from a single source. Conergy AG Annual ... - Alle jaarverslagen

99Top quality – from a single sourceManagement Board and Supervisory BoardGroup Management ReportNotes |Consolidated Financial StatementsFurther Informationducted from the cost of the asset in accordance withIAS 20.24 Government Grants Related to Assets andresult in a commensurate reduction in depreciation insubsequent periods.4. Assumptions and exercise in judgmentManagement’s material margin in judgmentApplication of the aforementioned accounting principlesrequires the Management Board to assess facts,perform estimates and make assumptions with respectto the carrying amounts of assets and liabilities thatcannot be readily determined from other sources. Boththe estimates and their underlying assumptions arebased on past experience as well as on other factorsdeemed to be relevant. Actual results may vary fromthese estimates, however. This also applies to contractsthat raise the question whether they should be treated asderivatives or as pending transactions. The assumptionsunderlying the estimates are regularly reviewed.Changes in the estimates that occur in a specific periodare considered solely in that period; if the changeconcerns both the current and subsequent reportingperiods, then it is considered in all relevant periods.Management wishes to point out that future eventsfrequently deviate from forecasts and that estimatesfrequently require routine adjustments. In this connection,please also see the disclosures in the risk reportof Conergy’s Group management report.Estimates and assumptionsBelow is a description of the judgment the ManagementBoard exercised in decisions concerning the applicationof the Company’s accounting policies whichhad an effect on the amount of the assets and liabilitiesrecognised in the balance sheet. The following providesa summary of key forward-looking assumptions aswell as the other main causes for uncertainties in estimatesat the balance sheet date which can trigger aconsiderable risk that the assets and liabilities recognisedmight have to be adjusted during the subsequentfinancial year.| Construction contractsThe Conergy Group’s business is based in part oncustomer-specific construction contracts. In thesecases, revenue is recognised pursuant to the percentageof completion method (PoC). Under thismethod, the assessment of the stage of completion,total contract costs, total revenues and contractrisks substantially affect both the amount of revenuethat is recognised and pro rata earnings. Changes inplanned costs and the profitability of the individualconstruction contracts lead to modifications ofthe estimates that are recognised in the periodduring which they occur. As at 31 December 2010,EUR 12.3 million (previous year: EUR 24.6 million) inreceivables from construction contracts were recognisedin trade accounts receivable.| Trade accounts receivableAllowances for doubtful receivables require substantialassessments of individual receivables based onthe creditworthiness of the respective customer,current economic developments and an analysis ofhistorical loan charge-offs. As at 31 December 2010,bad debt allowances were EUR 14.6 million (previousyear: EUR 14.7 million).| Impairment of goodwillThe Group tests goodwill for impairment at leastonce a year (see note 12). This requires estimatingthe recoverable amount of those cash generatingunits to which the goodwill has been allocated. Therecoverable amount is the higher of fair value lesscosts to sell and the cash generating unit’s value inuse. The Group must estimate the expected futurecash flows from the cash generating unit in order toestimate the value in use and, furthermore, select areasonable discount rate in order to determine thepresent value of these cash flows. As at 31 December2010, the carrying amount of the goodwill wasEUR 1.0 million (previous year: EUR 14.9 million).| Impairment of assetsThe Group must assess at every reporting datewhether there is any indication that the carryingamount of an item of property, plant and equipmentor an intangible asset might be impaired. If so, therecoverable amount of the relevant asset is estimated.The recoverable amount corresponds to the higherof the fair value less costs to sell and the value inuse. The value in use is determined based on the discountedfuture cash flows of the relevant asset. Estimatingthe discounted future cash flows entailsmaking material assumptions, especially with respectto future selling prices and volumes as well as to thediscounting rates. As at 31 December 2010, the carryingamount of the Company’s property, plant andequipment – which essentially concerns the Frankfurt(Oder) production site – was EUR 164.4 million(previous year: EUR 183.9 million).