The National Shipping Company of Saudi Arabia
i) Deferred dry-docking costs Deferred dry-docking costs are amortized over a period of two to five years from the date of completion of dry-docking depending on the type of vessel. Where a vessel undergoes another dry-docking operation during the specified amortization period, any unamortized balance of deferred costs related to the previous dry-docking of the vessel is amortized in the consolidated income statement in the period that ends at the beginning of the new dry-docking operation.
h) Inventories Inventories representing fuel and lubricants on board of the vessels are shown as inventories at the balance sheet date, and its cost is determined using First in First out (FIFO) method which is considered more appropriate to the Company’s operations. The differences between the weighted average method and FIFO method are not significant to the consolidated income statement. Spare parts and other consumables on board for each vessel are charged to operating expenses on purchase.
j) Fixed assets, net Fixed assets are recorded at actual cost and are depreciated using the straight-line method to allocate the costs of the related assets over the estimated useful lives using the following depreciation rates:
Buildings and improvements
From 5 to 33.3%
Fleet and equipment *
From 4 to 15%
Containers and trailers
From 8.33 to 20%
Furniture and fixtures
Tools and office equipment
From 2.5 to 25%
From 20 to 25%
From 15 to 25%
From 10 to 25%
From 7 to 15%
* 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. * Gains and losses on disposals are determined by comparing proceeds with carrying amount and are included in the consolidated income statement. * Maintenance and normal repairs which do not materially extend the estimated useful life of an asset are charged to the consolidated income statement as and when incurred. Major renewals and improvements, if any, are capitalized and the assets so replaced are retired.
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.
k) Impairment of non-current assets Non-current assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the carrying amount of the asset exceeds its recoverable amount which is the higher of an asset’s fair value less cost to sell and value in use. For the purpose of assessing impairment, assets are grouped at lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-current assets other than intangible assets that suffered
impairment are reviewed for possible reversal of impairment at each reporting date. 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 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 assets 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.
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