Arla Foods Annual Report 2020
Management Review Our Strategy
Our Brands and Commercial Segments Our Responsibility Our Governance
Revenue and cost
1.2 OPERATIONAL COSTS
Our Performance Review Our Consolidated Financial Statements Our Consolidated Environmental, Social and Governance Data
Revenue and cost
1.3 OTHER OPERATING INCOME AND COSTS
Accounting policies
Production costs
Production costs include direct and indirect costs
related to production including movements in volumes
on inventory and related inventory revaluation. Direct
costs comprise purchase of milk from owners, inbound
transportation costs, packaging, additives, consumables,
energy and variable salaries directly related to the
production. Indirect costs comprise other costs related
to the production of goods including depreciation and
impairment losses on production-related material and
other supply chain related costs. The purchase of milk
from cooperative owners is recognised at prepaid prices
for the accounting period and therefore does not
include the supplementary payment, which is classified
as distributions to owners and recognised directly
in equity.
Sales and distribution costs
Costs relating to sales staff, the write-down of
receivables, sponsorship, research and development,
depreciation and impairment losses are recognised as
sales and distribution costs. Sales and distribution
costs also include marketing expenses relating to
investment in the group's brands, like the development
of marketing campaigns, advertisement, exhibits,
and others.
Administration costs
Administration costs relate to management and
administration, including administrative staff, office
premises and office costs, as well as depreciation
and impairment.
Positive hedging impact
Other operating income and costs had a net positive
development of EUR 34 million compared to last year.
This was primarily attributable to a net positive hedging
effect of EUR 26 million from negative currency
developments, mainly in USD.
Other items included the net result from sale of surplus
energy and other items not part of the regular dairy
activities.
Accounting policies
Other operating income and costs consist of items
outside the regular course of dairy business activities.
It includes items such as gains and losses relating to the
settlement of disputes, revaluation gains from step
acquisition of entities, the net result from financial
hedging activities and the net result from the
production and sale of energy from our biogas plants.
Furthermore, it includes gains and losses from the
disposal of fixed assets no longer used within our dairy
operations.
2020
2019
78 ARLA FOODS ANNUAL REPORT 2020
Table 1.3 Other operating income and costs
(EURM)
Sale of electricity
Income of hedging instruments transferred from equity
Gain on disposal of intangible assets and PP&E
Other operating income
24
14
215 80
Total other operating income
61
39
Cost related to sale of electricity
-29
-29
Expense of hedging instruments transferred from equity
Other operating costs
-12
-27
-11
Total other operating costs
-52
-64
23102 22% 5
14
-8View entire presentation