Cloudberry Annual report 2022 Financial statements 132 Statement of financial position Note 16 Property, plant and equipment Accounting principle Property, plant, and equipment (PPE) is measured at historical cost less accumulated depreciation and accumulated impairment losses. Land is not depreciated. The initial cost of a PPE asset comprises its purchase price or construction cost, any costs directly attributable to bringing the asset into operation, the initial estimate of asset retirement obligation if any, and for qualifying assets, borrowing costs incurred in the construction period. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. All repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred. If a separate component is damaged and replaced, the component is derecognised and the carrying amount is charged to the profit and loss statement as an impairment loss in the period. The replacement component is capitalized as a new item of PPE. Each component of a PPE item with a cost that is significant in relation to the total cost of the item is depreciated separately. Depreciation is calculated using the straight-line method to allocate costs over their estimated useful lives. Depreciation of hydro and wind power plants commences when the plant is ready for managements intended use, normally at the date of the grid connection and commissioning. The depreciation period is adapted to the duration of the landowner contract period. The assets’ residual values and useful lives are reviewed annually and adjusted if appropriate. Gains and losses on disposals are determined by comparing actual proceeds with the carrying amount. Gains and losses on disposals are included in profit or loss. Capitalisation of borrowing costs Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset is included as a part of cost. Other borrowing costs are recognised as an expense. Asset retirement obligation (ARO) Provisions for asset retirement costs are recognised when the Group has an obligation to dismantle and remove a power plant and must restore the site on which it is located. The asset retirement cost is capitalised as a part of the carrying value of the power plant and depreciated over the useful life of the plants. Estimated useful life of power plants The estimated useful life of power plants is based on assumptions on expected usage of the plant, expected wear and tear, technical or commercial obsolescence, legal or other regulatory limitations or lease expiry. The power plants in current operations have expected useful life between 20-60 years. Significant estimates and judgement Assessment of asset acquisition or business combination Significant management judgement is required in the assessment if an acquired project or power plant is a business combination or an asset acquisition. It is made a specific assessment for each acquisition.. If the acquisition is regarded as a business combination IFRS 3 Business Combinations will be applied, while if an asset, it will be either IAS 2 inventory or IAS 16 Property plant and equipment that will be applied. For acquisitions that consist of a single power plant ready to construct, the acquisition will in most cases be regarded as an asset transaction, while acquisitions including producing assets are mainly business combinations. However, to conclude on accounting treatment, a separate assessment is performed for each acquisition.
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