Annual Report 2012 - ecoWise Holdings Limited

80ecoWise Holdings Limitedannual report 201231 OCTOBER 2012NOTES TO THE FINANCIAL STATEMENTS2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)Government GrantsA government grant is recognised at fair value when there is reasonable assurance that the conditionsattaching to it will be complied with and that the grant will be received. A grant in recognition of specificexpenses is recognised as income in profit or loss over the periods necessary to match them with therelated costs that they are intended to compensate, on a systematic basis. A grant related to depreciableassets is allocated to income over the periods in which such assets are used in the project subsidised bythe grant. A government grant related to assets, including non-monetary grants at fair value, is presentedin the statement of financial position as deferred income.Critical Judgements, Assumptions and Estimation UncertaintiesThe critical judgements made in the process of applying the accounting policies that have the most significanteffect on the amounts recognised in the financial statements and the key assumptions concerning the future,and other key sources of estimation uncertainty at the end of the reporting year, that have a significant riskof causing a material adjustment to the carrying amounts of assets and liabilities currently or within the nextreporting year are discussed below.These estimates and assumptions are periodically monitored to ensure they incorporate all relevantinformation available at the date when financial statements are prepared. However, actual figures may differfrom these estimates.Impairment of Property, Plant and EquipmentAn assessment is made at the end of each reporting year whether there is any indication that the assets maybe impaired. If any such indication exists, an estimate is made of the recoverable amounts of the assets.The recoverable amounts of cash-generating units have been determined based on value in use calculations.These calculations require the use of estimates.Included in the property, plant and equipment of the Group is a coal-fired power plant with carrying amountof $6,514,000 as at 31 October 2012 (2011: $7,008,000) of a non-wholly owned subsidiary, WuhanecoWise Energy Co., Ltd.. This plant will be converted to a biomass co-generation plant. The coal-firedpower plant has ceased operations and the commencement of plant conversion is subject to the subsidiaryreceiving additional capital injection from its shareholders for purposes of securing the bank financing for theconversion. As at 31 October 2012, the Group has assessed the recoverable amount of the plant based onits estimated value in use assuming the operation of a biomass co-generation plant, using a pre-tax discountvalue of 12.8%. Based on management’s review, there is no impairment loss.