Cloudberry Annual report 2021 Financial statements 104 circumstances or indicators implying an impairment test should be performed. Impairment is determined for goodwill by assessing the recoverable amount for each cash-generating unit (CGU) to which the goodwill relates. Impairment losses relating to goodwill cannot be reversed in future periods. Leases At the lease commencement date, the Group recognises a lease liability and corresponding right of use asset for all lease agreements in which it is the lessee, except for the following exemptions applied: · Short-term leases (defined as 12 months or less) · Low value assets For these leases, the Group recognises the lease payments as other operating expenses in the statement of profit or loss when they incur. Lease liabilities The Group measures the lease liability at the present value of the lease payments for the right to use the underlying asset during the lease term that are not paid at the commencement date. The lease term represents the non-cancellable period of the lease, together with periods covered by an option either to extend or to terminate the lease when the Group is reasonably certain to exercise this option. In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable The lease payments included in the measurement comprise of: · Fixed lease payments (including in-substance fixed payments), less any lease incentives receivable · Variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date · Payments of penalties for terminating the lease, if the lease term reflects the Group exercising an option to terminate the lease. The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability, reducing the carrying amount to reflect the lease payments made and remeasuring the carrying amount to reflect any reassessment or lease modifications, or to reflect adjustments in lease payments due to an adjustment in an index or rate. The Group does not include variable lease payments in the lease liability arising from future events, such as lease payments which depend on production volume. Instead, the Group recognises these variable lease expenses in profit or loss, se under description of water right lease agreement. Right-of-use assets The Group recognises right-of-use assets at the commencement date of the lease, i.e. the date the underlying asset is available for use. Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Water right lease agreements Cloudberry enters into water-right lease agreements with owners of water rights, which entitles the company to utilise the water in the rivers. The agreements typically have a period varying from 40 to 100 years, starting when the power plant is put into commercial operation. The agreement with the owners of the water rights has a variable payment depending on the gross revenue of the power plant and is typically around 10% of the gross revenue. In certain agreements the variable payment depends on the net profit of the power plant (not the gross revenue). In these cases, Cloudberry is secured a minimum return on the investment (typically 4 – 7% p.a.) before owners of the water rights are compensated. Excess return above this minimum return is then split between the owners of the water rights and Cloudberry. When Cloudberry has a commitment to pay rent to the owners of the water rights, we account for this as a regular cost as the commitment arises. Upon expiration of the agreement the owners have the right to purchase the power plant with all rights and technical installations at a price based on certain specific conditions. Land lease agreements for construction of wind farms Cloudberry enters into lease agreements with land- owners, which entitles the company to utilise the land for construction of wind farms. The agreement typically has a period varying from 25 to 35 years dependent on the concession period,
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