The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom correspond to the actual results. Estimates and assumptions that entail a significant risk of material adjustments to the carrying amounts of assets and liabilities in the next financial year are outlined below.
The Group annually tests whether capitalised development expenditure is subject to any impairment in accordance with the accounting policy described in Note 1. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. Certain estimates must be made in these calculations in the form of risk-free interest, market risk premium, industry beta value, equity and company-specific alfa value.
The forecast period covers 5 years based on the company's business plan. For the period thereafter, no assumption of growth rate has been made.
The calculation of the discount rate is based on an assumption of substantial external financing at an estimated interest of 5%, while the return on equity is estimated at close to 20%. Should, as an example, the external financing be halved, the discount rate will increase by more than 20% but requires no write-down of the underlying asset.
The impairment test is built on an assumption that the company will be able to execute its expansive business plan with a large volume commercial breakthrough from 2021 and that these projects and additional investments can be financed. Since the test period is only 5 years, an adjustment to the time plan could have a substantial impact on the value, which could lead to an impairment of the underlying asset. The company’s development is monitored continuously compared to the estimated cash flow and time plan.
Furthermore, the impairment test is based on assumptions regarding electricity prices in local markets. These prices are based on assessments of prices and competitiveness under these circumstances. The electricity prices can be impacted by a number of events that are difficult to assess – like the development of competing technologies, business cycle, and cost for raw materials.
Until such time the company’s sales are under way, there is a dependence on contributions from shareholders or other external investors to be able to ensure continued operations. As at the balance-sheet date, the company had liquidity of kSEK 53,349 which, combined with the share issue implemented in the month of January 2020 (kSEK 350,000 excluding costs), is estimated to be sufficient to safeguard the company’s operations well into the fourth quarter of 2020. For the subsequent period, there areno binding obligations that safeguard the company’s financing. Since the Board of Directors has already initiated work to safeguard the company’s financing, the Board is of the opinion that the accounts can be issued under the going concern assumption.