Consolidated Financial Statements
j) Fixed assets, net Fixed assets are recorded at actual cost and are depreciated using the straight line method as follows: 1. RoRo’ vessels are depreciated over a period of twenty years, while VLCCs are depreciated over a period of twenty-five years. Used vessels are depreciated based on their estimated remaining useful lives, after taking into consideration 10% of the vessels’ cost as residual value. RoRos’ equipment are depreciated over a period of fifteen years. 2. Other fixed assets items are depreciated using depreciation rates appropriate to those assets’ estimated useful lives which are as follows:
amount, but the increased carrying amount should not exceed the carrying amount that would have been determined, had no impairment loss been recognized for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized as income immediately in the consolidated income statement. Impairment losses recognized on intangible assets are not reversible. l) Employees’ end of service benefits provision Employees’ end of service benefits provision is provided for on the basis of accumulated services period in accordance with the By-Laws of the Company and in conformity with the Saudi Labor Law. End of service benefits in respect of subsidiaries outside the Kingdom of Saudi Arabia are provided for based on the applicable regulations applied to these subsidiaries. m) Revenue recognition The Company adopted the completed voyage policy to determine the revenues and expenses for the period of the voyages. A voyage is considered to be a “Completed Voyage” when a vessel has sailed from the last discharging port of a voyage. Freight revenues, direct and indirect operating expenses associated with incomplete voyages are deferred until completion of voyage. Incomplete voyages are shown at net amount in the consolidated balance sheet under “Incomplete Voyages”. Revenues from chartering and other associated activities are recorded when services are rendered and are recorded in conformity with contract periods, voyages durations, and agreed upon services. Other income is recorded when earned. n) Bunker subsidy Bunker subsidy is computed on bunker quantities purchased and recorded in the consolidated income statement. Provisions are made against any amounts that might not be collectable. o) Expenses Direct and indirect operating costs are classified as operating expenses and all other expenses are classified as general and administrative expenses. p) Borrowing costs Borrowings are recognized at the proceeds received, net of transactions costs incurred. Borrowing costs that are directly attributable to the acquisition, construction and production of qualifying assets are capitalized as part of those assets. Other borrowing costs are charged to the consolidated income statement.
Buildings and improvements
From 5 to 33,3%
Containers and trailers Furniture and fixtures Tools and office equipment
From 8,33 to 20%
10%
From 2,5 to 25% From 20 to 25% From 15 to 25% From 10 to 25% From 7 to 15%
Motor vehicles
Computers equipment
Container yard
Others
k) Impairment of non-current assets At each balance sheet date, the carrying amounts of non-current assets are reviewed to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount, which is the higher of an asset’s fair value less cost to sell and value in use, is estimated in order to determine the extent of the impairment loss. Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash generating unit to which the asset belongs. If the recoverable amount of an asset or cash- generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash- generating unit is reduced to its recoverable amount. Impairment loss is recognized as an expense in the consolidated income statement immediately. Where an impairment loss subsequently reverses, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable
Annual Report 2009 The National Shipping Company of Saudi Arabia
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