BiON plc (Formerly known as Green & Smart Holdings plc) 

CONSOLIDATED STATEMENT OF CASH FLOW

For the

The notes to the financial statements form an integral part of these financial statements.

BiON plc (Formerly known as Green & Smart Holdings plc) 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE PERIOD ENDED 31 DECEMBER 2019

1.   GENERAL INFORMATION

BiON plc (formerly known as Green & Smart Holdings plc) ("the Company") was incorporated as a public limited company in Jersey with registration number 119200 on 7 August 2015. The registered office of the Company is 12 Castle Street, St. Helier, Jersey JE2 3RT, Channel Islands.

Pursuant to a special resolution ratified at the Extraordinary General Meeting of the Company held on 30 April 2020, the Company has changed its name to BiON plc. Accordingly the change of name was taken effective from 1 May 2020, upon receiving the certificate from the Registrar of Companies in Jersey.

The Company is listed on the AIM market of the London Stock Exchange. The Company's nature of operations is to act as the holding company for a group of subsidiaries that are involved in research and development, provision of professional engineering consultancy and process design services in the areas of industrial biotechnology, pollution control and renewable energy; and engineering, procurement and construction of various waste treatment plants/systems; development, commercialisation, operation and maintenance of renewable energy plants.

The consolidated financial statements include the financial statements of the Company and its controlled subsidiaries (the "Group") as follows:

Note 1 - registered address: B-1-15, Block B, 8 Avenue, Jalan Sungai Jernih 8/1, Section 8, 46050 Petaling Jaya, Selangor.

Note 2 - registered address: 3-2, 3rd. Mile Square, No. 151, Jalan Klang Lama, Batu 3 ½, 58100 Kuala Lumpur.

2.   BASIS OF PREPARATION

The financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the EU ("IFRS") issued by the International Accounting Standards Board ("IASB"), including related interpretations issued by the International Financial Reporting Interpretations Committee ("IFRIC").

As permitted by Companies (Jersey) Law 1991 only the consolidated financial statements are presented.

The financial statements are presented in Ringgit Malaysia ("RM") unless otherwise stated and is the currency of the primary economic environment in which the Group operates. All values are rounded to the nearest thousand ringgits ("RM'000") except where otherwise indicated.

The results for 31 December 2019 are prepared for a 12-month period and therefore the comparative amounts, 15-month period to 31 December 2018, are not entirely comparable.

Going Concern

The financial statements are required to be prepared on the going concern basis unless it is inappropriate to do so. 

The Directors, having considered "Going Concern and Liquidity Risk: Guidance for Directors of UK Companies" issued by The Financial Reporting Council in 2016, consider the going concern basis of preparation to be appropriate in preparing the financial statements. The key conclusions are summarised below.

The Group made a loss for the period of RM0.07m (2018: RM13.66m) and recorded a net cash inflow from operating activities of RM0.38m (2018: outflow of RM12.08m). At the reporting date the Group held cash and cash equivalents of RM0.08m (2018: RM0.47m) and had current liabilities of RM69.91m (2018: RM40.18m).

As described in note 7, amounts of RM10.51m (2018: RM17.91m) are due to the Group from Concord Green Energy Sdn Bhd ("CGE").  A repayment plan was put in place during the year and RM7.40m was repaid. Due to the repayment plan not being upheld subsequent discussions are taking place to re-negotiate the terms of repayment and in the meantime, Serba Dinamik Sdn. Bhd. and one of the executive directors, have guaranteed the value of the debt.

As described in note 8, amounts of RM63.35m (2018: RM38.33m) are due to the Group from Megagreen Energy Sdn Bhd ("MGE"). Further debts arose during the financial period of approximately RM25.02m (2018: RM1.27m) from MGE. The repayment arrangement put in place during the year recovered RM3.13m. As a result of re-negotiations taking place to acquire two (2) biogas power plants located in Perak, in part exchange for some of the receivables this repayment arrangement was put on hold. These acquisitions completed in Q3 2020 and further negotiations are taking place to acquire an additional three (3) biogas power plants and is expected to be finalised upon satisfactory outcome from the due diligence exercise.

The Directors consider the amounts owing to be recoverable in full as a result of negotiations being undertaken.

The Group has also received a letter of support from one of its largest shareholders, Serba Dinamik Sdn. Bhd. giving its willingness to continue to fund the Group.

COVID-19 has been identified as having a significant impact on the Group in the 2020 financial year due to public lockdown. However, as restrictions have been eased and activity is increasingly resuming, the Directors continue to believe that the Group remains viable for the foreseeable future.

The Directors prepared financial projections and plans for a period of at least 12 months from the date of approval of these financial statements. On assessment of the Group's future cash flows, the new financing arrangements that have been made available from the SME Bank loan (detail in note 36), as well as the agreed letter of support from Serba Dinamik Sdn. Bhd. and an assessment of their willingness to perform under this the Directors believe the Group has the ability to continue as a going concern for at least 12 months. 

3.   basis of COnSOLIDATION

The consolidated financial statements comprise the financial information of the Company and its subsidiaries made up to the end of the reporting period. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The consolidated financial statements present the results of the Company and its subsidiaries and joint arrangements as if they formed a single entity. Inter-company transactions and balances between Group companies are therefore eliminated in full. The financial information of subsidiaries is included in the Group's financial statements from the date that control commences until the date that control ceases.

On 6 May 2016, the Company entered into agreements with all of the shareholders of BiON Ventures Sdn Bhd ("Green & Smart Ventures Sdn Bhd") for a share for share exchange regarding the ordinary shares in BiON plc and ordinary shares in BiON Ventures.  As a result of this transaction, the ultimate shareholders in the Company received shares in BiON plc in direct proportion to their original shareholdings in BiON Ventures.

The acquisition of BiON Ventures by the Company was that of a re-organisation of entities which were under common control. As such, that combination also falls outside the scope of IFRS 3 'Business Combinations' (Revised 2008). The Directors have, therefore, decided that it is appropriate to reflect the combination using the merger basis of accounting in order to give a true and fair view. No fair value adjustments were made as a result of that combination.

CHANGES IN ACCOUNTING POLICIES

Standards issued and applied for the first time in 2019

The following new and revised Standards and Interpretations have been adopted in the current year.

·      Amendments to IFRS 9 Financial Instruments

·      IFRS 16 Leases

·      IFRS 15 Revenue Contracts with Customers

·      Amendments to IAS 28 Investments in Associates and Joint Ventures

With the exception of IFRS 16 the adoption of these standards has not had a material impact on the financial statements.

Standards issued and not yet effective

There are no new standards, amendments and interpretations to existing standards that have been published which have not been adopted.

IFRS 9 Financial Instruments

                The Group applied IFRS 9 retrospectively, with an initial application date of 1 January 2019. The Group has not restated comparative information which continues to be reported under IAS 39 and the disclosure requirements of IFRS 7 Financial Instruments: Disclosures relating to items within the scope of IAS 39. The impact arising from IFRS 9 adoption was included in the opening retained earnings and other components of equity at the date of initial application.        

(i)      Classification and measurement

Under IFRS 9, debt instruments are subsequently measured either at fair value through profit or loss (FVPL), amortised cost or fair value through other comprehensive income (FVOCI). The classification is based on two criteria: The Group's business model for managing the assets; and whether the instruments' contractual cash flows represent 'solely payments of principal and interest' on the principal amount outstanding.

The assessment of the Group's business model was made as of the date of initial application, 1 January 2019. The assessment of whether contractual cash flows on debt instruments solely comprised of principal and interest was made based on the facts and circumstances as at the initial recognition of the assets.

The classification and measurement requirements of IFRS 9 did not have a significant impact to the Group. The Group continued measuring at fair value all financial assets previously held at fair value under IAS 39. The following are the changes in the classification and measurement of the Group's financial assets:

-       Trade and other receivables classified as receivables as at 31 December 2018 are held to collect contractual cash flows and give rise to cash flows representing solely payments of principal and interest. These were classified and measured as debt instruments at amortised cost beginning 1 January 2019.

-       Unquoted equity securities classified as available-for-sale (AFS) financial assets as at 31 December 2018 were classified and measured as equity instruments designated at FVOCI beginning 1 January 2019. The Group elected to classify irrevocably its unquoted equity securities under this category at the date of initial application as it intends to hold these investments for long-term appreciation. There was an impairment loss of RM150,000 recognised in profit or loss for these investments in prior periods. In addition, all of the investments in unquoted equity securities was measured at cost under IAS 39. Upon adoption of IFRS 9, the Group measured the unquoted equity security at FVOCI.

The Group has not designated any financial liabilities at FVPL. There are no changes in classification and measurement for the Group's financial liabilities.

(ii)    Impairment

The adoption of IFRS 9 has fundamentally changed the Group's accounting for impairment losses for financial assets by replacing IAS 39's incurred loss approach with a forward-looking expected credit loss (ECL) approach. IFRS 9 requires the Group to recognise an allowance for ECLs for all debt instruments not held at FVPL.

There is no impact on the impairment amount of the Group upon adoption of IFRS 9 as at 1 January 2019.

IFRS 16 Leases

IFRS 16 is effective from 1 January 2019 and supersedes IAS 17 Leases. The standard eliminates the classification of leases as either operating or finance leases and introduces a single accounting model. Lessees are required to recognise a right-of-use asset and related lease liability for their operating leases and show depreciation of leased assets and interest on lease liabilities separately in the statement of comprehensive income. The standard sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to recognise substantially all leases on the statement of financial position.

The Group adopted IFRS 16 effective 1 January 2019 using the modified retrospective method of adoption. Under this method, the standard is applied retrospectively with the cumulative effect of initially applying the standard recognised at the date of initial application as an adjustment to the opening balance of retained earnings. Accordingly, prior year financial information has not been restated and will continue to be reported under IAS 17 Leases. The right-of-use asset and lease liability have initially been measured at the present value of remaining lease payments, with the right-of-use asset being subject to certain adjustments.

i)             Practical expedients applied

In applying IFRS 16, the Group elected to apply the following practical expedients permitted by the standard:

·      The Group has elected not to reassess contracts that were not identified as leases under IAS 17 and IFRIC 4 to determine whether there is a lease under IFRS 16. Therefore, a definition of a lease under IFRS 16 was applied only to contracts entered into or modified on or after 1 January 2019;

·      Applying a single discount rate to a portfolio of leases with similar characteristics;

·      Relying on previous assessments as to whether leases are onerous as an alternative to performing an impairment review - there were no onerous contracts as at 1 January 2019;

·      Accounting for operating leases with a remaining lease term of less than 12 months as at 1 January 2019 as short-term leases;

·      Excluding initial direct costs for the measurement of the right-of-use asset at the date of the initial application; and

·      Using hindsight in determining the lease term where the contract contains options to extend or terminate the lease.

ii)            Measurement of lease liabilities

The following table reconciles the opening balance for the lease liabilities as at 1 January 2019 based upon the operating lease obligations as at 31 December 2018:

iii)           Measurement of right-of-use assets

The associated right-of-use assets for land leases were measured on a modified retrospective basis. The right-of-use assets for the leases were recognised based on the carrying amount as if the standard had always been applied, using the incremental borrowing rate at the date of initial application.

iv)           Adjustments recognised in the statement of financial position on 1 January 2019

The change in accounting policy affected the following items on 1 January 2019:

The Group solely has lease contracts in relation to land.

IFRS 15 Revenue Contracts with Customers

IFRS 15 supersedes IAS 11 Construction Contracts, IAS 18 Revenue and related interpretations and it applies, with limited exceptions, to all revenue arising from contracts with customers. IFRS 15 establishes a five-step model to account for revenue arising from contracts with customers and requires that revenue be recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer.

                IFRS 15 requires entities to exercise judgement, taking into consideration all of the relevant facts and circumstances when applying each step of the model to contracts with their customers. The standard also specifies the accounting for the incremental costs of obtaining a contract and the costs directly related to fulfilling a contract. In addition, the standard requires extensive disclosures.

                The Group adopted IFRS 15 using the modified retrospective method of adoption with the date of initial application of 1 January 2019. Under this method, the standard can be applied either to all contracts at the date of initial application or only to contracts that are not completed at this date. The Group elected to apply the standard to those contracts that are not completed as at 1 January 2019. The adoption of IFRS 15 didn't affect the opening retained earnings and other components of equity at the date of initial application.

4.   SIGNIFICANT ACCOUNTING POLICIES

4.1  CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Estimates and judgements are continually evaluated by the directors and management and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The estimates and judgements that affect the application of the Group accounting policies and disclosures, and have a significant risk of causing a material adjustment to the carrying amounts of assets, liabilities, income and expenses are discussed below: -

a)   Impairment of assets

When the recoverable amount of an asset is determined based on the estimate of the value-in-use of the cash-generating unit to which the asset is allocated, the management is required to make an estimate of the expected future cash flows from the cash-generating unit and also to apply a suitable discount rate in order to determine the present value of those cash flows.

b)   Impairment of trade and other receivables

An impairment loss is recognised when there is objective evidence that a financial asset is impaired. Management specifically reviews its loans and receivable financial assets and analyses historical bad debts, customer concentrations, customer creditworthiness, current economic trends and changes in the customer payment terms when making a judgement to evaluate the adequacy of the allowance for impairment losses. Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated based on historical loss experience for assets with similar credit risk characteristics. If the expectation is different from the estimation, such difference will impact the carrying value of receivables.

c)   Construction contracts

As described in note 4.13, the Group's accounting approach reflects a sound judgement as potential losses on contract are being considered and reflected with its probability immediately upon occurrence while contract revenue which cannot be estimated reliably is realised only after confirmed by written agreement. The carrying amounts of the Group's construction contracts due from/(to) customers at the end of the reporting period/year are disclosed in note 9 including any allowance for impairment if there is a material uncertainty to fully recover costs of each contract.

4.2  FUNCTIONAL AND FOREIGN CURRENCIES

a)    Transactions and balances

Transactions in foreign currencies are converted into the respective functional currencies on initial recognition, using the exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities at the end of the reporting period are translated at the rates ruling as of that date. Non-monetary assets and liabilities are translated using exchange rates that existed when the values were determined. All exchange differences are recognised in profit or loss.

b)    Foreign operations

Assets and liabilities of foreign operations are translated to RM at the rates of exchange ruling at the end of the reporting period. Revenues and expenses of foreign operations are translated at exchange rates approximating those ruling at the dates of the transactions. All exchange differences arising from translation are taken directly to other comprehensive income and accumulated in equity under the foreign exchange translation reserve. On the disposal of a foreign operation, the cumulative amount recognised in other comprehensive income relating to that particular foreign operation is reclassified from equity to profit or loss.

4.3  FINANCIAL INSTRUMENTS

            4.3.1       Financial Assets

On initial recognition, financial assets are classified as either financial assets at fair value through profit or loss, held-to-maturity investments, loans and receivables financial assets, or available-for-sale financial assets, as appropriate. The Group currently holds financial assets as:

a)   Loans and receivables

These assets are non-derivative financial assets that have fixed or determinable payments that are not quoted in an active market. They arise through the provision of services to customers (trade receivables). They are initially recognised at fair value plus transaction costs that are directly attributable to the acquisition or issue and subsequently carried at amortised cost using the effective interest method less provision for impairment. The effect of discounting on these financial instruments is not considered to be material.

Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the counterparty or default or significant delay in payment) that the Group will be unable to collect all the amounts due under the term's receivable. The amount of such a provision being the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired receivable. For trade receivables, such provisions are recorded in a separate allowance account with the loss being recognised within administrative expenses in the income statement. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.

4.3.2       Financial Liabilities

All financial liabilities are initially measured at fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method.

Financial liabilities are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.

4.3.3       Equity Instruments

Instruments classified as equity are measured at cost and are not remeasured subsequently.

a)    Ordinary shares

Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, net of tax, from proceeds.

4.3.4       Derecognition

A financial asset or part of it is derecognised when, and only when, the contractual rights to the cash flows from the financial asset expire or the financial asset is transferred to another party without retaining control or substantially all risks and rewards of the asset. On derecognition of a financial asset, the difference between the carrying amount and the sum of the consideration received (including any new asset obtained less any new liability assumed) and any cumulative gain or loss that had been recognised in equity is recognised in profit or loss.

A financial liability or a part of it is derecognised when, and only when, the obligation specified in the contract is discharged or cancelled or expires. On derecognition of a financial liability, the difference between the carrying amount of the financial liability extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss.

4.4  PROPERTY, PLANT AND EQUIPMENT

a)    Owned Assets

        Items of property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses, if any. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to the location and condition for its intended use.

b)    Assets under construction                    

        Assets under construction are items of property, plant and equipment that are yet to be completed or ready for use. These are held at historical cost less any accumulated impairment losses. Historical cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.

        Depreciation is not provided until such a time that the asset is capable of operating in the manner intended by management. Upon completion of the asset, the assets will be carried at fair value determined annually by the directors.

c)     Depreciation

      Depreciation is charged to profit or loss (unless it is included in the carrying amount of another asset) on the straight-line basis to write off the depreciable amount of the assets net of the estimated residual values over their estimated useful lives. Assets under construction are depreciated from the date they are ready for use. Depreciation of an asset does not cease when the asset becomes idle or is retired from active use unless the asset is fully depreciated. The principal annual rates used for this purpose are: -

        The depreciation method, useful lives and residual values are reviewed, and adjusted if appropriate, at the end of each reporting period to ensure that the amounts, method and periods of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the items of the property, plant and equipment.

d)    Subsequent expenditure

        Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when the cost is incurred and it is probable that the future economic benefits associated with the asset will flow to the Group and the cost of the asset can be measured reliably. The carrying amount of parts that are replaced is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred. Cost also comprises the initial estimate of dismantling and removing the asset and restoring the site on which it is located for which the Group is obligated to incur when the asset is acquired, if applicable.

        An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use. Any gain or loss arising from de-recognition of the asset is recognised in profit or loss.

4.5  INTANGIBLE ASSETS

Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less accumulated amortisation and any accumulated impairment losses (note 5). The useful lives of intangible assets are assessed to be either finite or indefinite.

Intangible assets with a finite life are amortised on straight-line basis over the estimated economic useful life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial period / year end.

The amortisation expense on intangible assets with finite useful lives is recognised in the profit or loss in the expense category consistent with the function of the intangible asset.

a)    Trademark

Trademarks are stated at cost less accumulated amortisation and any impairment losses (note 5). Trademarks are tested for impairment annually or more frequently if the events or changes in circumstances indicate that the carrying value may be impaired either individually or at cash generating unit level. Trademarks are amortised over a period of ten (10) years.

4.6  IMPAIRMENT

a)    Impairment of Non-Financial Assets

The carrying values of assets, are reviewed at the end of each reporting period for impairment when there is an indication that the assets might be impaired. Impairment is measured by comparing the carrying values of the assets with their recoverable amounts. The recoverable amount of the assets is the higher of the assets' fair value less costs to sell and their value‑in‑use, which is measured by reference to discounted future cash flow.

An impairment loss is recognised in profit or loss immediately.

When there is a change in the estimates used to determine the recoverable amount, a subsequent increase in the recoverable amount of an asset is treated as a reversal of the previous impairment loss and is recognised to the extent of the carrying amount of the asset that would have been determined (net of amortisation and depreciation) had no impairment loss been recognised. The reversal is recognised in profit or loss immediately.

4.7  INCOME TAXES

Income tax for the period comprises current and deferred tax.

Current tax is the expected amount of income taxes payable in respect of the taxable profit for the reporting period and is measured using the tax rates that have been enacted or substantively enacted at the end of the reporting period, and any adjustment to tax payable in respect of previous financial years.

Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements.

Deferred tax liabilities are recognised for all taxable temporary differences other than those that arise from the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit. 

Deferred tax assets are recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that future taxable profits will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised. The carrying amounts of deferred tax assets are reviewed at the end of each reporting period/year and reduced to the extent that it is no longer probable that sufficient future taxable profits will be available to allow all or part of the deferred tax assets to be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year/period when the asset is realised or the liability is settled, based on the tax rates that have been enacted or substantively enacted at the end of the reporting year/period.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred income taxes relate to the same taxation authority.

Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transactions either in other comprehensive income or directly in equity. Deferred tax arising from a business combination is included in the resulting goodwill or excess of the acquirer's interest in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities over the business combination costs.

4.8  CASH AND CASH EQUIVALENTS

Cash and cash equivalents comprise cash in hand, bank balances, demand deposits, bank overdrafts and short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value with original maturity periods of three months or less.

4.9  EMPLOYEE BENEFITS

a)     Short-term benefits               

Wages, salaries, paid annual leave and sick leave, bonuses and non-monetary benefits are measured on an undiscounted basis and are recognised in profit or loss and included in the development costs, where appropriate, in the period/year in which the associated services are rendered by employees of the Group.

b)    Defined contribution plans

The Group's contribution to defined contribution plans are recognised in profit or loss in the period/year to which they relate. Once the contributions have been paid, the Group has no further liability in respect of the defined contribution plans.

4.10 REVENUE AND OTHER INCOME

Revenue is recognised at an amount that reflects the consideration to which the entity expects to be entitled in exchange for transferring goods or services to a customer net of sales taxes and discounts.  A performance obligation may be satisfied at a point in time or over time. The amount of revenue recognised is the amount allocated to the satisfied performance obligation.

(i)            Revenue from construction contracts

Revenue from construction contracts is recognised in line with IFRS 15 based on the percentage of completion method based on works performed. The stage of completion is measured by reference to the actual cost incurred to date to estimated total cost for each contract.

Where the outcome of a contract cannot be reliably estimated, contract revenue is recognised to the extent of contract costs incurred that are likely to be recoverable. Contract costs are recognised as expenses in the period in which they are incurred.

When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.

 (ii)          Government grants

Grants that compensate the Group for expenses incurred are recognised in profit or loss on a systematic basis over the period necessary to match them with the related costs which they are intended to compensate for.

Grants that compensate the Group for the costs of assets are recognised in profit or loss on a systematic basis over the expected life of the related asset.

(iii)         Revenue from Sale of Electricity

Revenue from the sale of electricity generated from the renewable energy plant is recognised as and when the electricity is delivered to the off-taker, based on the invoiced value of sale of electricity, computed at a predetermined rate. Accrued unbilled revenues are reversed in the following month when actual billing occurs.

4.11 BORROWING COSTS

Borrowing costs, directly attributable to the acquisition, construction or production of a qualifying asset, are capitalised as part of the cost of those assets, until such time as the assets are ready for their intended use or sale. Capitalisation of borrowing costs is suspended during extended periods in which active development is interrupted.

All other borrowing costs are recognised in the profit or loss as expenses in the period in which they are incurred. No interest costs were capitalised during the period.

Investment income earned on the temporary investment of specific borrowing pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

4.12 CONTINGENT LIABILITIES

A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed by the occurrence of one or more uncertain future events not wholly within the control of the Group. It can also be a present obligation arising from past events that is not recognised because it is not probable that an outflow of economic resources will be required, or the amount of obligation cannot be measured reliably.

A contingent liability is not recognised but is disclosed in the notes to the financial statements. When a change in the probability of an outflow occurs so that the outflow is probable, it will then be recognised as a provision.

4.13 CONSTRUCTION CONTRACTS

(i)            Contract revenue

Revenue from construction contracts is recognised as described in note 4.10(i).

(ii)           Amount due from / (to) customer for contract work

Amount due from / (to) customer for contract work is the net amount of cost incurred for construction and contract-in-progress plus profit attributable to contract-in-progress less foreseeable losses, if any, and progress billings. Contract cost incurred to date include costs directly related to the contract or attributable to contract activities in general and costs specifically chargeable to the customer under the terms of the contract.
 

5.   INTANGIBLE ASSETS

(a) Trademark

The trademarks "GRASS", "POME-MAS" and "GREENPAK" are registered in Malaysia in respect of patented wastewater and bio-waste treatment technologies. These trademarks have been granted for an indefinite period, however, they are being amortised over ten (10) years in line with Management's best estimate of their expected useful life.

The remaining amortisation period of trademarks is between one (1) to three (3) years, the remaining amortisation period of patents is between six (6) to twelve (12) years.

(b) Impairment Test

The Group has assessed the recoverable amounts of intangible assets and determined that no impairment is required. The recoverable amounts of the cash-generating units ("CGU") are determined using the value in use approach, and this is derived from the present value of the future cash flows from each CGU computed based on the following key assumptions:

(i)            Cash flows are extrapolated to 18 years based on management's two-year business plan.

(ii)           Discount rates used, 7%, for the cash flows discounting purpose reflects specific risks relating to the relevant CGU.

(iii)         Growth rate for a CGU, 2%, is determined based on the management's estimate of the industry trends and past performances of the CGU.

(iv)          Profit margins are projected based on the industry trends and historical profit margin achieved.

Management believes that there is no reasonable possible change likely to materially cause the CGU carrying amount to exceed its recoverable amount if applied to the above key assumptions.