Property, Plant and Equipment

12 Months Ended

Dec. 31, 2012

Property, Plant and Equipment [Abstract]

(7) Property, plant and equipment

As of December 31, 2012 and 2011, property, plant and equipment consisted of the following:

	December 31,			December 31,
	2012			2011
Property, Plant, and Equipment:
Land use rights	$	9,895,081		$	2,358,862
Building and improvements		31,625,816			11,145,342
Machinery and equipment		111,857,002			122,844,563
Vehicles		439,007			233,217
Construction in progress		1,315,664			2,335,579
		155,132,570			138,917,563
Less accumulated depreciation and amortization		(32,741,114	)		(24,266,456	)
Property, Plant and Equipment, net	$	122,391,456		$	114,651,107

Land use rights represent two parcels of state-owned land located in Xushui County of Hebei Province in China, with lease terms of 50 years expiring in 2053 and 2061, respectively.

Construction in progress mainly represents payments for the electricity cable and the new 15,000 tonnes per year tissue paper manufacturing equipment PM8.

As of December 31, 2012 and 2011, property, plant and equipment with net values of $9,316,645 and $10,646,244 have been pledged for the long-term loan from credit union of Orient Paper HB, respectively. In addition, land use right in the amount of $7,419,614 was pledged for an independent third party which cross-guarantees the Company’s credit facility from the Bank of Hebei as of December 31, 2012. The amount of that long-term loan of the third party was $1,505,881 and will expire on February 26, 2014. Depreciation and amortization of property, plant and equipment was $8,382,859, $4,424,531and $4,147,777 during the years ended December 31, 2012, 2011 and 2010, respectively.

As of December 31, 2012, the Company has decided to take voluntary action to renovate its 150,000 tonnes/year corrugating medium production line PM1 in anticipation of increased regulatory concerns on energy efficiencies and to further upgrade the quality of our corrugating medium products. The renovation is set to start before the end of the first quarter of 2013 by demolishing a majority of the equipments and parts, which will not be producing income for Orient Paper HB until the renovated PM1 is launched with a designed capacity of 250,000 tonnes/year in 2014. The Company determined that the sum of undiscounted cash flows from the scrap value of the demolished machines parts and expected government subsidies may be less than the carrying value of such equipments, and accordingly recorded an impairment loss in the amount of $2,762,349 for the year ended December 31, 2012, representing the difference between the fair value of $1,561,361 and the carrying value of affected machinery parts as of the end of year 2012.

- Definition

The entire disclosure for long-lived, physical assets that are used in the normal conduct of business to produce goods and services and not intended for resale. Examples include land, buildings, machinery and equipment, and other types of furniture and equipment including, but not limited to, office equipment, furniture and fixtures, and computer equipment and software. This disclosure may include property plant and equipment accounting policies and methodology, a schedule of property, plant and equipment gross, additions, deletions, transfers and other changes, depreciation, depletion and amortization expense, net, accumulated depreciation, depletion and amortization expense and useful lives, income statement disclosures, assets held for sale and public utility disclosures.

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