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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, 04 March 20
CORONAVIRUS: A WILDCARD FOR BULKS DEMAND - WOOD MACKENZIE
The coronavirus is casting a shadow across commodity markets. It has undermined China’s economic sentiment, putting the country’s growt ...
Wednesday, 04 March 20
THERMAL COAL TO 'PHASE OUT', STRONG DEMAND FOR COKING COAL: PLATO - SYDNEY MORNING HERALD
Plato Investments managing director Don Hamson says Australian iron ore producers are set to benefit in the fallout from coronavirus as China will ...
Wednesday, 04 March 20
CHINA PROVINCE TO CLOSE 10 MLN TONNES OF COAL CAPACITY IN 2020 - XINHUA
Southwest China’s Guizhou Province plans to phase out 10 million tonnes of outdated coal production capacity by closing 80 coal mines in 2020 ...
Wednesday, 04 March 20
UKRAINE PRODUCED OVER 2.55 MLN TONNES OF COAL IN FEBRUARY - UKRINFORM
In February 2020, Ukraine produced over 2.55 million tonnes of coal, which is 0.2% less than planned.
The Coal Miners Union of Ukrai ...
Tuesday, 03 March 20
IMPORTANCE OF MASTER'S CARGO CHECKS - BALTIC EXCHANGE
KNOWLEDGE TO ELEVATE
Adecision in recent High Court case has made it clear that there is no implied indemnity from a charterer to their counte ...
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Showing 1096 to 1100 news of total 6871 |
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- Cement Manufacturers Association - India
- Sree Jayajothi Cements Limited - India
- Global Business Power Corporation, Philippines
- Makarim & Taira - Indonesia
- Coal and Oil Company - UAE
- Ceylon Electricity Board - Sri Lanka
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- LBH Netherlands Bv - Netherlands
- Banpu Public Company Limited - Thailand
- Iligan Light & Power Inc, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- South Luzon Thermal Energy Corporation
- Bukit Makmur.PT - Indonesia
- Therma Luzon, Inc, Philippines
- Commonwealth Bank - Australia
- PTC India Limited - India
- Larsen & Toubro Limited - India
- Sical Logistics Limited - India
- Siam City Cement - Thailand
- International Coal Ventures Pvt Ltd - India
- Oldendorff Carriers - Singapore
- Star Paper Mills Limited - India
- Videocon Industries ltd - India
- Latin American Coal - Colombia
- Interocean Group of Companies - India
- Kobexindo Tractors - Indoneisa
- Marubeni Corporation - India
- Pipit Mutiara Jaya. PT, Indonesia
- GMR Energy Limited - India
- Indian Oil Corporation Limited
- Ind-Barath Power Infra Limited - India
- Economic Council, Georgia
- Singapore Mercantile Exchange
- Savvy Resources Ltd - HongKong
- CIMB Investment Bank - Malaysia
- Baramulti Group, Indonesia
- Energy Development Corp, Philippines
- Central Electricity Authority - India
- Riau Bara Harum - Indonesia
- Ministry of Mines - Canada
- Cigading International Bulk Terminal - Indonesia
- Simpson Spence & Young - Indonesia
- European Bulk Services B.V. - Netherlands
- Global Coal Blending Company Limited - Australia
- Tamil Nadu electricity Board
- Orica Mining Services - Indonesia
- Heidelberg Cement - Germany
- Vijayanagar Sugar Pvt Ltd - India
- Altura Mining Limited, Indonesia
- Sarangani Energy Corporation, Philippines
- Georgia Ports Authority, United States
- Timah Investasi Mineral - Indoneisa
- Vizag Seaport Private Limited - India
- IHS Mccloskey Coal Group - USA
- Semirara Mining and Power Corporation, Philippines
- The University of Queensland
- Energy Link Ltd, New Zealand
- Straits Asia Resources Limited - Singapore
- Independent Power Producers Association of India
- Samtan Co., Ltd - South Korea
- Bhatia International Limited - India
- Rio Tinto Coal - Australia
- Bukit Asam (Persero) Tbk - Indonesia
- PowerSource Philippines DevCo
- New Zealand Coal & Carbon
- Bhushan Steel Limited - India
- Petron Corporation, Philippines
- Maheswari Brothers Coal Limited - India
- Holcim Trading Pte Ltd - Singapore
- Globalindo Alam Lestari - Indonesia
- Kaltim Prima Coal - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Tata Chemicals Ltd - India
- Power Finance Corporation Ltd., India
- Sakthi Sugars Limited - India
- Malabar Cements Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Coastal Gujarat Power Limited - India
- OPG Power Generation Pvt Ltd - India
- Global Green Power PLC Corporation, Philippines
- Jindal Steel & Power Ltd - India
- Barasentosa Lestari - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Karaikal Port Pvt Ltd - India
- Carbofer General Trading SA - India
- Ministry of Finance - Indonesia
- Goldman Sachs - Singapore
- Sindya Power Generating Company Private Ltd
- Karbindo Abesyapradhi - Indoneisa
- Bhoruka Overseas - Indonesia
- Orica Australia Pty. Ltd.
- Parliament of New Zealand
- GVK Power & Infra Limited - India
- Posco Energy - South Korea
- Standard Chartered Bank - UAE
- Indian Energy Exchange, India
- Dalmia Cement Bharat India
- Australian Coal Association
- Maharashtra Electricity Regulatory Commission - India
- Central Java Power - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Indogreen Group - Indonesia
- SMC Global Power, Philippines
- Electricity Authority, New Zealand
- Lanco Infratech Ltd - India
- Thai Mozambique Logistica
- Wood Mackenzie - Singapore
- Binh Thuan Hamico - Vietnam
- Metalloyd Limited - United Kingdom
- Agrawal Coal Company - India
- Antam Resourcindo - Indonesia
- Deloitte Consulting - India
- Formosa Plastics Group - Taiwan
- Indonesian Coal Mining Association
- Salva Resources Pvt Ltd - India
- CNBM International Corporation - China
- Directorate Of Revenue Intelligence - India
- Uttam Galva Steels Limited - India
- Romanian Commodities Exchange
- Minerals Council of Australia
- Vedanta Resources Plc - India
- Krishnapatnam Port Company Ltd. - India
- Kideco Jaya Agung - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Attock Cement Pakistan Limited
- Thiess Contractors Indonesia
- Chettinad Cement Corporation Ltd - India
- Rashtriya Ispat Nigam Limited - India
- GN Power Mariveles Coal Plant, Philippines
- TeaM Sual Corporation - Philippines
- Eastern Energy - Thailand
- Jaiprakash Power Ventures ltd
- Gujarat Electricity Regulatory Commission - India
- Gujarat Mineral Development Corp Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Toyota Tsusho Corporation, Japan
- Trasteel International SA, Italy
- Asmin Koalindo Tuhup - Indonesia
- Aditya Birla Group - India
- SMG Consultants - Indonesia
- Meralco Power Generation, Philippines
- Bayan Resources Tbk. - Indonesia
- London Commodity Brokers - England
- Sojitz Corporation - Japan
- Mercator Lines Limited - India
- Planning Commission, India
- Manunggal Multi Energi - Indonesia
- PNOC Exploration Corporation - Philippines
- Indika Energy - Indonesia
- Siam City Cement PLC, Thailand
- Bulk Trading Sa - Switzerland
- Bukit Baiduri Energy - Indonesia
- MS Steel International - UAE
- Eastern Coal Council - USA
- Kumho Petrochemical, South Korea
- Essar Steel Hazira Ltd - India
- ICICI Bank Limited - India
- Mjunction Services Limited - India
- Alfred C Toepfer International GmbH - Germany
- The Treasury - Australian Government
- Gujarat Sidhee Cement - India
- Madhucon Powers Ltd - India
- ASAPP Information Group - India
- Grasim Industreis Ltd - India
- Indo Tambangraya Megah - Indonesia
- Meenaskhi Energy Private Limited - India
- Aboitiz Power Corporation - Philippines
- Medco Energi Mining Internasional
- Price Waterhouse Coopers - Russia
- Kepco SPC Power Corporation, Philippines
- Ministry of Transport, Egypt
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Xindia Steels Limited - India
- Chamber of Mines of South Africa
- Anglo American - United Kingdom
- PetroVietnam Power Coal Import and Supply Company
- Petrochimia International Co. Ltd.- Taiwan
- Renaissance Capital - South Africa
- Edison Trading Spa - Italy
- White Energy Company Limited
- Intertek Mineral Services - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Sinarmas Energy and Mining - Indonesia
- The State Trading Corporation of India Ltd
- San Jose City I Power Corp, Philippines
- Kartika Selabumi Mining - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Ambuja Cements Ltd - India
- Africa Commodities Group - South Africa
- IEA Clean Coal Centre - UK
- McConnell Dowell - Australia
- Parry Sugars Refinery, India
- Miang Besar Coal Terminal - Indonesia
- Pendopo Energi Batubara - Indonesia
- Semirara Mining Corp, Philippines
- VISA Power Limited - India
- Jorong Barutama Greston.PT - Indonesia
- SN Aboitiz Power Inc, Philippines
- GAC Shipping (India) Pvt Ltd
- Australian Commodity Traders Exchange
- Coalindo Energy - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Borneo Indobara - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Wilmar Investment Holdings
- India Bulls Power Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Leighton Contractors Pty Ltd - Australia
- Bharathi Cement Corporation - India
- Port Waratah Coal Services - Australia
- Bahari Cakrawala Sebuku - Indonesia
- Merrill Lynch Commodities Europe
- Mintek Dendrill Indonesia
- Electricity Generating Authority of Thailand
- Bangladesh Power Developement Board
- Mercuria Energy - Indonesia
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