DRAVA, KUPA, RJE»INA, LOKVARKA, LI»ANKA LIKA, DOBRA ...

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS OF THE HEP GROUP (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2010
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
USE OF ESTIMATES IN THE PREPARATION OF THE FINANCIAL STATEMENTS
The preparation of financial statements in conformity with International Reporting Financial Standards, as published
by the International Accounting Standards Board requires management to make estimates and assumptions that affect
the reported amounts of assets, liabilities, income and expenses and disclosure of contingencies. The significant
areas of estimation used in the preparation of the accompanying financial statements relate to employee benefits,
useful lives of property, plant and equipment, impairment of assets and determination of fair values of assets and
liabilities, and estimated decommissioning costs. Future events may occur which will cause the assumptions used in
arriving at the estimates to change. The effect of any changes in estimates will be recorded in the financial statements,
when determinable.
REVENUE RECOGNITION
Revenue is earned primarily from the sale of electricity to households, industrial and other customers within Croatia.
These sales constitute the main source of the Group’s operating income.
Revenue recognition is based on the Decision of the Croatian Government on the tariff Amounts from June
2008 and August 2009.
Interest income is recognised on an accrual basis, by reference to the principal settled and at the effective
interest rate applied.
REVENUE FROM CONNECTION FEES
Up to 1 January 2010 connection fees received from customers were deferred and recognised in income over the
expected useful life of asset, i.e. connection fee. Such policy is still used for connection fees received before 1
January 2010.
As of 1 January 2010 Group has adopted IFRIC 18 Transfers of Assets from Customers.
IFRIC 18 clarifies the requirements of IFRSs for agreements in which an entity receives from a customer asset
(item or property, plant and equipment or cash) that the entity must then use either to connect the customer to a
network or to provide the customer with ongoing access to a supply of goods or services. When the item of property,
plant and equipment transferred from a customer meets the definition of an asset the Company must recognize the
asset in its financial statements.
As a result since 1 January 2010 the connection fees received from customers are recognized in the income
when the fee is received and are not deferred over the period of 20 years as was the case in prior periods.
SEGMENTAL DISCLOSURES
The Group has fully adopted IFRS 8 Operating segments and presented operating segments disclosures required by
Standard, since it has debt instruments which are traded in public market.
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HEP ANNUAL REPORT 2010
CHAPTER 6 - FINANCIAL STATEMENTS