Page 114 - KELAG Annual Report 2019
P. 114

Preparation  of  the  consolidated  financial  statements  in  accordance  with  IFRSs  requires
                                      judgements in the application of accounting policies. In addition, assumptions must be made by
                                      management about future developments that can materially affect the recognition and value of
                                      assets  and  liabilities,  the  disclosure  of  other  obligations  as  of  the  reporting  date  and  the
                                      presentation of income and expenses during the financial year.

                                      The following section provides a description of material judgements exercised and assumptions
                                      made regarding future developments on which these IFRS consolidated financial statements are

                                      If an investment is less than 20%, the company assumes that it has no significant influence unless
                                      this influence can be clearly demonstrated.

                                      KELAG holds 10.02% in VERBUND Hydro Power GmbH. However, for KELAG, it is a certainty that
                                      significant influence in accordance with IAS 28.6 is established by the granting of a contractually
                                      guaranteed dilution and squeeze-out protection clause and the joint realisation of significant
                                      capacity increases in the area of power plants as well as the provision of significant technical
                                      information  and  the  appointment  of  a  member  of  the  Supervisory  Board  and  the  related
                                      participation in decision-making processes.

                                      Borrowing costs are capitalised in the Group when the requirements of a qualifying asset are met.
                                      The accounting principles this is based on provide that a project only becomes a qualifying asset
                                      if the construction period is longer than six months and the forecast production cost exceeds a
                                      materiality threshold of EUR 2.0m. If the qualifying asset is financed by means of a loan, the actual
                                      borrowing costs are capitalised. If, however, the asset is financed by means of group financing,
                                      average borrowing costs are capitalised. The average cost of capital for investments made in the
                                      financial year 2019 amounts to 2.70% (prior year: 2.70%).

                                      The  carrying  amounts  of  entities  accounted  for  using  the  equity  method  are  tested  for
                                      impairment on the basis of forecasts for future cash flows as well as using a discount rate adjusted
                                      to the industry and the company risk (see Note 12).

                                      Primarily if the following indications arise, the carrying amounts of investments accounted for in
                                      the consolidated financial statements using the equity method are tested for impairment:
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