e- Accounting for finance lease The present value of lease payments for assets sold under finance lease together with unguaranteed residual value at end of the lease is recognized as a receivable net of unearned finance income. Lease income is recognized over the term of the lease using the net investment method, which reflects a constant periodic rate of return. The Company accounts for the assets acquired under a lease arrangement as a finance lease when the lease transfers to the lessee (“the Company”) substantially all the benefits and risks incident to the ownership of leased assets. f- Cash and cash equivalents For the purpose of preparing the consolidated statement of cash flows, cash and cash equivalents represent cash in hand, bank balances, investment in Murabaha and short-term deposits, and investments that can be liquidated to cash and maturing within three months or less from the date of acquisition which is available to the Company and its subsidiaries without any restrictions. Investment in affiliates in which the Company has significant influence, but no control, over the investee’s financial and operation policies, or in which the Company owns equity interest ranging between 20% and 50% are accounted for using the equity method. The Company’s investment in an associate includes goodwill identified on acquisition, being the excess of the purchase price over the value of purchased net assets, net of any accumulated amortization and impairment losses, if any. Due to the timing difference between Petredec Ltd. fiscal year and the Company’s fiscal year, the Company’s share in Petredec Ltd. net profits or losses are recognized in the Company’s books according to the latest financial statements prepared by Petredec Ltd. The gap period between the latest financial statements prepared by Petredec Ltd. and the date of the Company’s consolidated financial statements is two months. Investments in other companies which are not listed in market and the Company own equity interest of less than 20% is accounted for using the cost method. 2- Investments in government bonds: Investments in government bonds are held to maturity and are stated at cost adjusted by premium or discount. In case of a permanent decline in value, unrealized losses are charged to the consolidated income statement. g- Investments 1- Investments in affiliates and others:
The National Shipping Company of Saudi Arabia Annual Report 2010
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