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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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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 ...
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Showing 1036 to 1040 news of total 6871 |
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- Antam Resourcindo - Indonesia
- Madhucon Powers Ltd - India
- Sree Jayajothi Cements Limited - India
- Australian Coal Association
- Bhatia International Limited - India
- Uttam Galva Steels Limited - India
- Manunggal Multi Energi - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- MS Steel International - UAE
- Kohat Cement Company Ltd. - Pakistan
- Global Business Power Corporation, Philippines
- AsiaOL BioFuels Corp., Philippines
- Thai Mozambique Logistica
- Directorate Of Revenue Intelligence - India
- Savvy Resources Ltd - HongKong
- Bukit Asam (Persero) Tbk - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Carbofer General Trading SA - India
- Kalimantan Lumbung Energi - Indonesia
- The Treasury - Australian Government
- Tamil Nadu electricity Board
- Intertek Mineral Services - Indonesia
- Parliament of New Zealand
- Rashtriya Ispat Nigam Limited - India
- Krishnapatnam Port Company Ltd. - India
- Binh Thuan Hamico - Vietnam
- Vizag Seaport Private Limited - India
- Eastern Energy - Thailand
- Barasentosa Lestari - Indonesia
- Eastern Coal Council - USA
- Bulk Trading Sa - Switzerland
- Gujarat Mineral Development Corp Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Star Paper Mills Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Independent Power Producers Association of India
- Commonwealth Bank - Australia
- Ministry of Finance - Indonesia
- Siam City Cement PLC, Thailand
- Malabar Cements Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Bhushan Steel Limited - India
- PowerSource Philippines DevCo
- International Coal Ventures Pvt Ltd - India
- Goldman Sachs - Singapore
- Orica Mining Services - Indonesia
- Coalindo Energy - Indonesia
- Kartika Selabumi Mining - Indonesia
- Petron Corporation, Philippines
- Kapuas Tunggal Persada - Indonesia
- Therma Luzon, Inc, Philippines
- CIMB Investment Bank - Malaysia
- Edison Trading Spa - Italy
- Xindia Steels Limited - India
- Straits Asia Resources Limited - Singapore
- Latin American Coal - Colombia
- Toyota Tsusho Corporation, Japan
- PetroVietnam Power Coal Import and Supply Company
- Essar Steel Hazira Ltd - India
- Aditya Birla Group - India
- Orica Australia Pty. Ltd.
- Bank of Tokyo Mitsubishi UFJ Ltd
- GMR Energy Limited - India
- Indonesian Coal Mining Association
- VISA Power Limited - India
- South Luzon Thermal Energy Corporation
- Grasim Industreis Ltd - India
- GVK Power & Infra Limited - India
- Billiton Holdings Pty Ltd - Australia
- Petrochimia International Co. Ltd.- Taiwan
- Vijayanagar Sugar Pvt Ltd - India
- Sojitz Corporation - Japan
- Siam City Cement - Thailand
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Australian Commodity Traders Exchange
- Makarim & Taira - Indonesia
- Samtan Co., Ltd - South Korea
- Wilmar Investment Holdings
- Sical Logistics Limited - India
- IHS Mccloskey Coal Group - USA
- Ministry of Mines - Canada
- LBH Netherlands Bv - Netherlands
- Parry Sugars Refinery, India
- Anglo American - United Kingdom
- Salva Resources Pvt Ltd - India
- Globalindo Alam Lestari - Indonesia
- GAC Shipping (India) Pvt Ltd
- Bhoruka Overseas - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Wood Mackenzie - Singapore
- Georgia Ports Authority, United States
- New Zealand Coal & Carbon
- Chamber of Mines of South Africa
- Indogreen Group - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Videocon Industries ltd - India
- Holcim Trading Pte Ltd - Singapore
- Kepco SPC Power Corporation, Philippines
- Riau Bara Harum - Indonesia
- Kaltim Prima Coal - Indonesia
- Larsen & Toubro Limited - India
- Deloitte Consulting - India
- Cement Manufacturers Association - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Price Waterhouse Coopers - Russia
- Power Finance Corporation Ltd., India
- Chettinad Cement Corporation Ltd - India
- Coastal Gujarat Power Limited - India
- Timah Investasi Mineral - Indoneisa
- Kobexindo Tractors - Indoneisa
- Africa Commodities Group - South Africa
- CNBM International Corporation - China
- Planning Commission, India
- Karaikal Port Pvt Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Global Coal Blending Company Limited - Australia
- Thiess Contractors Indonesia
- ICICI Bank Limited - India
- Baramulti Group, Indonesia
- Mintek Dendrill Indonesia
- Formosa Plastics Group - Taiwan
- Banpu Public Company Limited - Thailand
- Electricity Generating Authority of Thailand
- Renaissance Capital - South Africa
- Sinarmas Energy and Mining - Indonesia
- Maheswari Brothers Coal Limited - India
- Romanian Commodities Exchange
- Offshore Bulk Terminal Pte Ltd, Singapore
- Leighton Contractors Pty Ltd - Australia
- Borneo Indobara - Indonesia
- The University of Queensland
- Dalmia Cement Bharat India
- San Jose City I Power Corp, Philippines
- Kideco Jaya Agung - Indonesia
- Gujarat Electricity Regulatory Commission - India
- GN Power Mariveles Coal Plant, Philippines
- Indo Tambangraya Megah - Indonesia
- SMG Consultants - Indonesia
- ASAPP Information Group - India
- Sindya Power Generating Company Private Ltd
- Metalloyd Limited - United Kingdom
- Posco Energy - South Korea
- Global Green Power PLC Corporation, Philippines
- SMC Global Power, Philippines
- Jindal Steel & Power Ltd - India
- Indika Energy - Indonesia
- India Bulls Power Limited - India
- Mercator Lines Limited - India
- Vedanta Resources Plc - India
- Gujarat Sidhee Cement - India
- Lanco Infratech Ltd - India
- Economic Council, Georgia
- Meenaskhi Energy Private Limited - India
- Rio Tinto Coal - Australia
- SN Aboitiz Power Inc, Philippines
- Sarangani Energy Corporation, Philippines
- Energy Development Corp, Philippines
- Indian Energy Exchange, India
- Ceylon Electricity Board - Sri Lanka
- Interocean Group of Companies - India
- Oldendorff Carriers - Singapore
- PTC India Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Sakthi Sugars Limited - India
- PNOC Exploration Corporation - Philippines
- Central Java Power - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Ambuja Cements Ltd - India
- Electricity Authority, New Zealand
- Singapore Mercantile Exchange
- Trasteel International SA, Italy
- Mercuria Energy - Indonesia
- The State Trading Corporation of India Ltd
- TeaM Sual Corporation - Philippines
- Indian Oil Corporation Limited
- London Commodity Brokers - England
- Miang Besar Coal Terminal - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Merrill Lynch Commodities Europe
- Coal and Oil Company - UAE
- McConnell Dowell - Australia
- Semirara Mining Corp, Philippines
- Standard Chartered Bank - UAE
- Bukit Makmur.PT - Indonesia
- Heidelberg Cement - Germany
- Asmin Koalindo Tuhup - Indonesia
- Meralco Power Generation, Philippines
- Ministry of Transport, Egypt
- Pendopo Energi Batubara - Indonesia
- Bharathi Cement Corporation - India
- Agrawal Coal Company - India
- Minerals Council of Australia
- Mjunction Services Limited - India
- Bukit Baiduri Energy - Indonesia
- Aboitiz Power Corporation - Philippines
- Energy Link Ltd, New Zealand
- Bayan Resources Tbk. - Indonesia
- OPG Power Generation Pvt Ltd - India
- Medco Energi Mining Internasional
- Jaiprakash Power Ventures ltd
- Bangladesh Power Developement Board
- Alfred C Toepfer International GmbH - Germany
- White Energy Company Limited
- Iligan Light & Power Inc, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Bahari Cakrawala Sebuku - Indonesia
- Port Waratah Coal Services - Australia
- Altura Mining Limited, Indonesia
- Marubeni Corporation - India
- IEA Clean Coal Centre - UK
- Central Electricity Authority - India
- Tata Chemicals Ltd - India
- Simpson Spence & Young - Indonesia
- European Bulk Services B.V. - Netherlands
- Kumho Petrochemical, South Korea
- Ind-Barath Power Infra Limited - India
- Attock Cement Pakistan Limited
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