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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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Thursday, 19 March 20
A CRUDE TSUNAMI: UP TO 3 MILLION BPD OF EXTRA OIL CAN HIT THE MARKET FROM APRIL, MORE COMING IN MAY - RYSTAD ENERGY
The extra oil coming into the global market from April will be as much as 3 million barrels per day (bpd), Rystad Energy estimates. Two million bpd ...
Thursday, 19 March 20
BIMCO REVISES 2020 FORECAST FOR MAIN SHIPPING MARKETS
The coronavirus pandemic is impacting global shipping demand for 2020 negatively. The speed of the virus spread makes it difficult to assess the fu ...
Thursday, 19 March 20
U.S. COAL EXPORTS DECLINED IN 2019 - EIA
In 2019, U.S. coal exports declined to 93 million short tons (MMst), a 20% decrease from the previous year, according to the U.S. Energy Informatio ...
Thursday, 19 March 20
SOUTH KOREA'S KOSPO INVITED BIDS FOR MIN 3,700 OR MIN 4,200 NCV LOW CALORIFIC VALUE COAL
COALspot.com: Korea Southern Power Co., Ltd. (KOSPO), has issued an international tender for total 160,000 MT (±10%) (80,000 x 2 Panamax) of ...
Wednesday, 18 March 20
DRY BULK: INDONESIAN COAL CARGOES PROVIDING A BIG BOOST IN THE EAST WHERE SENTIMENT FOR HANDIES ALSO STARTED IMPROVING - INTERMODAL
The BDI ended last week with small gains on the back of an encouraging number of cargoes out of key trading regions that helped sustain the reserve ...
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Showing 1061 to 1065 news of total 6871 |
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- Energy Development Corp, Philippines
- Trasteel International SA, Italy
- Chettinad Cement Corporation Ltd - India
- Simpson Spence & Young - Indonesia
- Tata Chemicals Ltd - India
- Energy Link Ltd, New Zealand
- ICICI Bank Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Agrawal Coal Company - India
- Sinarmas Energy and Mining - Indonesia
- SN Aboitiz Power Inc, Philippines
- The University of Queensland
- Wood Mackenzie - Singapore
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Orica Mining Services - Indonesia
- Kideco Jaya Agung - Indonesia
- Maheswari Brothers Coal Limited - India
- Parry Sugars Refinery, India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Sarangani Energy Corporation, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Kaltim Prima Coal - Indonesia
- Straits Asia Resources Limited - Singapore
- Billiton Holdings Pty Ltd - Australia
- Jaiprakash Power Ventures ltd
- Lanco Infratech Ltd - India
- Port Waratah Coal Services - Australia
- Bayan Resources Tbk. - Indonesia
- Latin American Coal - Colombia
- Sree Jayajothi Cements Limited - India
- Thai Mozambique Logistica
- Mercuria Energy - Indonesia
- PNOC Exploration Corporation - Philippines
- Bhatia International Limited - India
- VISA Power Limited - India
- Minerals Council of Australia
- Price Waterhouse Coopers - Russia
- Jindal Steel & Power Ltd - India
- Makarim & Taira - Indonesia
- London Commodity Brokers - England
- Baramulti Group, Indonesia
- Semirara Mining Corp, Philippines
- Borneo Indobara - Indonesia
- International Coal Ventures Pvt Ltd - India
- South Luzon Thermal Energy Corporation
- Manunggal Multi Energi - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Xindia Steels Limited - India
- Antam Resourcindo - Indonesia
- LBH Netherlands Bv - Netherlands
- Merrill Lynch Commodities Europe
- Aditya Birla Group - India
- Bangladesh Power Developement Board
- Heidelberg Cement - Germany
- Cement Manufacturers Association - India
- SMG Consultants - Indonesia
- Kumho Petrochemical, South Korea
- Sojitz Corporation - Japan
- Edison Trading Spa - Italy
- Directorate Of Revenue Intelligence - India
- Timah Investasi Mineral - Indoneisa
- Karaikal Port Pvt Ltd - India
- Commonwealth Bank - Australia
- Independent Power Producers Association of India
- TNB Fuel Sdn Bhd - Malaysia
- Holcim Trading Pte Ltd - Singapore
- Kapuas Tunggal Persada - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Ambuja Cements Ltd - India
- Siam City Cement - Thailand
- Pendopo Energi Batubara - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- PetroVietnam Power Coal Import and Supply Company
- GMR Energy Limited - India
- Australian Commodity Traders Exchange
- CIMB Investment Bank - Malaysia
- Pipit Mutiara Jaya. PT, Indonesia
- Videocon Industries ltd - India
- IHS Mccloskey Coal Group - USA
- Marubeni Corporation - India
- Leighton Contractors Pty Ltd - Australia
- Attock Cement Pakistan Limited
- GAC Shipping (India) Pvt Ltd
- Formosa Plastics Group - Taiwan
- The State Trading Corporation of India Ltd
- Petron Corporation, Philippines
- Australian Coal Association
- PTC India Limited - India
- GVK Power & Infra Limited - India
- Indika Energy - Indonesia
- Planning Commission, India
- Central Java Power - Indonesia
- Kartika Selabumi Mining - Indonesia
- Toyota Tsusho Corporation, Japan
- European Bulk Services B.V. - Netherlands
- Rashtriya Ispat Nigam Limited - India
- San Jose City I Power Corp, Philippines
- Karbindo Abesyapradhi - Indoneisa
- SMC Global Power, Philippines
- India Bulls Power Limited - India
- Posco Energy - South Korea
- Sindya Power Generating Company Private Ltd
- Cigading International Bulk Terminal - Indonesia
- Bulk Trading Sa - Switzerland
- Eastern Energy - Thailand
- Ministry of Finance - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Gujarat Sidhee Cement - India
- Global Coal Blending Company Limited - Australia
- PowerSource Philippines DevCo
- Electricity Generating Authority of Thailand
- Samtan Co., Ltd - South Korea
- Indogreen Group - Indonesia
- Barasentosa Lestari - Indonesia
- Tamil Nadu electricity Board
- Altura Mining Limited, Indonesia
- Standard Chartered Bank - UAE
- Chamber of Mines of South Africa
- Economic Council, Georgia
- Central Electricity Authority - India
- Bahari Cakrawala Sebuku - Indonesia
- CNBM International Corporation - China
- Global Business Power Corporation, Philippines
- The Treasury - Australian Government
- Sical Logistics Limited - India
- Salva Resources Pvt Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Indian Oil Corporation Limited
- Malabar Cements Ltd - India
- Essar Steel Hazira Ltd - India
- Coastal Gujarat Power Limited - India
- Global Green Power PLC Corporation, Philippines
- Intertek Mineral Services - Indonesia
- Savvy Resources Ltd - HongKong
- Bharathi Cement Corporation - India
- AsiaOL BioFuels Corp., Philippines
- Meralco Power Generation, Philippines
- Dalmia Cement Bharat India
- Medco Energi Mining Internasional
- Sakthi Sugars Limited - India
- Grasim Industreis Ltd - India
- Thiess Contractors Indonesia
- ASAPP Information Group - India
- OPG Power Generation Pvt Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Vizag Seaport Private Limited - India
- Goldman Sachs - Singapore
- Ind-Barath Power Infra Limited - India
- Gujarat Electricity Regulatory Commission - India
- Renaissance Capital - South Africa
- Kalimantan Lumbung Energi - Indonesia
- White Energy Company Limited
- Ministry of Transport, Egypt
- Eastern Coal Council - USA
- Wilmar Investment Holdings
- Georgia Ports Authority, United States
- Kepco SPC Power Corporation, Philippines
- Iligan Light & Power Inc, Philippines
- TeaM Sual Corporation - Philippines
- Semirara Mining and Power Corporation, Philippines
- Indo Tambangraya Megah - Indonesia
- Aboitiz Power Corporation - Philippines
- Indonesian Coal Mining Association
- Mjunction Services Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Rio Tinto Coal - Australia
- Riau Bara Harum - Indonesia
- Parliament of New Zealand
- Carbofer General Trading SA - India
- Romanian Commodities Exchange
- Maharashtra Electricity Regulatory Commission - India
- Bhushan Steel Limited - India
- Kobexindo Tractors - Indoneisa
- Kohat Cement Company Ltd. - Pakistan
- Mercator Lines Limited - India
- Electricity Authority, New Zealand
- Ceylon Electricity Board - Sri Lanka
- Oldendorff Carriers - Singapore
- MS Steel International - UAE
- Bhoruka Overseas - Indonesia
- Banpu Public Company Limited - Thailand
- Power Finance Corporation Ltd., India
- Bukit Baiduri Energy - Indonesia
- Vedanta Resources Plc - India
- Meenaskhi Energy Private Limited - India
- Madhucon Powers Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Interocean Group of Companies - India
- Krishnapatnam Port Company Ltd. - India
- Bukit Makmur.PT - Indonesia
- IEA Clean Coal Centre - UK
- Anglo American - United Kingdom
- Therma Luzon, Inc, Philippines
- Larsen & Toubro Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Ministry of Mines - Canada
- Globalindo Alam Lestari - Indonesia
- Siam City Cement PLC, Thailand
- Deloitte Consulting - India
- Binh Thuan Hamico - Vietnam
- Singapore Mercantile Exchange
- Coal and Oil Company - UAE
- Star Paper Mills Limited - India
- Africa Commodities Group - South Africa
- Bukit Asam (Persero) Tbk - Indonesia
- Mintek Dendrill Indonesia
- New Zealand Coal & Carbon
- Coalindo Energy - Indonesia
- Orica Australia Pty. Ltd.
- McConnell Dowell - Australia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Metalloyd Limited - United Kingdom
- Alfred C Toepfer International GmbH - Germany
- Neyveli Lignite Corporation Ltd, - India
- Indian Energy Exchange, India
- Uttam Galva Steels Limited - India
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