Note 4. Critical accounting estimates

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of material misstatements to the carrying amounts of assets and liabilities within the next financial year are addressed below.

Management has estimated the useful lifetime of property, plant and equipment and intangible assets. The results of the estimates are disclosed in the note 2 in section 'Property, plant and equipment, and intangible assets' and the information about the carrying amounts is disclosed in note 9.

As of 31 December 2014 Group owns property, plant and equipment, and intangible assets with a book value of 158.3 mln euros (31 December 2013: 153.3 mln euros) and annual depreciation was 5.9 mln euros (2013: 5.8 mln euros). If the depreciation/amortization rates decreased/increased by 5%, the depreciation/amortization expense would increase/decrease respectively by 293 thousand euros (2013: 290 thousand euros).

The Group undertook to construct water and wastewater and storm water pipelines with construction costs of 41 mln euros in 2008-2012. The construction of pipelines is compensated by local government with the grants receivable in 2008 – 2015. Compensations received from local government are recognised as government grants - compensations received or receivable are deducted from the book value of the constructed pipeline. Any amount exceeding the construction cost of the pipeline is recognized as income upon the completion of construction works. The part of the compensation that is received after the completion of the construction works is recognized in the statement of financial position as a receivable from local government at its present value. The compensation receivable has been discounted using a rate of 3.5% (2013: 3.5%). If the discount rate would be decreased/increased by 50 basis points, the profit of the accounting period would increase/decrease up to 2 thousand euros (2013: up to 36 thousand euros).

Accounts receivable - for the evaluation of doubtful debts the individual debts are grouped by age and, based on past experience, the following percentages are applied in the doubtful debt calculation:
61 to 90 days over due date 10%;
91 to 180 days over due date 30%;
181 to 360 days over due date 70%;
over 360 days over due date 100%.

Impairment of individually material receivables can differ from the rates above.