Annual report - HSE

4.5.7.6 Impairment of assets
4.5.7.6.1 Financial assets
A financial asset is considered impaired if there is objective evidence from which it is
evident that, due to one or more events, the expected future cash flows arising from this
assets that can be reliably measured have been decreased.
Objective evidence of impairment of financial assets can be: debtor’s non-settlement of
liabilities or breach of contractual provisions; signs that the debtor will go bankrupt.
Impairment of receivables and loans granted
The company individually assesses the evidence on impairment of receivables.
Whether it is assessed that the carrying amount of receivable has exceeded its fair value
(realisable value), the receivable is impaired.
Doubtful receivables from others are those which are not settled within 180 days after
their due date.
Disputed receivables are those which comply with one of the following conditions:
• the legal collection procedure began at the court;
• the decision on beginning of enforced settlement, liquidation or bankruptcy is published.
For receivables at the beginning of bankruptcy proceeding, an allowance in the amount
of 80% of open receivable is created; for disputable receivables 20% of the amount
claimed; for receivables subject to enforced settlement that have not been confirmed
yet it represents 50% of the amount claimed in the forced settlement proceeding. The
percentage may change, if taking into account circumstances and facts of individual case.
For subsequent write-offs of receivables relevant documents of proof are needed: legally
enforceable decisions of enforced settlement, bankruptcy proceeding, court ruling or
other relevant document.
In case all actions were performed with the carefulness of a good manager, with intention
to repay certain unsettled receivable and in case that due to the amount of receivable, it
would not be economic for the company to enter the collection procedure through court,
receivables are finally written down in full based on the management’s decision.
The company assesses evidence on loan impairment for each significant loan.
Loss due to impairment related to financial asset carried at amortised cost is calculated as
difference between the carrying amount of an asset and expected cash flows discounted
at historical interest rate. Loss is recognised in profit or loss.
4.5.7.6.2 Non-financial assets
On each reporting date the company verifies the carrying amount of significant nonfinancial
assets with the purpose to establish whether there are any signs of impairment. If
such signs exist, the recoverable amount of the asset is estimated.
The recoverable amount of an asset or cash-generating unit is the higher of the two: value
in use or fair value less costs of sale. When determining the value of an asset in use, the
expected future cash flows are discounted to their current value by using the discount rate
before tax that reflects regular market assessments of the time value of money and risks
that typically occur in relation to the asset. For the purpose of impairment test, the assets
that cannot be individually tested are classified in the smallest possible group of assets
that generate cash flows from further use and are mostly independent from receipts of
other assets and groups of assets (cash-generating unit).
The impairment of an asset or the cash-generating unit is recognised when its carrying
amount exceeds its recoverable amount. Impairment is disclosed in the income statement.
Annual Report HSE 2012
4 Financial Report of the company HSE
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