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)
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 policy of the Company and in conformity with 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 has adopted the completed voyage policy to determine the revenues and expenses for the year for complete and incomplete voyages. • General Cargo Transportation: the Company follows the complete voyage policy in determining the revenues and expenses of the year for vessels transporting general cargo (RoRo). A voyage is considered to be a “Completed Voyage” when a vessel has sailed from the last discharging port of a voyage. Incomplete voyages are shown at the net amount in the consolidated balance sheet under “Incomplete Voyages”. • Crude Oil Transportation: the Company follows the complete voyage policy in determining the revenues and expenses of the year for vessels transporting crude oil. A voyage is considered to be a “Completed Voyage” from the date the vessel unloads its previous voyage load up to the date of unloading the current voyage load at the final destination port. 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 statement of income 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 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 statement of income. q) Foreign currency transactions Foreign currency transactions are translated into Saudi Riyals at prevailing exchange rates on the transaction date. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated into Saudi Riyals at the prevailing exchange rates on that date. Gains and losses resulting from fluctuation of exchange rates, which were not significant for 2012 and 2011, are recognized in the consolidated statement of income. Assets and liabilities of the consolidated subsidiaries denominated in foreign currencies are converted into Saudi Riyals 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 Riyals at average exchange rates during the year. The components of shareholders’ equity, excluding retained earnings (deficit), are converted applying the exchange rates 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. r) Zakat and taxes Provision for zakat is computed in accordance with the Regulations of the Department of Zakat and Income Tax (DZIT) and charged to the consolidated statement of income 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 statement of income. 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 the consolidated statement of income. 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, if any, are recorded in the hedging reserve which is included in shareholders’ equity; the hedging reserve is adjusted based on the periodical valuation of commission rate swaps.
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