Bahri Annual Report-2012

The National Shipping Company of Saudi Arabia (A Saudi Joint Stock Company) Notes to the Consolidated Financial Statements As of December 31, 2012 (in Thousands of Saudi Riyals)

losses are recognized under shareholders’ equity, whereas the realized gains or losses from the redemptions of units are recognized in the consolidated statement of income in the period in which these units are redeemed. If there is a permanent decline in the value of these investments or objective evidence for impairment, the unrealized loss is transferred to the consolidated statement of income. If the Company intends to sell the investment available for sale within 12 months from the date of the consolidated financial statements, it is reported under current assets, otherwise under non-current assets. If the fair value of the above mentioned investment is not available, cost is considered the most appropriate alternative. h) Inventories Inventories representing fuel and lubricants on board of the vessels are shown as inventories at the balance sheet date, and the cost is determined using the First In First Out (FIFO) method which is considered more appropriate to the Company’s operations. The differences between the weighted average method and the FIFO method are not significant to the consolidated statement of income. Spare parts and other consumables on board for each vessel are charged to operating expenses on purchase. 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 statement of income in the period that ends at the beginning of the new dry-docking operation. 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:

Asset Type

Depreciation Rate

Asset Type

Depreciation Rate

Buildings and improvements From 5 to 33.3%

Motor vehicles

From 20 to 25%

Fleet and equipment*

From 4 to 15%

Computer equipment

From 15 to 25%

Containers and trailers

From 8.33 to 20%

Container yard

From 10 to 25%

Furniture and fixtures



From 7 to 15%

Tools and office equipment

From 2.5 to 25%

* 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. Residual value is calculated at 10% of the vessels’ cost. RoRos’ equipment are depreciated over a period of fifteen years. Gains or losses from disposal of fixed assets are determined by comparing proceeds with the book value and are recorded in the consolidated statement of income. Maintenance and normal repairs which do not materially extend the estimated useful life of an asset are charged to the consolidated statement of income as and when incurred. Major renewals and improvements, if any, are capitalized and the assets so replaced are retired. k) Impairment of non-current assets The book value of non-current assets is reviewed for any indication of loss as a result of impairment. If such indication exists, the impairment test is performed. If impairment exists, the recoverable amount, which is the asset’s fair value less cost to sell or the gross future discounted cash flows, whichever is higher, is estimated to identify the loss amount. If the recoverable amount cannot be determined for an asset by itself, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). When the estimated recoverable amount is less than the book value of the asset or cash-generating unit, the book value is reduced to the recoverable amount and the impairment loss is recognized as an expense immediately in the consolidated statement of income. 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 does 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 statement of income. Impairment losses recognized


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