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## Operating expenses, inventory and deposit liability 

Cost of sales decreased by 0.6%. The cost per hl declined slightly compared to last year. 

## 1.3.1 Cost of sales and inventory 

Cost of materials mainly relates to barley/ malt, hops, glass, cans and other packaging materials. 

Purchased finished goods include cost of point-of-sale materials sold to customers and third-party products. 

## COST OF SALES 

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Research and development costs of DKK -99m (2012: DKK -96m) have been recognised in the income statement as incurred. 

## INVENTORY 

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Inventory increased due to the acquisition of Chongqing Brewery Group, which was fully consolidated from December 2013 and there- fore impacted the level of inventory at year- end while having only a minor impact on the cost of sales (only included for one month). 

## RAW MATERIAL RISKS 

Raw material risks are associated in particular with purchasing of cans (aluminium), malt (bar- ley) and energy. The management of raw ma- terial risks is coordinated centrally and aimed at achieving stable and predictable raw material prices in the long term and avoiding capital and liquidity being tied up unnecessarily. 

As the underlying markets for the specified categories of raw materials vary, so does the way in which they are hedged against price increases. The most common form of hedging is fixed-price agreements in local currencies with suppliers. 

To hedge the implicit risk of volatile alu- minium prices associated with the purchase of cans, the Group’s purchase price in the majority of purchase agreements is variable and based on the global market price of aluminium (London Metal Exchange, LME). The Group is thus able to hedge the underly- ing aluminium price risk. 

For 2013, the majority of the aluminium price risk has been hedged for Western Europe and Eastern Europe, and for 2014 the risk has been partially hedged. The total volume of aluminium purchased via financial instruments was approximately 110,800 tonnes at the end of 2013 (2012: 97,300 tonnes). Based on this volume, and assuming 100% efficiency, a 10% increase (decrease) in aluminium prices would impact equity positively (negatively) by DKK 108m (2012: DKK 106m). Fair values of the finan- cial instruments are specified in section 4.8. 

## 1.3  SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS 

At least once a year, the local entities assess whether the standard cost of inventories is a close approximation of the actual cost. The standard cost is also revised if during the year it deviates by more than 5% from the actual cost of the individual product. 

Management also assesses the impact on the standard cost of government and other grants received to fund operating activi- ties. This involves assessing the terms and conditions of grants received, including the risk of any repayment. 

Funding and grants are recognised in the income statement in the same period as the activities to which they relate. 

Indirect production overheads are cal- culated on the basis of relevant assump- tions as to capacity utilisation, production time and other factors pertaining to the individual product. 

The calculation of the net realisable value of inventory is mainly relevant to packaging materials, point-of-sale mate- rials and spare parts. The net realisable value is normally not calculated for beer and soft drinks because their limited shelf-life means that slow-moving goods must be scrapped instead. Following the economic downturn, the individual entities in the Group have paid special attention to inventory turnover and the remaining shelf-life when determining the net realisable value and scrapping. 

