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.
|
|
Wednesday, 18 March 20
SHIPPING MARKET INSIGHT - INTERMODAL
Despite we all knew about the Covid-19 weeks ago, few could realize the size of the thread until the last few days. The examples of China and Italy ...
Tuesday, 17 March 20
IT IS NOW UNQUESTIONABLE THAT 2020 WILL BE A MILESTONE YEAR FOR THE OIL MARKET, AS WELL AS THE WHOLE GLOBAL ECONOMY - ALLIED
It is now unquestionable that 2020 will be a milestone year for the oil market, as well as the whole global economy. The impact from the COVID-19 o ...
Tuesday, 17 March 20
PRELIMINARY FIELD EXPERIENCES ON THE EFFECTS OF LSFO AND VLSFO ON CYLINDER CONDITION - HANS JENSEN LUBRICATORS
It is now more than two months since the 0.5% sulphur cap entered into force, which have affected the operation of more than 70,000 vessels. As ant ...
Monday, 16 March 20
ULTRAMAX: S8 INDONESIA-INDIA AND S10 INDONESIA-CHINA ROUTES BOTH POSTED GAINS OF $1,412, AND $1,289 ON THE WEEK, TO CLOSE AT $5,575, AND $6,089 RESPECTIVELY - BALTIC BRIEFING
Capesize
The Capesize market came to work on Monday, with little expectation, or confidence, that the days ahead were going to bring anything o ...
Sunday, 15 March 20
CAPTIVE COAL OUTPUT RISES 19% IN APRIL-FEBRUARY - FINANCIAL EXPRESS
Coal production from captive mines in the first eleven months of the ongoing fiscal have increased by 18.8% year-on-year (y-o-y) to 51.7 million to ...
|
|
|
Showing 1066 to 1070 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Planning Commission, India
- Dalmia Cement Bharat India
- GMR Energy Limited - India
- Lanco Infratech Ltd - India
- Electricity Generating Authority of Thailand
- CIMB Investment Bank - Malaysia
- PTC India Limited - India
- Ceylon Electricity Board - Sri Lanka
- Ambuja Cements Ltd - India
- Posco Energy - South Korea
- Ministry of Transport, Egypt
- Coal and Oil Company - UAE
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Rio Tinto Coal - Australia
- Straits Asia Resources Limited - Singapore
- PNOC Exploration Corporation - Philippines
- Central Java Power - Indonesia
- Oldendorff Carriers - Singapore
- Manunggal Multi Energi - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Aditya Birla Group - India
- Krishnapatnam Port Company Ltd. - India
- Sical Logistics Limited - India
- Indogreen Group - Indonesia
- Coastal Gujarat Power Limited - India
- Mjunction Services Limited - India
- Australian Commodity Traders Exchange
- SMC Global Power, Philippines
- Attock Cement Pakistan Limited
- Ministry of Mines - Canada
- London Commodity Brokers - England
- Salva Resources Pvt Ltd - India
- Renaissance Capital - South Africa
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- PowerSource Philippines DevCo
- Mercuria Energy - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Parliament of New Zealand
- New Zealand Coal & Carbon
- Maheswari Brothers Coal Limited - India
- Parry Sugars Refinery, India
- Sakthi Sugars Limited - India
- European Bulk Services B.V. - Netherlands
- Kapuas Tunggal Persada - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Vedanta Resources Plc - India
- Cement Manufacturers Association - India
- Thiess Contractors Indonesia
- Binh Thuan Hamico - Vietnam
- India Bulls Power Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Kaltim Prima Coal - Indonesia
- Coalindo Energy - Indonesia
- Kideco Jaya Agung - Indonesia
- Jindal Steel & Power Ltd - India
- Indika Energy - Indonesia
- Antam Resourcindo - Indonesia
- Madhucon Powers Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Pipit Mutiara Jaya. PT, Indonesia
- SN Aboitiz Power Inc, Philippines
- Aboitiz Power Corporation - Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Directorate Of Revenue Intelligence - India
- Maharashtra Electricity Regulatory Commission - India
- Romanian Commodities Exchange
- Ind-Barath Power Infra Limited - India
- Essar Steel Hazira Ltd - India
- Karaikal Port Pvt Ltd - India
- Malabar Cements Ltd - India
- SMG Consultants - Indonesia
- Riau Bara Harum - Indonesia
- South Luzon Thermal Energy Corporation
- Samtan Co., Ltd - South Korea
- Orica Mining Services - Indonesia
- Simpson Spence & Young - Indonesia
- Marubeni Corporation - India
- AsiaOL BioFuels Corp., Philippines
- Wilmar Investment Holdings
- Independent Power Producers Association of India
- Petrochimia International Co. Ltd.- Taiwan
- The Treasury - Australian Government
- Trasteel International SA, Italy
- CNBM International Corporation - China
- Billiton Holdings Pty Ltd - Australia
- Bukit Makmur.PT - Indonesia
- Altura Mining Limited, Indonesia
- Indian Energy Exchange, India
- Meenaskhi Energy Private Limited - India
- Deloitte Consulting - India
- Siam City Cement PLC, Thailand
- Holcim Trading Pte Ltd - Singapore
- OPG Power Generation Pvt Ltd - India
- IHS Mccloskey Coal Group - USA
- LBH Netherlands Bv - Netherlands
- Borneo Indobara - Indonesia
- Kepco SPC Power Corporation, Philippines
- Videocon Industries ltd - India
- Bharathi Cement Corporation - India
- Agrawal Coal Company - India
- Bukit Baiduri Energy - Indonesia
- Indian Oil Corporation Limited
- Gujarat Sidhee Cement - India
- Metalloyd Limited - United Kingdom
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Intertek Mineral Services - Indonesia
- TeaM Sual Corporation - Philippines
- Bangladesh Power Developement Board
- Leighton Contractors Pty Ltd - Australia
- Sarangani Energy Corporation, Philippines
- Star Paper Mills Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- International Coal Ventures Pvt Ltd - India
- Semirara Mining Corp, Philippines
- Commonwealth Bank - Australia
- Bhoruka Overseas - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Sojitz Corporation - Japan
- Indo Tambangraya Megah - Indonesia
- Carbofer General Trading SA - India
- Chettinad Cement Corporation Ltd - India
- Bayan Resources Tbk. - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Bhatia International Limited - India
- Australian Coal Association
- Central Electricity Authority - India
- Energy Link Ltd, New Zealand
- Port Waratah Coal Services - Australia
- Sree Jayajothi Cements Limited - India
- Tamil Nadu electricity Board
- GN Power Mariveles Coal Plant, Philippines
- VISA Power Limited - India
- GAC Shipping (India) Pvt Ltd
- Edison Trading Spa - Italy
- Eastern Coal Council - USA
- Meralco Power Generation, Philippines
- Sinarmas Energy and Mining - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Global Green Power PLC Corporation, Philippines
- Petron Corporation, Philippines
- Kumho Petrochemical, South Korea
- Mercator Lines Limited - India
- Savvy Resources Ltd - HongKong
- IEA Clean Coal Centre - UK
- Pendopo Energi Batubara - Indonesia
- Globalindo Alam Lestari - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Sindya Power Generating Company Private Ltd
- Global Coal Blending Company Limited - Australia
- MS Steel International - UAE
- Semirara Mining and Power Corporation, Philippines
- The State Trading Corporation of India Ltd
- The University of Queensland
- Electricity Authority, New Zealand
- Vizag Seaport Private Limited - India
- Latin American Coal - Colombia
- Power Finance Corporation Ltd., India
- Siam City Cement - Thailand
- Bank of Tokyo Mitsubishi UFJ Ltd
- Africa Commodities Group - South Africa
- Kartika Selabumi Mining - Indonesia
- Goldman Sachs - Singapore
- Ministry of Finance - Indonesia
- Price Waterhouse Coopers - Russia
- Iligan Light & Power Inc, Philippines
- Medco Energi Mining Internasional
- Tata Chemicals Ltd - India
- Heidelberg Cement - Germany
- ICICI Bank Limited - India
- Energy Development Corp, Philippines
- Bulk Trading Sa - Switzerland
- Indonesian Coal Mining Association
- Georgia Ports Authority, United States
- Merrill Lynch Commodities Europe
- Baramulti Group, Indonesia
- Toyota Tsusho Corporation, Japan
- Offshore Bulk Terminal Pte Ltd, Singapore
- Standard Chartered Bank - UAE
- Alfred C Toepfer International GmbH - Germany
- Mintek Dendrill Indonesia
- Wood Mackenzie - Singapore
- Orica Australia Pty. Ltd.
- Formosa Plastics Group - Taiwan
- White Energy Company Limited
- ASAPP Information Group - India
- Uttam Galva Steels Limited - India
- Therma Luzon, Inc, Philippines
- GVK Power & Infra Limited - India
- Barasentosa Lestari - Indonesia
- Thai Mozambique Logistica
- Xindia Steels Limited - India
- Larsen & Toubro Limited - India
- Grasim Industreis Ltd - India
- Interocean Group of Companies - India
- Minerals Council of Australia
- Eastern Energy - Thailand
- San Jose City I Power Corp, Philippines
- McConnell Dowell - Australia
- Timah Investasi Mineral - Indoneisa
- Karbindo Abesyapradhi - Indoneisa
- Directorate General of MIneral and Coal - Indonesia
- Banpu Public Company Limited - Thailand
- Cigading International Bulk Terminal - Indonesia
- Chamber of Mines of South Africa
- Global Business Power Corporation, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Kobexindo Tractors - Indoneisa
- Anglo American - United Kingdom
- TNB Fuel Sdn Bhd - Malaysia
- Singapore Mercantile Exchange
- Makarim & Taira - Indonesia
- Bhushan Steel Limited - India
- Economic Council, Georgia
- Jaiprakash Power Ventures ltd
- Kalimantan Lumbung Energi - Indonesia
|
| |
| |
|
