Inventory

Inventory consists of fine art, jewelry, and decorative art owned by Sotheby's through its Principal and Agency segments. Principal segment inventory includes artworks that have been purchased opportunistically by Sotheby's, including property acquired for sale at auction in the near term in lieu of the Agency segment providing an auction guarantee to a potential consignor. To a much lesser extent, Principal segment inventory also includes the remaining inventory of NMP (see Note 4). The inventory of the Agency segment consists principally of items obtained as a result of the failure of guaranteed property to sell at auction. To a lesser extent, Agency segment inventory also includes property obtained as a result of buyer defaults in situations when Sotheby's has paid the consignor and property acquired in connection with the settlement of authenticity and other claims.

As of December 31, 2014 and 2013, Inventory balances by segment were as follows (in thousands of dollars):



December 31	2014		2013
Agency	$	157,835	$	130,665
Principal	59,297		61,475
Total	$	217,132	$	192,140

In certain situations, Sotheby's accepts Inventory in exchange for reductions to existing client receivable balances. For the years ended December 31, 2014 and 2013, Sotheby's acquired $6.7 million and $19 million, respectively, of Inventory in exchange for reductions in the client's Accounts Receivable and Notes Receivable balances ($4.7 million and $19 million, respectively). The difference in the amount of Inventory acquired in 2014 in respect of these situations and the amount of the reduction in the Accounts Receivable balance is due to the concurrent receipt of a balancing cash payment. These transactions result in non-cash additions to Inventory during 2014 and 2013, and are not reflected in the Consolidated Statement of Cash Flows for those years.

In 2014, 2013, and 2012, Inventory writedowns by segment were as follows (in thousands of dollars):



	2014		2013		2012
Agency	$	5,888	$	3,954	$	4,203
Principal	4,115		4,848		1,933
Total	$	10,003	$	8,802	$	6,136

In 2014, 2013, and 2012, Principal segment inventory writedowns include NMP writedowns of $0.7 million, $4.4 million, and $0.4 million, respectively.