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Friday, 13 March 20
TOP 4 ACCOUNTING CONSIDERATIONS AFTER THE IMPLEMENTATION OF IMO 2020 - PWC
 To install or not to install?
Following the IMO 2020 global low sulphur cap for marine fuel effective since 1 January 2020, many shipowners are still evaluating their positioning on whether to install scrubbers or not.
Some shipping companies have already made an initial assessment, have weighed the risks and have taken the decision not to install scrubbers just yet, advocating a “wait and see” approach in an effort to avoid speculation of bunker spreads. They also keep the option (put/call) to install a scrubber later in the future, in case the spreads between HSFO and LSFO / ULSFO increase significantly. On the other hand, there is a large number of shipowners (by January 2020 approximately 11% of the global fleet by tonnage and 4.5% by vessel count*) who have already decided to invest in scrubbers installation (the amounts range between $1,5m – $5m depending on the type of vessel) in order to avoid the uncertainty related to the future supply and prices of LSFO /ULSFO. One of the main drivers behind such investment decisions, is the assumption that these vessels will be more employable in the future as charterers are also being driven by their boards and corporate responsibility initiatives to employ more “green” friendly vessels. Moreover, the vessel owners can also take advantage (i.e. higher rates, lower fuel cost) of scrubber investment programs in a rising market.
Investing in scrubbers is one of the most significant one-off capital improvements having an important impact on the shipping industry over the last decade. The cost of the scrubbers is either being funded by the owners of the vessels, the charterer (lessee) or a combination of both. Where the charterers fully or partially fund the cost of scrubbers, this is done through either an upfront payment or through increased hire charter rates during the lease term.
For those shipping companies that have taken the decision to install scrubbers on their vessels, PwC has identified four main accounting considerations to be taken into account.
Capitalization of scrubbers
In general, an expenditure that adds to the productive capacity or improves the efficiency of an existing asset can be considered a capital item. Some key benefits that vessels with scrubbers are expected to generate in the future include:
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Demand higher charter rates;
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Incur lower fuel costs;
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Increase corporate responsibility – more employable vessels, take advantage of the rising market;
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Reduce environmental footprint;
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Maintain their current speed;
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Possibly a reduction in interest rates (finance costs), as more banks are turning to “green lending” or are now incorporating reduction in interest rates for environmentally friendly assets
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On the other hand, vessels without scrubbers may demand lower charter rates, incur higher fuel costs and potentially slow down their speed
Overall, taking into consideration that scrubbers improve the efficiency of the vessel, a view can be taken that the costs related to scrubber installation qualify for capitalization.
Useful life of the scrubber
The useful life of an asset is defined as the period over which the asset is expected to contribute directly or indirectly to future cash flows, the assessment of which can require a significant amount of judgment dependent on a number of factors.
Based on inquiries with technical departments of shipping companies, it is rather difficult to say that there is a certain useful life for a scrubber. Given that there are no regulations or guidelines yet on scrubbers’ lifecycle and replacement, we can assume that a scrubber with proper maintenance can contribute to the operation of the vessel over the remaining useful life of the asset.
Who is the owner of the asset?
It is generally expected that the owner of the vessel will be the owner of the scrubber as it would be difficult for a charterer to remove a scrubber after the completion of a charter – in which case, probably neither of the two parties would undertake the incremental cost. It is also highly likely that the scrubber will be used by subsequent charterers, regardless of whether the installation was funded by the vessel owner or reimbursed by the charterer. In both cases, the increase in the daily hire rate or the one-time payment from the charterer could be considered as an additional revenue for the owner as it relates to the premium that the charterer is willing to pay in order to benefit from the lower bunker expense. Any potential upfront reimbursements from the charterer for the scrubber could be deferred and amortized over the lease term.
Impairment considerations
To the extent scrubbers will be fitted, there is a need to determine if the cash flow projections used in the long-lived asset impairment tests will need to include an estimate of the relevant outflow (i.e. scrubber costs and future maintenance costs). The effect of any additional operating expenses associated with the scrubber maintenance on the projected cash flows should also be considered.
Currently, vessels predominantly utilize HSFO, and the installation of scrubbers would allow the vessels to continue to utilize this fuel. The ability to consume specific types of fuel could become a new service potential, with vessels’ scrubber installation probably being a cash outflow able to maintain this new service.
Charterers may fund or partially fund the installation of a scrubber through either a one-time payment or an amended charter rate including a potential premium. For cases where one-time payment is received from the charterer, the impairment assessment may not include this payment or the related scrubber cost and accordingly keep the original charter rate until the scrubber is installed. With this approach projected revenue is not overstated and the expense will be included upon installation, to offset the additional charter hire. Ultimately, the impact to the cash flows should be nil or minimal when the charterer is funding or partially funding the cost of the scrubber, respectively.
The above-mentioned accounting considerations include a high level of judgement. Therefore, it is crucial that management assesses the accounting treatment on a case by case basis, taking into consideration its specific characteristics and ensuring that the proper disclosures are made.
Source ING
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Friday, 10 April 20
INDIA'S BULKS SUPPLY CHAIN TAKES A HIT DURING LOCKDOWN - WOOD MACKENZIE
India is under a three-week lockdown from 25 March to contain the spread of the coronavirus outbreak. Businesses are shut, and the supply chain is ...
Thursday, 09 April 20
SUSPENSION OF WRONGFUL TRADING IN LIGHT OF COVID 19 - WF&W
KNOWLEDGE TO ELEVATE
DIRECTORS’ PERSONAL LIABILITY FOR WRONGFUL TRADING – RELIEF DURING THE CORONAVIRUS CRISIS
As the UK&rsquo ...
Wednesday, 08 April 20
LESSONS LEARNED FROM SCRUBBER INSTALLATION AND OPERATION - ABS
KNOWLEDGE TO ELEVATE
At the beginning of this year, the IMO’s global sulfur cap on marine fuels entered into force and shipowners who ch ...
Wednesday, 08 April 20
MARKET INSIGHT - INTERMODAL
With lockdown measures around the globe tightening during the last weeks of Q1, there is finally a feeling that most countries are slowly but stead ...
Tuesday, 07 April 20
SHIPPING MARKET ANALYSIS - ALLIED
With the first quarter of 2020 now firmly written in the books, it is worth examining what we have witnessed so far in the tanker market. Undoubted ...
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Showing 1021 to 1025 news of total 6871 |
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- Electricity Authority, New Zealand
- Bulk Trading Sa - Switzerland
- Dalmia Cement Bharat India
- SMC Global Power, Philippines
- Eastern Energy - Thailand
- Larsen & Toubro Limited - India
- Krishnapatnam Port Company Ltd. - India
- Simpson Spence & Young - Indonesia
- Price Waterhouse Coopers - Russia
- International Coal Ventures Pvt Ltd - India
- Ministry of Mines - Canada
- Wilmar Investment Holdings
- Interocean Group of Companies - India
- Globalindo Alam Lestari - Indonesia
- Metalloyd Limited - United Kingdom
- Indogreen Group - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Kohat Cement Company Ltd. - Pakistan
- OPG Power Generation Pvt Ltd - India
- Makarim & Taira - Indonesia
- London Commodity Brokers - England
- Aboitiz Power Corporation - Philippines
- Directorate Of Revenue Intelligence - India
- Therma Luzon, Inc, Philippines
- Renaissance Capital - South Africa
- Maheswari Brothers Coal Limited - India
- Bangladesh Power Developement Board
- Global Green Power PLC Corporation, Philippines
- Star Paper Mills Limited - India
- Latin American Coal - Colombia
- Global Business Power Corporation, Philippines
- Rashtriya Ispat Nigam Limited - India
- Oldendorff Carriers - Singapore
- The University of Queensland
- Vijayanagar Sugar Pvt Ltd - India
- Coastal Gujarat Power Limited - India
- GVK Power & Infra Limited - India
- Meralco Power Generation, Philippines
- Agrawal Coal Company - India
- Siam City Cement PLC, Thailand
- Vizag Seaport Private Limited - India
- VISA Power Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Indonesian Coal Mining Association
- Minerals Council of Australia
- Siam City Cement - Thailand
- The State Trading Corporation of India Ltd
- Uttam Galva Steels Limited - India
- Kapuas Tunggal Persada - Indonesia
- Attock Cement Pakistan Limited
- TeaM Sual Corporation - Philippines
- SMG Consultants - Indonesia
- Port Waratah Coal Services - Australia
- Energy Development Corp, Philippines
- Semirara Mining Corp, Philippines
- PTC India Limited - India
- Posco Energy - South Korea
- Ministry of Finance - Indonesia
- Straits Asia Resources Limited - Singapore
- Bank of Tokyo Mitsubishi UFJ Ltd
- Indika Energy - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Intertek Mineral Services - Indonesia
- Medco Energi Mining Internasional
- Madhucon Powers Ltd - India
- Sojitz Corporation - Japan
- Salva Resources Pvt Ltd - India
- Indo Tambangraya Megah - Indonesia
- Australian Commodity Traders Exchange
- Chamber of Mines of South Africa
- Semirara Mining and Power Corporation, Philippines
- Iligan Light & Power Inc, Philippines
- European Bulk Services B.V. - Netherlands
- Directorate General of MIneral and Coal - Indonesia
- Aditya Birla Group - India
- Bhushan Steel Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Altura Mining Limited, Indonesia
- Trasteel International SA, Italy
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- ICICI Bank Limited - India
- Grasim Industreis Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Marubeni Corporation - India
- Karaikal Port Pvt Ltd - India
- Essar Steel Hazira Ltd - India
- Ambuja Cements Ltd - India
- Riau Bara Harum - Indonesia
- Global Coal Blending Company Limited - Australia
- Kumho Petrochemical, South Korea
- Commonwealth Bank - Australia
- PNOC Exploration Corporation - Philippines
- Coalindo Energy - Indonesia
- Xindia Steels Limited - India
- Borneo Indobara - Indonesia
- Thiess Contractors Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- McConnell Dowell - Australia
- South Luzon Thermal Energy Corporation
- Bukit Baiduri Energy - Indonesia
- Planning Commission, India
- Barasentosa Lestari - Indonesia
- Bayan Resources Tbk. - Indonesia
- Merrill Lynch Commodities Europe
- Orica Mining Services - Indonesia
- LBH Netherlands Bv - Netherlands
- Lanco Infratech Ltd - India
- Parliament of New Zealand
- Anglo American - United Kingdom
- Formosa Plastics Group - Taiwan
- Leighton Contractors Pty Ltd - Australia
- White Energy Company Limited
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- GAC Shipping (India) Pvt Ltd
- Carbofer General Trading SA - India
- Singapore Mercantile Exchange
- Goldman Sachs - Singapore
- Neyveli Lignite Corporation Ltd, - India
- Manunggal Multi Energi - Indonesia
- Binh Thuan Hamico - Vietnam
- Vedanta Resources Plc - India
- New Zealand Coal & Carbon
- Holcim Trading Pte Ltd - Singapore
- CNBM International Corporation - China
- Heidelberg Cement - Germany
- Sarangani Energy Corporation, Philippines
- IEA Clean Coal Centre - UK
- Bharathi Cement Corporation - India
- IHS Mccloskey Coal Group - USA
- Chettinad Cement Corporation Ltd - India
- Ministry of Transport, Egypt
- Bhoruka Overseas - Indonesia
- The Treasury - Australian Government
- India Bulls Power Limited - India
- Mjunction Services Limited - India
- Wood Mackenzie - Singapore
- Central Electricity Authority - India
- Kartika Selabumi Mining - Indonesia
- Timah Investasi Mineral - Indoneisa
- ASAPP Information Group - India
- GMR Energy Limited - India
- Sakthi Sugars Limited - India
- Edison Trading Spa - Italy
- Antam Resourcindo - Indonesia
- Banpu Public Company Limited - Thailand
- Jaiprakash Power Ventures ltd
- Ind-Barath Power Infra Limited - India
- Pendopo Energi Batubara - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Savvy Resources Ltd - HongKong
- Indian Oil Corporation Limited
- Sree Jayajothi Cements Limited - India
- Indian Energy Exchange, India
- Energy Link Ltd, New Zealand
- Central Java Power - Indonesia
- Australian Coal Association
- Gujarat Sidhee Cement - India
- Thai Mozambique Logistica
- San Jose City I Power Corp, Philippines
- Electricity Generating Authority of Thailand
- Toyota Tsusho Corporation, Japan
- Cement Manufacturers Association - India
- TNB Fuel Sdn Bhd - Malaysia
- Georgia Ports Authority, United States
- Jindal Steel & Power Ltd - India
- SN Aboitiz Power Inc, Philippines
- Independent Power Producers Association of India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Samtan Co., Ltd - South Korea
- Tata Chemicals Ltd - India
- Eastern Coal Council - USA
- PetroVietnam Power Coal Import and Supply Company
- Mintek Dendrill Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Orica Australia Pty. Ltd.
- Standard Chartered Bank - UAE
- Petron Corporation, Philippines
- Rio Tinto Coal - Australia
- Kalimantan Lumbung Energi - Indonesia
- Coal and Oil Company - UAE
- Economic Council, Georgia
- Alfred C Toepfer International GmbH - Germany
- Jorong Barutama Greston.PT - Indonesia
- Bhatia International Limited - India
- Africa Commodities Group - South Africa
- Parry Sugars Refinery, India
- Tamil Nadu electricity Board
- Sinarmas Energy and Mining - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Mercuria Energy - Indonesia
- MS Steel International - UAE
- CIMB Investment Bank - Malaysia
- GN Power Mariveles Coal Plant, Philippines
- Romanian Commodities Exchange
- Baramulti Group, Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bukit Makmur.PT - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Deloitte Consulting - India
- Bahari Cakrawala Sebuku - Indonesia
- Power Finance Corporation Ltd., India
- Gujarat Electricity Regulatory Commission - India
- Sical Logistics Limited - India
- Kaltim Prima Coal - Indonesia
- PowerSource Philippines DevCo
- Kideco Jaya Agung - Indonesia
- Sindya Power Generating Company Private Ltd
- Kepco SPC Power Corporation, Philippines
- Mercator Lines Limited - India
- Videocon Industries ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Meenaskhi Energy Private Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Kobexindo Tractors - Indoneisa
- Malabar Cements Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
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