105 Cloudberry Annual report 2020 Financial statements Impairment For inventory impairment is preformed if net sales value is less than the carrying value of the asset. Cloudberry has implemented a quarterly routine to go through all projects to secure satisfying progress and attention. If a project does not qualify for internally prioritization, but the projects is put on hold or discontinued, the book value is impairment tested and a sales value is assessed. If the sales value, less cost of disposal is less than book value, an impair- ment loss classified as a write down is recognized over the profit or loss statement. As per 31 December there was not recognised any impairment loss of inventory. Note 19 Impairment Impairment testing is done for assets, grouped at the lowest level for which they generate separately identifiable cash flow, when an impairment indicator is observed. This refers to assets classified as prop- erty, plant and equipment, and equity accounted investments. Goodwill is tested at least annually without regards to observed impairment indicators. Due to recent transactions Cloudberry has per- formed impairment tests for the following CGUs (cash generating unit) at year end. Property plant and equipment Producing power plants and projects under con- struction are tested for impairment to the extent that indicators of impairment exist. Impairment exists when the carrying value of an asset or CGU exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The subject for the impairment test is each individual hydro or wind power plant. The fair value less costs of disposal calculation is based on data from comparable transactions for similar assets when this is available, observable and is believed to be a reliable estimate. The value in use model applied by Cloudberry is a calculation based on a discounted cash flow model, with after tax cash flow from operations compared with the face value of debt. The estimated future cash flows are based on budgets for production and operating costs, external sources for information related to price forecasts, expected inflation and foreign currency and the Groups long term cost of capital. The cash flow is discounted using a post-tax discount rate which is based on an expected WACC with an equity return after tax (Equity IRR) normally in the range 5-10%. An equity return of 8% and a long-term borrowing rate of 3% p.a. was used as input in the 31.12.2020 impairment test. The impairment test did not cause any write downs of the carrying amount as per 31 December. The recoverable amount is sensitive to the discount rate as well as for the expected cash flows from operations derived from long term power prices and currency. Investments in associated companies With application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on its investment in its associated companies. At each reporting date, the Group determines whether there is an impairment indicator observed which indicates the need for impairment testing. If so, the Group calculates the amount of impairment as the difference between the recover- able amount of the associate and its carrying value, and then recognises the loss as ‘Net income(loss) from associated companies in the statement of profit or loss. The model for calculating the recoverable amount is the same as for producing assets held by the Group. The discounted cash flow model, with after tax cash flow from operations is applied. The esti- mated future cash flows are based on budgets for production and operations costs, external sources for information related to price forecast, expected inflation and currency, the Groups long term cost of capital and a discount rate post-tax which is based on an expected WACC with an equity return in the range 5-10%.