103 Cloudberry Annual report 2021 Financial statements Asset retirement obligation (ARO) When Cloudberry is obligated to remove an item of property, plant and equipment as well as to restore the site at the date when the operation ceases, an estimate of the asset retirement obligation (ARO, decommissioning obligation) is recognized. The obligation is best estimate of the net present value of the costs that will occur at the closing date. When a provision for ARO is recognised, a corresponding amount is recognised and capitalized as part of the carrying value of the power plant and depreciated over the useful life. The Group have recognised Asset retirement obligation for wind power assets. Asset retirement obligations have not been made for the Group’s current hydro plants. The concessions for the hydro power plants do not have an expiry date, and the useful life of the equipment is estimated to be longer than the lease periods. It is currently assessed that because the power plants would continue to be revenue generating power producing plants, after the end of the lease periods, it is assumed that either the landowners (if the exercise their option to acquire the equipment), or the Company (which have the right to prolong the lease period if option to acquire the equipment is not exercised) will continue the use of the plants and therefore not decommission the equipment. The lease expiry dates are between 40-60 years and the assessment will be updated over the useful life of the power plants and may change so that an asset retirement obligation will be made later, when material. Intangible assets Intangible assets acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses. Costs relating to intangible assets, including goodwill, are recognised in the statement of financial position when it is probable that the asset will generate future economic benefits and the costs can be measured reliably. Intangible assets with an indefinite useful life, such as goodwill and water rights owned are not amortised but are instead tested annually for impairment. Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired business at the date of acquisition. Goodwill is carried at cost less accumulated impairment losses. Goodwill is allocated to cash-generating units for the purpose of the impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose. Impairment Property, plant and equipment and intangible assets with a definite useful life are tested for impairment to the extent that indicators of impairment exist. Factors that trigger impairment testing include but is not limited to changes in long power price estimates, political changes, underperforming power plants in terms of production or macroeconomic fluctuations. When there are indicators that future earnings cannot justify the carrying value, the recoverable amount is calculated to consider whether an allowance for impairment must be made. The recoverable amount is the higher of the asset’s fair value less costs of disposal and its value in use. Previously impaired non-financial assets, except goodwill, are reviewed for possible reversal of the impairment at each reporting date. For the purposes of assessing impairment losses, assets are grouped at the lowest level for which there are separately identifiable cash flows (cash-generating units (CGUs)). CGUs in Cloudberry are identified as follows: Property plant and equipment (Power producing assets) · Hydropower: Power plants sharing the same water flow and/or being subject to the same infrastructure limitation are managed together to optimise power generation. · Wind farms: The individual wind farm. Inventory of projects · The individual project with concession · Groups of similar projects that are connected in progress Equity accounted companies · The individual associated company Goodwill and intangible assets with an indefinite useful life are not depreciated but are considered for impairment once every year and when there are
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