Cloudberry Clean Energy Annual report 2020

Cloudberry Annual report 2020 Financial statements 78 · Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable and make use of best estimate Cash and cash equivalents Cash and cash equivalents include deposits held at call with financial institutions, commercial papers and other interest-bearing securities which normally are due within a period of three months. Taxes Income tax is calculated in accordance with ordi- nary tax rules and by applying the adopted tax rate. The tax expense in the statement of comprehensive income comprises taxes payable and changes in deferred tax liabilities and deferred tax assets. Taxes payable are calculated on the basis of the taxable income for the year. Deferred tax liabilities and deferred tax assets are calculated on the basis of temporary differences between the accounting and tax values and the tax effect of losses carried forward. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Deferred tax assets are recognised to the extent that it is probable that they will be utilised. Tax related to items recognised in other comprehensive income is also recognised in other comprehensive income, while tax related to equity transactions is recognised in equity. Note 3 Key accounting estimates and judgements The use of reasonable estimates and judgements is a critical element in preparing the financial state- ment of the Group. Due to the level of uncertainties inherent in Cloudberry’s business activities, manage- ment must make certain estimates and judgement that affect the reported values of assets, liabilities, revenues, expenses, and related disclosures. Management bases its estimates on historical expe- rience, current trends and other various assumptions that the company’s management believes to be relevant at the time the consolidated financial statements are prepared. Long term price forecast for power One of the critical assumptions used by manage- ment in making business decisions is the long-term price forecast for power and the related market developments. The assumption is also critical input for management related to financial statement processes such as: · Allocation of fair value in business combination: note 5 · Impairment testing: note 19 Management use Volue (former Wattsight), and their base case for long term power price forecasts. Volue is an external source of information which ensures an unbiased estimate. Management review and update the forecast continuously, based on market development. Fair value measurement Significant judgement is applied in the valuation of the Group’s contracts categorised within level 2 in the fair value hierarchy levels. Where fair value measurement cannot be derived from publicly available information, they are estimated using models and other valuations methods. To the extent possible, the assumptions and inputs used take into account externally verifiable inputs. However, such information is by nature subject to uncertainty, par- ticularly where comparable market-based transac- tions often do not exist. In such cases management is required to make market-based assumptions to find the best estimates.