.3)
7,087.4
8.5
7,095.9
$ 10,329.9
3
RELIANCE, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in millions, except number of shares which are reflected in thousands
and per share amounts)
2023
Net sales
Costs and expenses:
Cost of sales
Warehouse, delivery, selling, general and administrative
Depreciation and amortization
Impairment of intangible assets
Operating income
Other (income) expense:
Interest expense
Other (income) expense, net
Income before income taxes
Income tax provision
Net income
Less: net income attributable to noncontrolling interests
Net income attributable to Reliance
Earnings per share attributable to Reliance stockholders:
Basic
Diluted
Shares used in computing earnings per share:
Basic
Diluted
Year Ended December 31,
2022
2021
$ 14,805.9
$ 17,025.0
$ 14,093.3
10,258.6
2,562.4
245.4
—
13,066.4
1,739.5
11,773.7
2,504.2
240.2
—
14,518.1
2,506.9
9,603.0
2,306.5
230.2
4.7
12,144.4
1,948.9
$
40.1
(41.3)
1,740.7
400.6
1,340.1
4.2
1,335.9 $
62.3
14.2
2,430.4
586.2
1,844.2
4.1
1,840.1
$
62.7
3.1
1,883.1
465.7
1,417.4
4.4
1,413.0
$
$
22.90
22.64
30.39
29.92
$
$
22.35
21.97
$
$
58,328
59,015
60,559
61,495
63,217
64,327
RELIANCE, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
Net income
Other comprehensive income (loss):
Foreign currency translation gain (loss)
Pension and postretirement benefit
adjustments, net of tax
Total other comprehensive income (loss)
Comprehensive income
Less: comprehensive income attributable
to noncontrolling interests
Comprehensive income attributable to
Reliance
Year Ended December 31,
2022
2023
$
$
1,340.1
$
1,844.2
2021
$
1,417.4
8.3
(28.8)
(2.5)
1.3
9.6
1,349.7
11.4
(17.4)
1,826.8
11.5
9.0
1,426.4
4.2
4.1
4.4
1,345.5
$
1,822.7
$
1,422.0
4
RELIANCE, INC.
CONSOLIDATED STATEMENTS OF EQUITY
Year Ended December 31,
2022
2021
(in millions, except per share amounts)
2023
Total equity, beginning balances
$
Common stock and additional paid-in capital:
Beginning balances
Stock-based compensation
Taxes paid related to net share settlement of restricted stock units
Repurchase of common shares
Excise tax on repurchase of common shares
Ending balances
Retained earnings:
Beginning balances
Net income attributable to Reliance
Cash dividends and dividend equivalents
Repurchase of common shares
Ending balances
Accumulated other comprehensive loss:
Beginning balances
Other comprehensive income (loss)
Ending balances
Total Reliance stockholders’ equity, ending balances
Noncontrolling interests:
Beginning balances
Comprehensive income
Capital contribution
Dividends paid
Ending balances
Total equity, ending balances
$
Cash dividends declared per common share
$
7,095.9
$
6,093.7
$
5,122.7
0.1
65.0
(54.1)
(7.0)
(3.9)
0.1
0.1
65.3
(39.7)
(25.6)
—
0.1
0.1
70.8
(21.2)
(49.6)
—
0.1
7,173.6
1,335.9
(238.1)
(472.5)
7,798.9
6,155.3
1,840.1
(217.1)
(604.7)
7,173.6
5,193.2
1,413.0
(177.0)
(273.9)
6,155.3
(86.3)
9.6
(76.7)
7,722.3
(68.9)
(17.4)
(86.3)
7,087.4
(77.9)
9.0
(68.9)
6,086.5
8.5
4.2
—
(2.2)
10.5
7,732.8 $
4.00 $
7.2
4.1
0.3
(3.1)
8.5
7,095.9 $
3.50 $
7.3
4.4
—
(4.5)
7.2
6,093.7
2.75
5
RELIANCE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
2023
Year Ended December 31,
2022
Operating activities:
Net income
$
1,340.1
$
1,844.2
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense
245.4
240.2
Impairment of intangible assets
—
—
Provision for credit losses
3.5
3.4
Deferred income tax provision (benefit)
16.2
(6.7)
Stock-based compensation expense
65.0
65.3
Net (gain) loss on life insurance policies
and deferred compensation plan assets
(0.5)
22.4
Other
(0.3)
4.8
Changes in operating assets and liabilities (excluding effect of businesses acquired):
Accounts receivable
95.6
105.7
Inventories
(41.5)
58.9
Prepaid expenses and other assets
37.3
17.4
Accounts payable and other liabilities
(89.5)
(237.0)
Net cash provided by operating activities
1,671.3
2,118.6
Investing activities:
Acquisitions, net of cash acquired
(24.0)
—
Purchases of property, plant and
equipment
(468.8)
(341.8)
Proceeds from sales of property, plant and
equipment
11.1
10.9
Other
(2.2)
(17.6)
Net cash used in investing activities
(483.9)
(348.5)
Financing activities:
Net short-term debt repayments
(2.2)
(2.2)
Proceeds from long-term debt borrowings
—
—
Principal payments on long-term debt
(506.1)
(0.3)
Cash dividends and dividend equivalents
(238.1)
(217.1)
Share repurchases
(479.5)
(630.3)
Taxes paid related to net share settlement
of restricted stock units
(54.1)
(39.7)
Other
(2.3)
(3.0)
Net cash used in financing activities
(1,282.3)
(892.6)
Effect of exchange rate changes on cash and
cash equivalents
1.7
(4.6)
(Decrease) increase in cash and cash
equivalents
(93.2)
872.9
Cash and cash equivalents at beginning of
year
1,173.4
300.5
Cash and cash equivalents at end of year
$
1,080.2
$
1,173.4
Supplemental cash flow information:
Interest paid during the year
$
41.8
$
59.7
Income taxes paid during the year, net
$
386.3
$
692.4
2021
$
1,417.4
230.2
4.7
9.8
(23.8)
70.8
5.0
(5.0)
(656.1)
(505.9)
26.2
226.1
799.4
(439.3)
(236.6)
36.0
(12.4)
(652.3)
(0.8)
20.0
(20.7)
(177.0)
(323.5)
(21.2)
(5.7)
(528.9)
(1.2)
(383.0)
$
683.5
300.5
$
$
59.1
444.4
6
Note 4. Inventories
Our inventories are primarily stated on the LIFO method, which is not in excess of market. We use the LIFO
method of inventory valuation because it results in a better matching of costs and revenues. The cost of
inventories stated on the first-in, first-out (“FIFO”) method is not in excess of net realizable value.
Inventories consisted of the following:
(in millions)
Dec 31, 2023
LIFO inventories—cost on FIFO method
Cost on FIFO method higher than LIFO value
Inventories—stated on LIFO method
Inventories—stated on FIFO method
$
$
Dec 31, 2022
2,087.3 $
(579.3)
1,508.0
535.2
2,043.2 $
2,257.9
(743.8)
1,514.1
481.2
1,995.3
The changes in the LIFO inventory valuation reserve were as follows:
(in millions)
2023
LIFO inventory valuation reserve (income) expense
$
Year Ended December 31,
2022
2021
(164.5) $
(76.6) $
704.8
Cost decreases for the majority of our products were the primary cause of the 2023 and 2022 LIFO
inventory valuation reserve change resulting in a credit, or income. Cost increases for the majority of our
products were the primary cause of the 2021 LIFO inventory valuation reserve change resulting in a charge, or
expense. There were insignificant liquidations of LIFO inventory quantities for all years presented.
RELIANCE, INC.
SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS
Additions
Charged to
Costs and
Expenses
Balance at
Beginning
of Year
(in millions)
Year Ended December 31, 2023:
Amounts
Charged to
Other
Accounts
Deductions(1)
Balance at
End of
Year
Allowance for credit losses
$
26.1
$
3.5
$
4.7
$
—
$
24.9
Allowance for credit losses
$
26.7
$
3.4
$
4.0
$
—
$
26.1
Allowance for credit losses
$
19.0
$
9.8
$
2.8
$
0.7
$
26.7
Year Ended December 31, 2022:
Year Ended December 31, 2021:
(1)
Uncollectible accounts written off.
7
Exhibit 2 – Gerdau SA financial statements and notes
GERDAU S.A.
CONSOLIDATED BALANCE SHEETS
In thousands of Brazilian reais (R$)
CURRENT ASSETS
Cash and cash equivalents
Short-term investments
Trade accounts receivable – net
Inventories
Other current assets
NON-CURRENT ASSETS
Tax credits
Deferred income taxes
Other non-current assets
Investments in associates and joint ventures
Goodwill
Leasing
Other intangibles
Property, plant and equipment, net
TOTAL ASSETS
CURRENT LIABILITIES
Trade accounts payable
Short-term debt
Debentures
Taxes payable
Leasing payable
Employee benefits
Environmental liabilities
Fair value of derivatives
Other current liabilities
NON-CURRENT LIABILITIES
Long-term debt
Debentures
Deferred income taxes
Provision for tax, civil and labor liabilities
Environmental liabilities
Leasing payable
Other non-current liabilities
Note
Dec 31, 2023
4
4
5
6
3,005,645
2,338,097
4,875,394
15,227,778
3,751,023
29,197,937
2,475,863
2,959,135
4,999,004
17,817,585
3,005,835
31,257,422
7
8
1,916,100
2,219,461
2,431,155
3,858,449
10,825,148
1,182,654
373,710
22,880,530
45,687,207
74,885,144
511,547
2,164,477
2,535,455
3,896,518
11,634,464
960,876
415,159
20,422,734
42,541,230
73,798,652
14
15
16
18
13
21
22
17
5,901,183
1,783,201
14,421
512,935
373,151
209
139,395
19,042
2,541,075
11,284,612
6,618,923
2,492,262
628,886
395,212
275,934
516
262,018
19,056
2,769,774
13,462,581
15
16
8
19
22
13
8,296,474
799,212
204,151
2,185,825
378,274
904,451
1,593,282
14,361,669
8,687,355
798,887
96,341
2,026,003
222,634
754,709
1,451,949
14,037,878
20,215,343
11,597
(150,182)
25,914,830
3,067,371
49,058,959
179,904
49,238,863
74,885,144
19,249,181
11,597
(179,995)
22,172,561
4,862,850
46,116,194
181,999
46,298,193
73,798,652
9
11
13
12
10
EQUITY
23
Capital
Capital reserves
Treasury stocks
Retained earnings
Other reserves
EQUITY ATTRIBUTABLE TO THE EQUITY HOLDERS OF THE PARENT
NON-CONTROLLING INTERESTS
EQUITY
TOTAL LIABILITIES AND EQUITY
Dec 31, 2022
8
GERDAU S.A.
CONSOLIDATED STATEMENTS OF INCOME
for the years ended December 31, 2023, 2022 and 2021
In thousands of Brazilian reais (R$)
Note
NET SALES
Cost of sales
GROSS PROFIT
Selling expenses
General and administrative expenses
Other operating income
Other operating expenses
Eletrobras compulsory loan recovery
Results in operations with subsidiary and joint ventures
Impairment of financial assets
Equity in earnings of unconsolidated companies
INCOME BEFORE FINANCIAL INCOME (EXPENSES) AND
TAXES
Financial income
Financial expenses
Other, net
INCOME BEFORE TAXES
Income and social contribution taxes
NET INCOME
ATTRIBUTABLE TO:
Owners of the parent
Non-controlling interests
25
30
68,916,447 82,412,210 78,345,081
(57,583,992) (63,661,156) (57,527,721)
11,332,455 18,751,054 20,817,360
30
(716,195)
(733,026)
(715,830)
30
(1,491,441) (1,454,592) (1,390,121)
30
1,033,506
246,313
979,760
30
(522,476)
(210,042)
(460,029)
19
—
—
1,391,280
3.4
—
—
(162,913)
30
(10,728)
(81)
357
9
827,606
1,151,827
563,158
2023
Basic earnings per share – (R$)
Diluted earnings per share – (R$)
24
24
31
31
31
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
for the years ended December 31, 2023, 2022 and 2021
In thousands of Brazilian reais (R$)
Net income for the year
Items that may be reclassified subsequently to profit or loss
Other comprehensive income from associates and joint ventures
Cumulative translation adjustment
Recycling of cumulative translation adjustment to net income
Unrealized Gains (Losses) on net investment hedge
Cash flow hedges
Unrealized Gains (Losses) on Financial Instruments, net of tax
2022
2021
10,452,727
903,019
(1,396,789)
(612,352)
9,346,605
(1,809,622)
7,536,983
17,751,453
606,362
(1,563,158)
(935,630)
15,859,027
(4,379,475)
11,479,552
21,023,022
249,024
(1,433,087)
433,609
20,272,568
(4,713,630)
15,558,938
7,501,565
35,418
7,536,983
4.29
4.26
11,425,512
54,040
11,479,552
6.53
6.50
15,494,111
64,827
15,558,938
9.09
9.04
2023
2022
2021
7,536,983
11,479,552
15,558,938
176,214
(2,405,155)
—
247,924
(205,592)
(1,335,109)
13,239
488,146
225,507
1,275,767
193,334
(695,102)
783
(1,980,234)
(607)
(1,039,923)
1,907
1,001,413
Items that will not be reclassified subsequently to profit or loss
Remeasurement of defined benefit pension plan, net of tax
Other comprehensive (loss) income, net of tax
Total comprehensive income for the year, net of tax
Total comprehensive income attributable to:
Owners of the parent
Non-controlling interests
96,570
245,853
252,532
96,570
245,853
252,532
(1,883,664)
(794,070) 1,253,945
5,653,319 10,685,482 16,812,883
5,625,696
27,623
5,653,319
10,634,205
51,277
10,685,482
16,753,253
59,630
16,812,883
9
Attributed to parent company’s interest
Retained
Treasury
Capital
earnings
stocks
Reserve
Other
reserves
Total parent
company’s
interest
Non-controlling
interests
Total
Shareholder’s
Equity
4,536,470
30,860,271
224,939
31,085,210
15,558,938
in thousands of Brazilian reais (R$)
Capital
Balance as of January 1, 2021
19,249,181
11,597
(229,309)
7,292,332
Net income
—
—
—
15,494,111
—
15,494,111
64,827
Other comprehensive income (loss) recognized in the year
—
—
—
—
1,259,142
1,259,142
(5,197)
1,253,945
Total comprehensive income (loss) recognized in the year
—
—
—
15,494,111
1,259,142
16,753,253
59,630
16,812,883
Dividends/interest on capital
—
—
—
(5,014,978)
—
(5,014,978)
(54,234)
(5,069,212)
Other
—
—
76,900
67,029
(138,193)
5,736
(18,968)
(13,232)
19,249,181
11,597
(152,409)
17,838,494
5,657,419
42,604,282
211,367
42,815,649
Net income
—
—
—
11,425,512
—
11,425,512
54,040
11,479,552
Other comprehensive income (loss) recognized in the year
—
—
—
—
(791,307)
(791,307)
(2,763)
(794,070)
Total comprehensive income (loss) recognized in the year
—
—
—
11,425,512
(791,307)
10,634,205
51,277
10,685,482
Dividends/interest on capital
—
—
—
(6,091,461)
—
(6,091,461)
(60,996)
(6,152,457)
Effects of the share buyback program
—
—
(1,073,124)
—
(1,073,124)
—
—
1,024,086
—
—
(1,073,124)
Cancellation of treasury stocks
—
(1,024,086)
—
—
—
Other
—
—
21,452
24,102
(3,262)
42,292
(19,649)
22,643
19,249,181
11,597
(179,995)
22,172,561
4,862,850
46,116,194
181,999
46,298,193
Net income
—
—
—
7,501,565
—
7,501,565
35,418
7,536,983
Other comprehensive income (loss) recognized in the year
—
—
—
—
(1,875,869)
(1,875,869)
(7,795)
(1,883,664)
Total comprehensive income (loss) recognized in the year
—
—
—
7,501,565
(1,875,869)
5,625,696
27,623
5,653,319
Dividends/interest on capital
—
—
—
(2,799,654)
—
(2,799,654)
(20,192)
(2,819,846)
966,162
—
—
(966,162)
—
—
—
—
2021 Changes in Equity
Balance as of December 31, 2021 (Note 23)
2022 Changes in Equity
Balance as of December 31, 2022 (Note 23)
2023 Changes in Equity
Increase in Capital through capitalization of Retained earnings
Other
Balance as of December 31, 2023 (Note 23)
—
—
29,813
6,520
80,390
116,723
(9,526)
107,197
20,215,343
11,597
(150,182)
25,914,830
3,067,371
49,058,959
179,904
49,238,863
Exercse 5
GERDAU S.A.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
for the years ended December 31, 2023, 2022 and 2021
10
Exercse 5
GERDAU S.A.
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31, 2023, 2022 and 2021
In thousands of Brazilian reais (R$)
Note
2023
Cash flows from operating activities
Net income for the year
7,536,983
Adjustments to reconcile net income for the year to net cash provided by operating activities
Depreciation and amortization
30
3,047,212
Losses (Gains) on derivative financial instruments, net
31
14,979
Income tax
8
1,809,622
Gain (Loss) on disposal of property, plant and equipment
27,525
Results in operations with subsidiary and joint ventures
—
Impairment (Reversal) of financial assets
5
10,728
Provision (Reversal) for net realizable value adjustment in
6
12,036
inventory, net
Other
(35,016)
Changes in assets and liabilities
(Increase) Decrease in trade accounts receivable
(294,509)
Decrease (Increase) in inventories
1,305,424
(Decrease) Increase in trade accounts payable
(355,416)
(Increase) Decrease in other receivables
(107,171)
Decrease in other payables
(434,100)
Dividends from associates and joint ventures
461,292
Purchases of short-term investments
(7,223,644)
Proceeds from maturities and sales of short-term investments
7,908,990
Cash provided by operating activities
13,684,935
Interest paid on loans and financing
(858,301)
Interest paid on lease liabilities
13
(127,787)
Income and social contribution taxes paid
(1,560,137)
Net cash provided by operating activities
11,138,710
Cash flows from investing activities
Purchases of property, plant and equipment
10
(5,209,128)
Proceeds from sales of property, plant and equipment,
40,661
investments and other intangibles
Additions in other intangibles
12
(127,195)
Shares repurchase from joint venture
9
47,006
Capital (increase) decrease in associate and joint venture
9
(524,185)
Net cash used by investing activities
(5,772,841)
Cash flows from financing activities
Acquisition of interest in subsidiary
—
Purchases of Treasury stocks
—
Dividends and interest on capital paid
(2,683,328)
Proceeds from loans and financing
1,776,684
Payment of loans and financing
(2,830,684)
Leasing payment
(388,202)
Intercompany loans, net
102
Net cash used in financing activities
(4,125,428)
Exchange variation on cash and cash equivalents
(710,659)
Increase (Decrease) in cash and cash equivalents
529,782
Cash and cash equivalents at beginning of year
2,475,863
Cash and cash equivalents at end of year
3,005,645
2022
2021
11,479,552
15,558,938
2,866,699
(39,079)
4,379,475
(25,579)
—
81
2,658,561
(17,928)
4,713,630
(77,417)
162,913
(357)
43,843
(2,812)
1,212,969
(238,590)
290,579
(2,039,135)
(995,598)
(284,826)
(1,597,602)
425,493
(3,588,529)
3,434,859
15,563,202
(968,851)
(88,370)
(3,355,643)
11,150,338
(1,614,047)
(7,704,329)
2,534,329
290,658
(386,447)
117,438
(3,010,084)
3,595,212
16,579,668
(1,100,826)
(68,789)
(2,893,120)
12,516,933
(4,291,873)
(3,026,023)
48,322
82,635
(189,382)
—
(26,751)
(4,459,684)
(166,310)
—
113,595
(2,996,103)
(46,153)
(1,073,124)
(5,891,690)
2,263,311
(3,201,126)
(310,226)
2,721
(8,256,287)
(119,158)
(1,684,791)
4,160,654
2,475,863
—
—
(5,339,426)
609,703
(5,116,621)
(275,854)
139,556
(9,982,642)
5,262
(456,550)
4,617,204
4,160,654
11
Exercse 5
NOTE 5 — TRADE ACCOUNTS RECEIVABLE
Trade accounts receivable – in Brazil
Trade accounts receivable – exports from Brazil
Trade accounts receivable – outside of Brazil
(-) Impairment loss on trade receivables
2023
2022
2,622,865
617,577
1,724,838
(89,886)
4,875,394
2,641,881
262,306
2,187,404
(92,587)
4,999,004
Accounts receivable by aging are as follows:
2023
Current
Past-due:
Up to 30 days
From 31 to 60 days
From 61 to 90 days
From 91 to 180 days
From 181 to 360 days
Above 360 days
(-) Impairment on financial assets
The changes in the impairment on financial assets are as follows:
Balance as of January 1, 2021
Impairment on financial assets during the year
Write-offs
Loss of control of subsidiary (note 3.4)
Exchange variation
Balance as of December 31, 2021
Impairment on financial assets during the year
Write-offs
Exchange variation
Balance as of December 31, 2022
Impairment on financial assets during the year
Write-offs
Exchange variation
Balance as of December 31, 2023
2022
4,294,446
4,303,352
513,384
48,538
24,027
50,502
13,251
21,132
(89,886)
4,875,394
629,018
50,587
37,065
24,627
18,934
28,008
(92,587)
4,999,004
(137,146)
357
9,892
23,203
(4,078)
(107,772)
(81)
11,313
3,953
(92,587)
(10,728)
9,574
3,855
(89,886)
The Company’s maximum exposure to credit risk, net of impairment on financial assets, is the amount of
accounts receivable. The credit quality of accounts receivable to maturity is considered adequate, and the
value of the effective risk of possible losses on accounts receivable from customers is presented as
impairment on financial assets.
12
Exercse 5
NOTE 6 — INVENTORIES
Inventories are measured at the lower of historical cost of acquisition or production and net realizable value.
The acquisition and production costs include transportation, storage and non-recoverable taxes.
Net realizable value is the estimated sale price in the ordinary course of business less the estimated costs of
completion and directly related selling expenses.
2023
Finished products
Work in progress
Raw materials
Storeroom supplies
Imports in transit
(-) Allowance for adjustments to net realizable value
6,971,497
3,336,780
3,241,607
1,266,465
469,601
(58,172)
15,227,778
2022
7,942,003
4,480,989
3,257,362
1,349,130
835,598
(47,497)
17,817,585
The allowance for adjustment to net realizable value of inventories, on which the provision and write-offs are
registered with impact on cost of sales, is as follows:
Balance as of January 1, 2021
(6,119)
Provision for the year
(6,331)
Reversal of adjustments to net realizable value
9,143
Exchange rate variation
(68)
Balance as of December 31, 2021
(3,375)
Provision for the year
(56,441)
Reversal of adjustments to net realizable value
12,598
Exchange rate variation
(279)
Balance as of December 31, 2022
(47,497)
Provision for the year
(59,783)
Reversal of adjustments to net realizable value
47,747
Exchange rate variation
1,361
Balance as of December 31, 2023
(58,172)
13