Financial Statements

Notes to the Consolidated Financial Statementsfor the year to 31 December 2008

17. Inventories

2008
£m
2007
£m
Raw materials and consumables 1.5 2.3
Finished goods and goods for resale 34.4 106.4
Residential developments:    
    Land* 3,410.3 3,879.4
    Development and construction costs 1,438.8 2,019.6
Commercial, industrial and mixed development properties 5.6 10.1
4,890.6 6,017.8

* Details of land creditors are in note 22.

The Directors consider all inventory to be current in nature. The operational cycle is such that the majority of inventory will not be realised within 12 months. It is not possible to determine with accuracy when specific inventory will be realised, as this will be subject to a number of issues such as consumer demand and planning permission delays.

Non-refundable land option payments of £81.3m (2007: £59.6m) are recorded within 'Residential developments: Land'.

During the year, the Group wrote down the carrying value of certain inventories to net realisable value following a significant deterioration in market conditions. The write down reflects the extent to which current market conditions have lowered management's estimates of selling prices and associated costs to sell for its land and work in progress below the value at which the inventory had previously been held in the balance sheet. The write down of £1,071.8m (2007: £289.7m) is included as an exceptional charge in the consolidated income statement. As a result of this review of the carrying value of inventory, the Group also reversed £59.0m (2007: nil) of write downs which had been previously charged to the income statement where management's estimates of recoverable value for certain land and work in progress had improved. This reversal is treated as exceptional income and netted off the exceptional charge.