We welcome article submissions from experts in the areas of coal, mining,
shipping, etc.
To Submit your article please click here.
|
|
|
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:
-
Demand higher charter rates;
-
Incur lower fuel costs;
-
Increase corporate responsibility – more employable vessels, take advantage of the rising market;
-
Reduce environmental footprint;
-
Maintain their current speed;
-
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
-
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
If you believe an article violates your rights or the rights of others, please contact us.
|
|
Tuesday, 31 March 20
CHINA TAIYUAN COAL TRANSACTION PRICE INDEX DOWN 0.43 PCT - XINHUA
China Taiyuan coal transaction price index stood at 132.17 points Monday, down 0.43 percent week on week.
The index, released by Chi ...
Tuesday, 31 March 20
COAL POWER REMAINS IN GLOBAL DECLINE, DESPITE CHINESE SURGE - SYDNEY MORNING HERALD
The impact of coronavirus has prompted a surge in coal-fired power plant construction permits in China, with the Chinese government issuing more pe ...
Monday, 30 March 20
CORONAVIRUS - IMPLICATIONS FOR SHIPS AND CREW - GARD
KNOWLEDGE TO ELEVATE
Countries around the world are strengthening their border control measures in order to prevent the further spread of COVI ...
Monday, 30 March 20
LAY-UP AND RE-ACTIVATION REVISITED - GARD
KNOWLEDGE TO ELEVATE
The COVID-19 pandemic has affected the maritime industry in previously unthinkable ways. Ports around the world are denyi ...
Monday, 30 March 20
PANAMAX: INDONESIA LACKED VOLUME, PARTLY DUE TO FORCE MAJEURE IN INDIAN PORTS - BALTIC BRIEFING
Capesize
As Covid-19 continued to ratchet up tensions across the globe, the Cape market dealt with the change to remote working. Most regions o ...
|
|
|
Showing 1036 to 1040 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Savvy Resources Ltd - HongKong
- Africa Commodities Group - South Africa
- Miang Besar Coal Terminal - Indonesia
- Electricity Generating Authority of Thailand
- Bahari Cakrawala Sebuku - Indonesia
- San Jose City I Power Corp, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Singapore Mercantile Exchange
- Mjunction Services Limited - India
- Leighton Contractors Pty Ltd - Australia
- Jaiprakash Power Ventures ltd
- Intertek Mineral Services - Indonesia
- Globalindo Alam Lestari - Indonesia
- Renaissance Capital - South Africa
- Vijayanagar Sugar Pvt Ltd - India
- Eastern Coal Council - USA
- Binh Thuan Hamico - Vietnam
- IHS Mccloskey Coal Group - USA
- SMG Consultants - Indonesia
- Straits Asia Resources Limited - Singapore
- CIMB Investment Bank - Malaysia
- TNB Fuel Sdn Bhd - Malaysia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Port Waratah Coal Services - Australia
- Directorate General of MIneral and Coal - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Bangladesh Power Developement Board
- Xindia Steels Limited - India
- Kideco Jaya Agung - Indonesia
- Standard Chartered Bank - UAE
- McConnell Dowell - Australia
- Asmin Koalindo Tuhup - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Indogreen Group - Indonesia
- Riau Bara Harum - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Goldman Sachs - Singapore
- Electricity Authority, New Zealand
- Oldendorff Carriers - Singapore
- AsiaOL BioFuels Corp., Philippines
- Vizag Seaport Private Limited - India
- Toyota Tsusho Corporation, Japan
- Bank of Tokyo Mitsubishi UFJ Ltd
- Mintek Dendrill Indonesia
- LBH Netherlands Bv - Netherlands
- Maheswari Brothers Coal Limited - India
- Edison Trading Spa - Italy
- Deloitte Consulting - India
- Bukit Asam (Persero) Tbk - Indonesia
- PNOC Exploration Corporation - Philippines
- Australian Commodity Traders Exchange
- Kapuas Tunggal Persada - Indonesia
- Bukit Makmur.PT - Indonesia
- Ministry of Transport, Egypt
- OPG Power Generation Pvt Ltd - India
- Central Electricity Authority - India
- Iligan Light & Power Inc, Philippines
- Sojitz Corporation - Japan
- Offshore Bulk Terminal Pte Ltd, Singapore
- Ministry of Finance - Indonesia
- Anglo American - United Kingdom
- ICICI Bank Limited - India
- Aboitiz Power Corporation - Philippines
- Kohat Cement Company Ltd. - Pakistan
- Banpu Public Company Limited - Thailand
- Borneo Indobara - Indonesia
- Latin American Coal - Colombia
- Aditya Birla Group - India
- Power Finance Corporation Ltd., India
- IEA Clean Coal Centre - UK
- Billiton Holdings Pty Ltd - Australia
- Manunggal Multi Energi - Indonesia
- South Luzon Thermal Energy Corporation
- Sakthi Sugars Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Indian Oil Corporation Limited
- Bhatia International Limited - India
- Wilmar Investment Holdings
- Simpson Spence & Young - Indonesia
- Global Green Power PLC Corporation, Philippines
- Lanco Infratech Ltd - India
- Sree Jayajothi Cements Limited - India
- VISA Power Limited - India
- Tamil Nadu electricity Board
- PowerSource Philippines DevCo
- SMC Global Power, Philippines
- Indo Tambangraya Megah - Indonesia
- Salva Resources Pvt Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- GVK Power & Infra Limited - India
- Formosa Plastics Group - Taiwan
- CNBM International Corporation - China
- Petron Corporation, Philippines
- Meenaskhi Energy Private Limited - India
- Makarim & Taira - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Global Coal Blending Company Limited - Australia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Altura Mining Limited, Indonesia
- Rashtriya Ispat Nigam Limited - India
- Marubeni Corporation - India
- Posco Energy - South Korea
- Siam City Cement - Thailand
- Samtan Co., Ltd - South Korea
- Sinarmas Energy and Mining - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Grasim Industreis Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Thiess Contractors Indonesia
- Chettinad Cement Corporation Ltd - India
- Independent Power Producers Association of India
- Australian Coal Association
- Timah Investasi Mineral - Indoneisa
- Jindal Steel & Power Ltd - India
- London Commodity Brokers - England
- Kaltim Prima Coal - Indonesia
- Energy Development Corp, Philippines
- Malabar Cements Ltd - India
- Orica Mining Services - Indonesia
- Mercuria Energy - Indonesia
- White Energy Company Limited
- Interocean Group of Companies - India
- MS Steel International - UAE
- Madhucon Powers Ltd - India
- Indika Energy - Indonesia
- Barasentosa Lestari - Indonesia
- Central Java Power - Indonesia
- Videocon Industries ltd - India
- Georgia Ports Authority, United States
- Antam Resourcindo - Indonesia
- Karaikal Port Pvt Ltd - India
- Semirara Mining Corp, Philippines
- Medco Energi Mining Internasional
- Kumho Petrochemical, South Korea
- Wood Mackenzie - Singapore
- Energy Link Ltd, New Zealand
- Larsen & Toubro Limited - India
- Minerals Council of Australia
- Mercator Lines Limited - India
- Eastern Energy - Thailand
- Rio Tinto Coal - Australia
- Orica Australia Pty. Ltd.
- Bukit Baiduri Energy - Indonesia
- Carbofer General Trading SA - India
- Sarangani Energy Corporation, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Gujarat Electricity Regulatory Commission - India
- Parliament of New Zealand
- The Treasury - Australian Government
- Merrill Lynch Commodities Europe
- Attock Cement Pakistan Limited
- Metalloyd Limited - United Kingdom
- Indian Energy Exchange, India
- Bulk Trading Sa - Switzerland
- Ceylon Electricity Board - Sri Lanka
- Siam City Cement PLC, Thailand
- Kepco SPC Power Corporation, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- New Zealand Coal & Carbon
- Cement Manufacturers Association - India
- Bhushan Steel Limited - India
- Planning Commission, India
- Meralco Power Generation, Philippines
- SN Aboitiz Power Inc, Philippines
- Chamber of Mines of South Africa
- International Coal Ventures Pvt Ltd - India
- TeaM Sual Corporation - Philippines
- Kalimantan Lumbung Energi - Indonesia
- Ind-Barath Power Infra Limited - India
- Price Waterhouse Coopers - Russia
- Ambuja Cements Ltd - India
- PTC India Limited - India
- Essar Steel Hazira Ltd - India
- Romanian Commodities Exchange
- Tata Chemicals Ltd - India
- Coalindo Energy - Indonesia
- Kobexindo Tractors - Indoneisa
- GMR Energy Limited - India
- Thai Mozambique Logistica
- Commonwealth Bank - Australia
- Vedanta Resources Plc - India
- Gujarat Mineral Development Corp Ltd - India
- Therma Luzon, Inc, Philippines
- Baramulti Group, Indonesia
- Parry Sugars Refinery, India
- Jorong Barutama Greston.PT - Indonesia
- The University of Queensland
- India Bulls Power Limited - India
- Trasteel International SA, Italy
- Star Paper Mills Limited - India
- European Bulk Services B.V. - Netherlands
- Cigading International Bulk Terminal - Indonesia
- Coal and Oil Company - UAE
- Ministry of Mines - Canada
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Indonesian Coal Mining Association
- Uttam Galva Steels Limited - India
- Economic Council, Georgia
- Gujarat Sidhee Cement - India
- Sindya Power Generating Company Private Ltd
- Heidelberg Cement - Germany
- GAC Shipping (India) Pvt Ltd
- Dalmia Cement Bharat India
- Global Business Power Corporation, Philippines
- Sical Logistics Limited - India
- Agrawal Coal Company - India
- Directorate Of Revenue Intelligence - India
- Pendopo Energi Batubara - Indonesia
- Coastal Gujarat Power Limited - India
- Maharashtra Electricity Regulatory Commission - India
- ASAPP Information Group - India
- Holcim Trading Pte Ltd - Singapore
- Bhoruka Overseas - Indonesia
- The State Trading Corporation of India Ltd
- Kartika Selabumi Mining - Indonesia
- Bayan Resources Tbk. - Indonesia
- Bharathi Cement Corporation - India
|
| |
| |
|
