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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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Wednesday, 25 March 20
CORONAVIRUS CRISIS IS CRUSHING GLOBAL GDP GROWTH - FITCH RATINGS
The coronavirus crisis is crushing global GDP growth according to Fitch Ratings in its latest quarterly “Global Economic Outlook” (GEO) ...
Wednesday, 25 March 20
MARKET INSIGHT - INTERMODAL
There is no doubt that the Covid-19 pandemic crisis is a world-shattering event that will change the world as we know it. Societies are facing chal ...
Wednesday, 25 March 20
INDONESIA TO CANCEL RULES REQUIRING DOMESTIC SHIPS FOR COAL, PALM EXPORTS : REFINITIV
Indonesia's government will revoke rules requiring exporters of coal and palm oil to use domestic shipping companies for shipments, Coordinatin ...
Wednesday, 25 March 20
JAN-FEB 2020, INDONESIA SHIPPED 64.5 MLN TONNES OF COAL, UP +3.4% YOY - BANCHERO COSTA
In the 12 months of calendar 2019, Indonesia exported 386.4 mln tonnes of coal, according to vessel tracking data from Refinitiv. This represents a ...
Tuesday, 24 March 20
MARKET ANALYSIS - ALLIED
As countries around the world struggle to take back control of the ongoing COVID-19 pandemic the global economy shuts down bit by bit, leaving only ...
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Showing 1046 to 1050 news of total 6871 |
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- Formosa Plastics Group - Taiwan
- Vizag Seaport Private Limited - India
- Ministry of Finance - Indonesia
- Videocon Industries ltd - India
- Bhoruka Overseas - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Essar Steel Hazira Ltd - India
- Renaissance Capital - South Africa
- Planning Commission, India
- PowerSource Philippines DevCo
- Latin American Coal - Colombia
- Bhushan Steel Limited - India
- Intertek Mineral Services - Indonesia
- Standard Chartered Bank - UAE
- The State Trading Corporation of India Ltd
- Coal and Oil Company - UAE
- SN Aboitiz Power Inc, Philippines
- Price Waterhouse Coopers - Russia
- Gujarat Sidhee Cement - India
- GN Power Mariveles Coal Plant, Philippines
- Jaiprakash Power Ventures ltd
- Straits Asia Resources Limited - Singapore
- Chettinad Cement Corporation Ltd - India
- Global Coal Blending Company Limited - Australia
- Salva Resources Pvt Ltd - India
- CNBM International Corporation - China
- Heidelberg Cement - Germany
- Timah Investasi Mineral - Indoneisa
- White Energy Company Limited
- Deloitte Consulting - India
- Australian Commodity Traders Exchange
- Singapore Mercantile Exchange
- Karbindo Abesyapradhi - Indoneisa
- GAC Shipping (India) Pvt Ltd
- Directorate General of MIneral and Coal - Indonesia
- Oldendorff Carriers - Singapore
- India Bulls Power Limited - India
- Riau Bara Harum - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Anglo American - United Kingdom
- IEA Clean Coal Centre - UK
- International Coal Ventures Pvt Ltd - India
- LBH Netherlands Bv - Netherlands
- Makarim & Taira - Indonesia
- Central Electricity Authority - India
- OPG Power Generation Pvt Ltd - India
- Trasteel International SA, Italy
- Georgia Ports Authority, United States
- Sarangani Energy Corporation, Philippines
- Bangladesh Power Developement Board
- Simpson Spence & Young - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Sical Logistics Limited - India
- Sinarmas Energy and Mining - Indonesia
- Independent Power Producers Association of India
- Coastal Gujarat Power Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Star Paper Mills Limited - India
- AsiaOL BioFuels Corp., Philippines
- Electricity Generating Authority of Thailand
- Uttam Galva Steels Limited - India
- Leighton Contractors Pty Ltd - Australia
- Romanian Commodities Exchange
- San Jose City I Power Corp, Philippines
- Toyota Tsusho Corporation, Japan
- Samtan Co., Ltd - South Korea
- Medco Energi Mining Internasional
- ASAPP Information Group - India
- Siam City Cement - Thailand
- The Treasury - Australian Government
- PetroVietnam Power Coal Import and Supply Company
- SMG Consultants - Indonesia
- Mercator Lines Limited - India
- Edison Trading Spa - Italy
- Baramulti Group, Indonesia
- Barasentosa Lestari - Indonesia
- Eastern Coal Council - USA
- European Bulk Services B.V. - Netherlands
- Wilmar Investment Holdings
- Altura Mining Limited, Indonesia
- Mjunction Services Limited - India
- Bhatia International Limited - India
- Central Java Power - Indonesia
- Parliament of New Zealand
- The University of Queensland
- Binh Thuan Hamico - Vietnam
- Sree Jayajothi Cements Limited - India
- Banpu Public Company Limited - Thailand
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Semirara Mining Corp, Philippines
- Africa Commodities Group - South Africa
- Australian Coal Association
- Asmin Koalindo Tuhup - Indonesia
- South Luzon Thermal Energy Corporation
- Grasim Industreis Ltd - India
- VISA Power Limited - India
- CIMB Investment Bank - Malaysia
- Mintek Dendrill Indonesia
- Electricity Authority, New Zealand
- Bayan Resources Tbk. - Indonesia
- Agrawal Coal Company - India
- Gujarat Mineral Development Corp Ltd - India
- Thai Mozambique Logistica
- TeaM Sual Corporation - Philippines
- Energy Development Corp, Philippines
- Globalindo Alam Lestari - Indonesia
- Kideco Jaya Agung - Indonesia
- Pendopo Energi Batubara - Indonesia
- Jindal Steel & Power Ltd - India
- Orica Australia Pty. Ltd.
- Indogreen Group - Indonesia
- Madhucon Powers Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Meenaskhi Energy Private Limited - India
- Malabar Cements Ltd - India
- IHS Mccloskey Coal Group - USA
- Cigading International Bulk Terminal - Indonesia
- Borneo Indobara - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- GMR Energy Limited - India
- Directorate Of Revenue Intelligence - India
- Rio Tinto Coal - Australia
- GVK Power & Infra Limited - India
- Vedanta Resources Plc - India
- ICICI Bank Limited - India
- Savvy Resources Ltd - HongKong
- Xindia Steels Limited - India
- Chamber of Mines of South Africa
- Bharathi Cement Corporation - India
- Petron Corporation, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Energy Link Ltd, New Zealand
- Indo Tambangraya Megah - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Minerals Council of Australia
- Kartika Selabumi Mining - Indonesia
- Carbofer General Trading SA - India
- Meralco Power Generation, Philippines
- Karaikal Port Pvt Ltd - India
- Kumho Petrochemical, South Korea
- Eastern Energy - Thailand
- Attock Cement Pakistan Limited
- SMC Global Power, Philippines
- Ministry of Mines - Canada
- Global Green Power PLC Corporation, Philippines
- Krishnapatnam Port Company Ltd. - India
- Kalimantan Lumbung Energi - Indonesia
- Indian Oil Corporation Limited
- Lanco Infratech Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Bukit Baiduri Energy - Indonesia
- McConnell Dowell - Australia
- Tamil Nadu electricity Board
- PNOC Exploration Corporation - Philippines
- Sindya Power Generating Company Private Ltd
- Kobexindo Tractors - Indoneisa
- Bulk Trading Sa - Switzerland
- Kepco SPC Power Corporation, Philippines
- Mercuria Energy - Indonesia
- MS Steel International - UAE
- New Zealand Coal & Carbon
- PTC India Limited - India
- Maheswari Brothers Coal Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Commonwealth Bank - Australia
- Metalloyd Limited - United Kingdom
- London Commodity Brokers - England
- Ministry of Transport, Egypt
- Sakthi Sugars Limited - India
- Coalindo Energy - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Iligan Light & Power Inc, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Vijayanagar Sugar Pvt Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Aditya Birla Group - India
- Merrill Lynch Commodities Europe
- Port Waratah Coal Services - Australia
- Thiess Contractors Indonesia
- Dalmia Cement Bharat India
- Larsen & Toubro Limited - India
- Economic Council, Georgia
- Therma Luzon, Inc, Philippines
- Goldman Sachs - Singapore
- Rashtriya Ispat Nigam Limited - India
- Indika Energy - Indonesia
- Wood Mackenzie - Singapore
- Power Finance Corporation Ltd., India
- Neyveli Lignite Corporation Ltd, - India
- Bukit Makmur.PT - Indonesia
- Posco Energy - South Korea
- Parry Sugars Refinery, India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Manunggal Multi Energi - Indonesia
- Global Business Power Corporation, Philippines
- Interocean Group of Companies - India
- Indian Energy Exchange, India
- Bukit Asam (Persero) Tbk - Indonesia
- Cement Manufacturers Association - India
- Petrochimia International Co. Ltd.- Taiwan
- TNB Fuel Sdn Bhd - Malaysia
- Ind-Barath Power Infra Limited - India
- Ceylon Electricity Board - Sri Lanka
- Kaltim Prima Coal - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Aboitiz Power Corporation - Philippines
- Marubeni Corporation - India
- Tata Chemicals Ltd - India
- Ambuja Cements Ltd - India
- Siam City Cement PLC, Thailand
- Orica Mining Services - Indonesia
- Indonesian Coal Mining Association
- Sojitz Corporation - Japan
- Antam Resourcindo - Indonesia
- Jorong Barutama Greston.PT - Indonesia
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