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

HEP ANNUAL REPORT 2010
84
CHAPTER 6 - FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS OF THE HEP GROUP (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2010
3. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES
CRITICAL JUDGMENTS IN APPLYING ACCOUNTING POLICIES
In the application of the accounting policies, which are described in Note 2, the management made certain judgments
that had a significant impact on the amounts reported in the financial statements (irrespective of the underlying
estimates referred to below).
These judgments are provided in detail in the accompanying notes. However, the critical judgments relate to
the following areas:
Useful lives of property, plant and equipment
As described in Note 2, the Group reviews the estimated useful lives of property, plant and equipment at the end
of each annual reporting period.
Fair value of financial assets and interest-rate swap
As described in Note 20, the management uses judgment to estimate whether trade and other receivables have suffer
an impairment loss. The management believes that the carrying amount of the interest-rate swap approximates
its fair value as disclosed in Note 26.
Provisions for environmental protection
The exact scope of activities or technologies to be applied has not been specified by the applicable laws or regulations.
In determining the level of provisions for environmental protection and decommissioning, the management relies
on the prior experience and its own interpretation of the current laws and regulations. Pursuant to Article 4.1 of the
Law on Acknowledging the Contract between the Government of the Republic of Croatia and the Government of the
Republic of Slovenia on Regulating the Status and other Legal Relations in Respect of Investments in, Exploitation
and Decommissioning of, the Nuclear Power Plant Krško (Official Gazette No. 9/2002), the Croatian Government
issued on 28 April 2006 a decree on the payment of the funds for the decommissioning and disposal of radioactive
waste and consumed nuclear fuel of the NPPK.
The decommissioning costs of thermal power plants represent the discounted value of the estimated decommissioning
costs of the Group’s thermal power plants.
Over / under billed revenue adjustment
After analyzing a number of different methods of approximation (five – year average, a linear approximation, etc.),
Management has decided that the most appropriate is a method of logarithmic regression is the most appropriate.
The amount of losses on the network distribution is calculated using the percentage of the function of the logarithmic
regression on the total amount of purchased power from the transmission network – the result of the losses of
electricity distribution network in the current year in MWh.
The difference between the thus obtained size of losses and over/under billed revenue balance for the current
year is calculated.
Such difference represents basis for calculation of over / under billed revenue and is multiplied by the average
selling prices for households earned in the current year from those without a fixed monthly fee and the result is the
difference that increases or decreases the revenues from selling electricity to households (note 21).
Impairment of non-current assets
The impairment calculation requires the estimate of the value in use of the cash generating units. Value in use is
measured using the discounted cash flow projections. The most significant variables in determining cash flows are
discount rates, time values, the period of cash flow projections, as well as assumptions and judgments used in determining
cash receipts and expenditure. There were no impairments of assets of the Group that would result from
the projections described above.