Cloudberry Clean Energy Annual report 2020

79 Cloudberry Annual report 2020 Financial statements Assessments in Business Combinations Significant management judgement is required in the assessment of a business combination. This includes determining if an acquisition is a business combination or an asset acquisition, determining an acquiring part and determining the allocation of fair value ta assets and liabilities acquired. Deferred tax assets Significant management judgement is required when determining the amount of deferred tax asset to be recognised. Deferred tax asset is to be recog- nised for unused tax losses to the extent that it is probable that taxable profit will be available within reasonable time against which the losses can be utilised. Uncertain tax positions and potential tax exposures are analysed individually and the best estimate of the probable amount for liabilities to be paid and assets to be received are recognised within current tax or deferred tax as appropriate. See note 16. Lease When calculating lease liability, the discount factor is a significant estimate. In the absence of an identifi- able discount rate, implicit in the lease agreement, the discount rate used is the Groups incremental borrowing rate. Judgement is also used to assess the lease period and the assessment of lease option in the leasing period. See note 25. Share based payment The fair value of management warrant programme makes use of an estimation model, Black-Scholes for calculation the call option value at grant date. This model makes use of management estimates for expected life option, volatility, and expected dividend yield. See note 13 Employee benefits and share based payments. Asset retirement obligation The calculation of the decommissioning obligation makes use of several estimates, the future cost of decommissioning, the timing of decommissioning, the probability of a landowner call option to pur- chase the power plant at the end of the lease period and the valuation of net present value with the appropriate discount rate. Management seeks to at least annually evaluate and update with the acces- sible information all estimates in the calculation. Application of accounting policy Due to Cloudberry’s business activities, manage- ment must apply judgement in determining the appropriate accounting policies in areas where application of the Groups accounting may have a material impact on the accounting treatment in the financial statements. Such areas include: · Classification of power purchase agreements: note 10 · Classification of energy and other revenues: note 12 · Classification of developing projects: note 17 and 18 · Classification of investments made together with third parties: note 20