Page 68 - InterEnergo - Annual Report 2020

Interenergo Accounting report Interenergo
The Company assumes that a financial asset is a default if:
• the debtor is unlikely to pay its payables to the Company in full without the latter using the possibility of
incashing the collateral (if any), or
• the debtor is considered to be at high risk (late payment is longer than 90 days).
The Company considers that the financial assets have a low credit risk according to the generally known and
accepted credit rating definitions. It takes into account that the low-risk rating is Baa3 or higher (Moody’s
rating) or BBB rating or higher (S&P rating).
The maximum period for which expected credit losses are taken into account equals the maximum period for
which the Company is exposed to credit risk.
Trade receivables and other receivables without a significant financing component are initially recognized at
the transaction price and do not have a contractual interest rate. The effective interest rate for these claims is
therefore considered to be zero. Accordingly, cash deficit discounting, which reflects the time value of money
when measuring expected credit losses, is not applied.
As of each balance sheet date, the Company checks whether financial assets measured at amortised cost
and assets from contracts with customers, are credit impaired. A financial asset is impaired if one or more
events have occurred that adversely affect the estimated future cash flow of the financial asset. Evidence that
a financial asset is impaired includes the following visible data:
• significant financial difficulties of the debtor;
• breach of contract e.g. late or overdue payment by more than 90 days;
• the probability that the debtor will go bankrupt or start insolvency proceedings;
• the likelihood that the debtor will not be able to comply with contractual provisions;
• the existence of negative external and internal factors indicating that the debtor will not be able to meet
its contractual obligations.
Impairment losses on financial assets measured at amortised cost are deducted from the gross carrying
amount of the asset. Increases and decreases due to impairment are recognized in profit or loss.
The gross carrying amount of a financial asset is written off if the Company has no reasonable expectation that
the financial asset will be repaid in full or in part. Che company prepares an assessment for each individual
asset regarding the time and amount of the write-off and whether it is reasonably expected that repayment
will occur. The Company does not expect a larger recovery from the written-off amount. However, write-offs
may still be subject to enforcement activities in accordance with the Company’s procedures for recovering
outstanding amounts.
For financial assets that are credit impaired at the reporting date but not impaired at the acquisition date,
including loans granted, the expected credit loss is measured as the difference between the carrying amount
and the present value of expected cash flows, discounted at the original effective interest rate.
Impairment of other non-financial assets
The Company reviews the carrying amount of its non-financial assets (other than the carrying amount of
inventories, contract assets and deferred tax assets) at each reporting date to determine whether there is
any indication of impairment. If any such indication exists, the recoverable amount of the asset is estimated.
At the end of each reporting period, the Company reviews internal and external sources of information to
determine whether non-financial assets, including investments in subsidiaries, property, plant and equipment
and the right of use assets, need to be impaired.
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Accounting report
Other assets are impaired and impairment losses are recognized in profit or loss when the recoverable amount
of the asset is less than its carrying amount and are reversed if the recoverable amount has changed favorably.
The recoverable amount of an asset or group of assets is the higher of its value in use and its fair value less
costs to sell. In determining the value in use of an asset - or when the asset does not generate cash flows
independently of other assets - the expected future cash flows are discounted to their present value using
a pre-tax discount rate that reflects current market assessments of the time value of money and risk for an
asset or group of assets.
Impairment losses are recognized in profit or loss.
Impairment of investments in subsidiaries
An impairment loss in connection with a financial asset is calculated as the difference between the asset’s
carrying amount and the present value of estimated future cash flows. Future expected cash flows are discounted
at a weighted average cost of capital rate (WACC) that reflects the cost of capital and financing. The value of the
company, which expresses the value of the capital of a subsidiary, is relevant for assessing the impairment of
investments; the debt’s fair value is deducted from the present value of expected cash flows.
Cash and cash equivalents
Cash and cash equivalents include cash on hand and cash, sight deposits with banks and other financial
institutions, sight deposits with third parties and short-term, highly liquid investments that are readily convertible
to known amounts of cash and for which there is insignificant risk of change in value.
Equity
Share capital is the called-up capital of the shareholder. Total equity consists of share capital, capital surplus
(share premium), legal reserves, and retained earnings or losses.
Income
Income is the gross inflow of economic benefits during the period arising in course of the ordinary activities
of an entity when those inflows result in increases in equity, other than increases relating to contributions
from equity participants.
Income is recognised when the company transfers the right of controlling the asset or service to the buyer i.e. up
to the amount expected to be justified. Depending on whether certain criteria are met, income is recognised a)
over time, in a manner depicting the company’s performance, or b) at a point in time when control is transferred
to the customer. Income arises on the sale of products and goods and rendering of services.
Manner and the point of time of complying with enforceable obligations and recognition of income for individual
types of goods or services are as follows:
• Sale of products and goods: control of goods and products is transferred to the customer at the time of
delivery. Revenue generated thereunder are recognised at the time of delivery. The Company generates
this revenue from sale of electricity produced by solar power plants and from electricity wholesale trading
and trading at power exchanges. In case of an electricity supply contract, the seller transfers control
gradually, and the buyer simultaneously obtains and uses the benefits of the seller’s obligation when
it is performed. Thus, the seller fulfils its enforceable obligation and recognizes revenue gradually by
measuring progress towards complete fulfilment of the enforceable obligation of supplying electricity by
the method of outputs i.e. method of calculated amounts based on the delivered quantities of electricity.
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