Bahri Annual Report-2011

Financial Statements Report 2011

Notes To The Consolidated Financial Statements For the year ended December 31, 2011 (In Thousands Saudi Riyals) m) Revenue recognition

r) Zakat and taxes Provision for zakat is computed in accordance with the regulations of Department of Zakat and Income Tax (DZIT) and charged to the consolidated income statement based on the higher of zakat base or adjusted net income for each individual company. Provision is made for withholding tax on payments made to non-resident parties and is charged to the consolidated income statement. For subsidiaries outside the Kingdom of Saudi Arabia, provisions for tax are computed in accordance with the regulations applicable in the respective countries and are charged to consolidated income statement. s) Hedging reserve for loans commission The Company uses commission rate swaps and caps agreements to hedge its long- term loans against fluctuations in market commission rates. Changes in the fair market value of the commission rate swaps that qualifies for hedge accounting are recorded in the hedging reserve which is included in shareholders’ equity; also, the hedging reserve is adjusted based on the periodical valuation of commission rate swaps. t) Earning per share and proposed dividends Earning per share from operating income, other operations and net profit is calculated based on the weighted average number of shares outstanding during the year. Dividends proposed after year end are treated as a part of retained earnings and not as liabilities unless the General Assembly’s approval was before the end of the year. u)Trade accounts receivables Trade accounts receivables are stated at net value after deducting provision for doubtful debts. A provision against doubtful debts is established when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of the receivables. Such provisions are charged to the consolidated income statement and reported under “General and administrative expenses”. When account receivable is uncollectible, it is written-off against the provision for doubtful debts. Any subsequent recoveries of amounts previously written-off are credited against “General and administrative expenses” in the consolidated income statement.

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. q) Foreign currency transactions Foreign currency transactions are translated into Saudi riyal at prevailing exchange rates on transaction date. Monetary assets and liabilities in foreign currencies at balance sheet date are translated into Saudi riyal at the prevailing exchange rates on that date. Gains and losses resulting from fluctuation of exchange rates, which were not significant for 2011 and 2010, are recognized in the consolidated income statement. Assets and liabilities of the consolidated subsidiaries denominated in foreign currencies are converted into Saudi riyal at exchange rates prevailing at the consolidated balance sheet date. Revenues and expenses of the consolidated subsidiaries denominated in foreign currencies are converted into Saudi riyal at average exchange rates during the period. Also the components of shareholders’ equity excluding retained earnings (deficit) are converted applying the exchange rate prevailing at the dates the related items originated. Exchange differences arising from such conversion, if material, are included in a separate line item under shareholders’ equity.

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 on purchase. 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

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