Stora Enso Oyj described itself in its annual report as the “leading provider of renewable solutions in packaging, biomaterials, wooden constructions, and paper globally.”

Instructions

Access the financial statements in the financial report of Stora Enso Oyj for its year ended December 31, 2017, from the company’s website. With reference to the financial statements, answer the following questions.

a. Describe the accounting policies that the company uses for reporting inventories. What types of expenses are included in costs? Is interest included in inventory costs?

b. What different components make up Stora Enso’s inventory and what is the percentage of each of the total for December 31, 2017 and 2016? Which items represent a high percentage of the inventory? How has this changed over the years? Is there any cause for concern? What was the amount reported on the income statement related to inventory items? Is it possible to calculate the days in inventory ratio?

c. Does the company use the allowance method or the direct method to record writedowns to the inventory? What was the writedown amount during 2017? Were there any amounts reversed during the year?

d. How are the inventories of standing trees measured and reported? What types of assumptions are needed to determine the reported amount of these assets? Where are these assets located? How much was harvested in 2017? What other changes occurred in 2017 in the company’s biological assets? What are the effects on earnings for the current year and previous year?

e. Is this inventory-related disclosure useful to the reader? Is there any other information you would like to have?