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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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Friday, 13 March 20
PANAMAX: SLIGHTLY STRONGER NUMBERS IN BOTH BASINS THIS WEEK - FEARNLEYS
Cape
Still very sad times for the big ships, and merit in further trading at present levels is highly debatable for most tonnage. Spot fixtures ...
Friday, 13 March 20
CHINA'S BENCHMARK POWER COAL PRICE DROPS SLIGHTLY - XINHUA
China’s benchmark power coal price dropped slightly during the past week.
The Bohai-Rim Steam-Coal Price Index (BSPI), a gauge ...
Friday, 13 March 20
KOREA SOUTH-EAST POWER INVITED BIDS FOR 390,000 MT OF THERMAL COAL FOR MAY-JUNE 2020 LOADING
COALspot.com: Korea South-East Power Co., Ltd. (KOEN), has issued an international tender for total 390,000 Metric Tons of coal for May & June ...
Thursday, 12 March 20
INDIA 2019 THERMAL COAL IMPORTS RISE 12.6% TO NEARLY 200 MILLION TONNES - REUTERS
India’s thermal coal imports rose 12.6% to nearly 200 million tonnes in 2019, government data reviewed by Reuters showed, reflecting the seco ...
Wednesday, 11 March 20
CHINA TAIYUAN COAL TRANSACTION PRICE INDEX UP 0.07 PCT - XINHUA
China Taiyuan coal transaction price index stood at 133.16 points Monday, up 0.07 percent week on week.
The index, released by China ...
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Showing 1071 to 1075 news of total 6871 |
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- Therma Luzon, Inc, Philippines
- The University of Queensland
- GMR Energy Limited - India
- Lanco Infratech Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Sindya Power Generating Company Private Ltd
- Georgia Ports Authority, United States
- Kapuas Tunggal Persada - Indonesia
- Grasim Industreis Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Meenaskhi Energy Private Limited - India
- Directorate Of Revenue Intelligence - India
- Sojitz Corporation - Japan
- Edison Trading Spa - Italy
- Latin American Coal - Colombia
- Formosa Plastics Group - Taiwan
- Vedanta Resources Plc - India
- Intertek Mineral Services - Indonesia
- Energy Development Corp, Philippines
- Kaltim Prima Coal - Indonesia
- PNOC Exploration Corporation - Philippines
- Orica Australia Pty. Ltd.
- Jindal Steel & Power Ltd - India
- Standard Chartered Bank - UAE
- Australian Commodity Traders Exchange
- Tata Chemicals Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Indika Energy - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Antam Resourcindo - Indonesia
- PTC India Limited - India
- Rio Tinto Coal - Australia
- Port Waratah Coal Services - Australia
- Wilmar Investment Holdings
- TeaM Sual Corporation - Philippines
- Metalloyd Limited - United Kingdom
- Mercuria Energy - Indonesia
- Eastern Coal Council - USA
- The State Trading Corporation of India Ltd
- Xindia Steels Limited - India
- Barasentosa Lestari - Indonesia
- Altura Mining Limited, Indonesia
- SN Aboitiz Power Inc, Philippines
- Baramulti Group, Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Independent Power Producers Association of India
- OPG Power Generation Pvt Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- PowerSource Philippines DevCo
- Globalindo Alam Lestari - Indonesia
- Medco Energi Mining Internasional
- Indo Tambangraya Megah - Indonesia
- Straits Asia Resources Limited - Singapore
- Kohat Cement Company Ltd. - Pakistan
- Bhoruka Overseas - Indonesia
- Bayan Resources Tbk. - Indonesia
- Romanian Commodities Exchange
- Dalmia Cement Bharat India
- Indonesian Coal Mining Association
- Merrill Lynch Commodities Europe
- Holcim Trading Pte Ltd - Singapore
- Aditya Birla Group - India
- Cigading International Bulk Terminal - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Parry Sugars Refinery, India
- Madhucon Powers Ltd - India
- Aboitiz Power Corporation - Philippines
- Petron Corporation, Philippines
- Kideco Jaya Agung - Indonesia
- Oldendorff Carriers - Singapore
- SMC Global Power, Philippines
- Africa Commodities Group - South Africa
- McConnell Dowell - Australia
- Coastal Gujarat Power Limited - India
- London Commodity Brokers - England
- Indian Energy Exchange, India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Power Finance Corporation Ltd., India
- Siam City Cement - Thailand
- SMG Consultants - Indonesia
- Riau Bara Harum - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- CNBM International Corporation - China
- Ministry of Mines - Canada
- GAC Shipping (India) Pvt Ltd
- San Jose City I Power Corp, Philippines
- Ceylon Electricity Board - Sri Lanka
- Carbofer General Trading SA - India
- Energy Link Ltd, New Zealand
- IEA Clean Coal Centre - UK
- Minerals Council of Australia
- Ministry of Transport, Egypt
- Central Electricity Authority - India
- Thiess Contractors Indonesia
- Heidelberg Cement - Germany
- Gujarat Electricity Regulatory Commission - India
- AsiaOL BioFuels Corp., Philippines
- Malabar Cements Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Sakthi Sugars Limited - India
- Meralco Power Generation, Philippines
- Ambuja Cements Ltd - India
- Tamil Nadu electricity Board
- Asia Pacific Energy Resources Ventures Inc, Philippines
- MS Steel International - UAE
- Kalimantan Lumbung Energi - Indonesia
- Bharathi Cement Corporation - India
- Krishnapatnam Port Company Ltd. - India
- Bangladesh Power Developement Board
- Savvy Resources Ltd - HongKong
- Global Green Power PLC Corporation, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Sarangani Energy Corporation, Philippines
- Indian Oil Corporation Limited
- White Energy Company Limited
- Star Paper Mills Limited - India
- Eastern Energy - Thailand
- Price Waterhouse Coopers - Russia
- IHS Mccloskey Coal Group - USA
- Mjunction Services Limited - India
- Indogreen Group - Indonesia
- Bhatia International Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Chettinad Cement Corporation Ltd - India
- Australian Coal Association
- Jaiprakash Power Ventures ltd
- Essar Steel Hazira Ltd - India
- European Bulk Services B.V. - Netherlands
- Bukit Asam (Persero) Tbk - Indonesia
- Wood Mackenzie - Singapore
- Borneo Indobara - Indonesia
- Mercator Lines Limited - India
- Thai Mozambique Logistica
- PetroVietnam Power Coal Import and Supply Company
- Iligan Light & Power Inc, Philippines
- Global Business Power Corporation, Philippines
- Coal and Oil Company - UAE
- Sinarmas Energy and Mining - Indonesia
- Bhushan Steel Limited - India
- Kartika Selabumi Mining - Indonesia
- Economic Council, Georgia
- Commonwealth Bank - Australia
- Banpu Public Company Limited - Thailand
- Bahari Cakrawala Sebuku - Indonesia
- Pendopo Energi Batubara - Indonesia
- Renaissance Capital - South Africa
- Kobexindo Tractors - Indoneisa
- Vijayanagar Sugar Pvt Ltd - India
- Videocon Industries ltd - India
- Kepco SPC Power Corporation, Philippines
- India Bulls Power Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Gujarat Sidhee Cement - India
- Timah Investasi Mineral - Indoneisa
- Singapore Mercantile Exchange
- Vizag Seaport Private Limited - India
- Bukit Baiduri Energy - Indonesia
- Trasteel International SA, Italy
- Bulk Trading Sa - Switzerland
- Electricity Generating Authority of Thailand
- The Treasury - Australian Government
- Attock Cement Pakistan Limited
- Ministry of Finance - Indonesia
- Siam City Cement PLC, Thailand
- Rashtriya Ispat Nigam Limited - India
- ICICI Bank Limited - India
- Binh Thuan Hamico - Vietnam
- Alfred C Toepfer International GmbH - Germany
- Gujarat Mineral Development Corp Ltd - India
- Makarim & Taira - Indonesia
- Central Java Power - Indonesia
- South Luzon Thermal Energy Corporation
- Chamber of Mines of South Africa
- Maheswari Brothers Coal Limited - India
- International Coal Ventures Pvt Ltd - India
- Parliament of New Zealand
- Samtan Co., Ltd - South Korea
- CIMB Investment Bank - Malaysia
- Marubeni Corporation - India
- LBH Netherlands Bv - Netherlands
- Directorate General of MIneral and Coal - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Planning Commission, India
- Sree Jayajothi Cements Limited - India
- Coalindo Energy - Indonesia
- GVK Power & Infra Limited - India
- Sical Logistics Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Goldman Sachs - Singapore
- Mintek Dendrill Indonesia
- Ind-Barath Power Infra Limited - India
- New Zealand Coal & Carbon
- Kumho Petrochemical, South Korea
- TNB Fuel Sdn Bhd - Malaysia
- Salva Resources Pvt Ltd - India
- Deloitte Consulting - India
- Cement Manufacturers Association - India
- Semirara Mining Corp, Philippines
- Orica Mining Services - Indonesia
- Global Coal Blending Company Limited - Australia
- Agrawal Coal Company - India
- VISA Power Limited - India
- Karaikal Port Pvt Ltd - India
- Uttam Galva Steels Limited - India
- Interocean Group of Companies - India
- Posco Energy - South Korea
- Anglo American - United Kingdom
- Electricity Authority, New Zealand
- Toyota Tsusho Corporation, Japan
- Semirara Mining and Power Corporation, Philippines
- Larsen & Toubro Limited - India
- Bukit Makmur.PT - Indonesia
- Manunggal Multi Energi - Indonesia
- Simpson Spence & Young - Indonesia
- ASAPP Information Group - India
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