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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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Saturday, 21 March 20
PANAMAX: 82,000DWT SHIP AGREED $4,250 FOR A COAL TRIP VIA INDONESIA REDELIVERY SOUTH CHINA - BALTIC BRIEFING
Capesize
The Capesize market made some headway this past week despite being buffeted by the global pandemic storm. With the market in a constan ...
Friday, 20 March 20
VOLATILITY TO INCREASE IN TANKER MARKET FOLLOWING OIL PRICE WAR - DREWRY
Crude oil prices plunged by more than a third in the past week after OPEC+ failed to agree on production cut as demand softened in the aftermath of ...
Friday, 20 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, 20 March 20
OIL PRICES COULD FALL BELOW ZERO: ANALYST - FOX BUSINESS
Plunging oil prices could be headed a lot lower – possibly below zero, according to one Wall Street analyst.
West Texas Interm ...
Friday, 20 March 20
84% OF FEBRUARY BUNKER SALES IN SINGAPORE ARE LOW-SULPHUR FUELS - BIMCO
Low-sulphur fuels accounted for 84% of total February sales in Singapore, slightly up from 83% in January. The sale of low-sulphur fuel oil (LSFO) ...
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Showing 1056 to 1060 news of total 6871 |
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- Gujarat Mineral Development Corp Ltd - India
- Bharathi Cement Corporation - India
- Timah Investasi Mineral - Indoneisa
- Thai Mozambique Logistica
- Eastern Energy - Thailand
- Kepco SPC Power Corporation, Philippines
- Anglo American - United Kingdom
- TeaM Sual Corporation - Philippines
- Asmin Koalindo Tuhup - Indonesia
- Marubeni Corporation - India
- Economic Council, Georgia
- Manunggal Multi Energi - Indonesia
- Agrawal Coal Company - India
- Power Finance Corporation Ltd., India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Therma Luzon, Inc, Philippines
- Star Paper Mills Limited - India
- Australian Coal Association
- Jindal Steel & Power Ltd - India
- Parry Sugars Refinery, India
- Merrill Lynch Commodities Europe
- Central Electricity Authority - India
- Chettinad Cement Corporation Ltd - India
- Sarangani Energy Corporation, Philippines
- Samtan Co., Ltd - South Korea
- San Jose City I Power Corp, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Billiton Holdings Pty Ltd - Australia
- Kumho Petrochemical, South Korea
- Energy Link Ltd, New Zealand
- Mintek Dendrill Indonesia
- Karaikal Port Pvt Ltd - India
- Xindia Steels Limited - India
- IEA Clean Coal Centre - UK
- Neyveli Lignite Corporation Ltd, - India
- Kaltim Prima Coal - Indonesia
- Oldendorff Carriers - Singapore
- Sinarmas Energy and Mining - Indonesia
- LBH Netherlands Bv - Netherlands
- PNOC Exploration Corporation - Philippines
- Bhatia International Limited - India
- Meenaskhi Energy Private Limited - India
- Vizag Seaport Private Limited - India
- Bangladesh Power Developement Board
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Savvy Resources Ltd - HongKong
- Binh Thuan Hamico - Vietnam
- Essar Steel Hazira Ltd - India
- CNBM International Corporation - China
- Lanco Infratech Ltd - India
- Ambuja Cements Ltd - India
- Interocean Group of Companies - India
- Minerals Council of Australia
- Maharashtra Electricity Regulatory Commission - India
- Vedanta Resources Plc - India
- Pendopo Energi Batubara - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Baramulti Group, Indonesia
- Kobexindo Tractors - Indoneisa
- Bahari Cakrawala Sebuku - Indonesia
- Price Waterhouse Coopers - Russia
- Planning Commission, India
- Eastern Coal Council - USA
- Indonesian Coal Mining Association
- Bayan Resources Tbk. - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Aditya Birla Group - India
- Renaissance Capital - South Africa
- Kartika Selabumi Mining - Indonesia
- Globalindo Alam Lestari - Indonesia
- Bulk Trading Sa - Switzerland
- Georgia Ports Authority, United States
- Kapuas Tunggal Persada - Indonesia
- Attock Cement Pakistan Limited
- Ministry of Finance - Indonesia
- London Commodity Brokers - England
- New Zealand Coal & Carbon
- Miang Besar Coal Terminal - Indonesia
- Intertek Mineral Services - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Wood Mackenzie - Singapore
- Borneo Indobara - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- European Bulk Services B.V. - Netherlands
- Larsen & Toubro Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- MS Steel International - UAE
- Indian Oil Corporation Limited
- Gujarat Electricity Regulatory Commission - India
- International Coal Ventures Pvt Ltd - India
- Africa Commodities Group - South Africa
- Altura Mining Limited, Indonesia
- Edison Trading Spa - Italy
- Deloitte Consulting - India
- Posco Energy - South Korea
- OPG Power Generation Pvt Ltd - India
- PTC India Limited - India
- ASAPP Information Group - India
- Uttam Galva Steels Limited - India
- Cigading International Bulk Terminal - Indonesia
- Romanian Commodities Exchange
- White Energy Company Limited
- SN Aboitiz Power Inc, Philippines
- Australian Commodity Traders Exchange
- Gujarat Sidhee Cement - India
- GMR Energy Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Meralco Power Generation, Philippines
- Rashtriya Ispat Nigam Limited - India
- PowerSource Philippines DevCo
- Independent Power Producers Association of India
- Energy Development Corp, Philippines
- Global Green Power PLC Corporation, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Mercator Lines Limited - India
- Mjunction Services Limited - India
- Simpson Spence & Young - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Tamil Nadu electricity Board
- Grasim Industreis Ltd - India
- Wilmar Investment Holdings
- GAC Shipping (India) Pvt Ltd
- Indo Tambangraya Megah - Indonesia
- South Luzon Thermal Energy Corporation
- Sakthi Sugars Limited - India
- Krishnapatnam Port Company Ltd. - India
- Salva Resources Pvt Ltd - India
- Goldman Sachs - Singapore
- Jorong Barutama Greston.PT - Indonesia
- Petron Corporation, Philippines
- Riau Bara Harum - Indonesia
- Straits Asia Resources Limited - Singapore
- VISA Power Limited - India
- Jaiprakash Power Ventures ltd
- Directorate Of Revenue Intelligence - India
- Indika Energy - Indonesia
- Semirara Mining Corp, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Global Business Power Corporation, Philippines
- Orica Australia Pty. Ltd.
- Cement Manufacturers Association - India
- Global Coal Blending Company Limited - Australia
- Sree Jayajothi Cements Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Antam Resourcindo - Indonesia
- India Bulls Power Limited - India
- Madhucon Powers Ltd - India
- Orica Mining Services - Indonesia
- Sindya Power Generating Company Private Ltd
- Bukit Baiduri Energy - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Aboitiz Power Corporation - Philippines
- ICICI Bank Limited - India
- Carbofer General Trading SA - India
- Heidelberg Cement - Germany
- Thiess Contractors Indonesia
- Indian Energy Exchange, India
- Ministry of Transport, Egypt
- Toyota Tsusho Corporation, Japan
- Bhushan Steel Limited - India
- The University of Queensland
- Commonwealth Bank - Australia
- Iligan Light & Power Inc, Philippines
- SMC Global Power, Philippines
- Mercuria Energy - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Holcim Trading Pte Ltd - Singapore
- Karbindo Abesyapradhi - Indoneisa
- Kideco Jaya Agung - Indonesia
- The State Trading Corporation of India Ltd
- Makarim & Taira - Indonesia
- McConnell Dowell - Australia
- Leighton Contractors Pty Ltd - Australia
- Electricity Authority, New Zealand
- Coastal Gujarat Power Limited - India
- CIMB Investment Bank - Malaysia
- Central Java Power - Indonesia
- Barasentosa Lestari - Indonesia
- Metalloyd Limited - United Kingdom
- Rio Tinto Coal - Australia
- Coalindo Energy - Indonesia
- Videocon Industries ltd - India
- Bhoruka Overseas - Indonesia
- Malabar Cements Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Coal and Oil Company - UAE
- Tata Chemicals Ltd - India
- Ind-Barath Power Infra Limited - India
- Sical Logistics Limited - India
- Formosa Plastics Group - Taiwan
- SMG Consultants - Indonesia
- Trasteel International SA, Italy
- Singapore Mercantile Exchange
- Parliament of New Zealand
- GVK Power & Infra Limited - India
- Siam City Cement PLC, Thailand
- Banpu Public Company Limited - Thailand
- IHS Mccloskey Coal Group - USA
- Latin American Coal - Colombia
- Dalmia Cement Bharat India
- Chamber of Mines of South Africa
- Medco Energi Mining Internasional
- Sojitz Corporation - Japan
- Pipit Mutiara Jaya. PT, Indonesia
- Bukit Makmur.PT - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Electricity Generating Authority of Thailand
- Bank of Tokyo Mitsubishi UFJ Ltd
- Port Waratah Coal Services - Australia
- Indogreen Group - Indonesia
- The Treasury - Australian Government
- Siam City Cement - Thailand
- Ministry of Mines - Canada
- PetroVietnam Power Coal Import and Supply Company
- Standard Chartered Bank - UAE
- AsiaOL BioFuels Corp., Philippines
- Maheswari Brothers Coal Limited - India
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