Bahri Annual Report-2016

113

112

Consolidated Financial Statement

Bahri Annual Report

Consolidated Financial Statement

Bahri Annual Report

Significant Accounting Policies (Continued)

m. Fixed assets (Continued)

of its interest rate risks arising from financing activities. The Group designates these as cash flow hedges of interest rate risk. The use of financial derivatives is governed by the Group’s policies, which provide principles on the use of financial derivatives consistent with the Group’s risk management strategy. The Group does not use derivative financial instruments for speculative purposes. Derivative financial instruments are initially measured at fair value on the contract date and are re-measured to fair value at subsequent reporting dates. Changes in the fair value of derivative financial instruments that are designated as effective hedges of future cash flows are recognized directly in equity, if material and the ineffective portion is recognized immediately in the consolidated statement of income. If the cash flow hedge of a firm commitment or forecasted transaction results in the recognition of an asset or a liability, then, at the time the asset or liability if recognized, the associated gain or loss on the derivative that had previously been recognized is included in the initial measurement of the asset or liability. For hedges that do not result in the recognition of an asset or a liability, amounts deferred in equity are recognized in the consolidated statement of income in the same period in which the hedged item affects net income or loss. Changes in fair value of derivative financial instruments that do not qualify for hedge accounting are recognized in the consolidated statement of income as they arise.

o. Accounts payable and accruals Liabilities are recognized for amounts to be paid in the future for goods or services received, whether billed by the supplier or not. p. Provisions Provisions are recognized when the Group has an obligation (legal or constructive) arising from a past event, and the costs to settle the obligation are both probable and may be measured reliably. q. Zakat and taxes Zakat isprovided for inaccordance with the regulations of the General Authority of Zakat and Tax (the “GAZT”) in the Kingdom of Saudi Arabian, and the provision is charged to the consolidated statement of income. Provision is made for withholding tax on payments to non-resident parties and is charged to the consolidated statement of income. For subsidiaries outside the Kingdom of Saudi Arabia, income tax is provided for in accordance with the regulations applicable in the respective countries and is charged to the consolidated statement of income. Employees’ end of service benefits is provided for on the basis of the accumulated services period in accordance with the By-Laws of the Company and Saudi Labor Law, the applicable regulations applied to overseas subsidiaries. r. Employees’ end of service benefits s. Hedge and derivative financial instruments The Group uses derivative financial instruments to hedge its exposure to certain portions agreements

Category

Depreciation rate

5 to 33.3%

20 to 25%

Buildings and improvements

Vehicles

4 to 15%

15 to 25%

Fleet and equipment *

Computers

8.33 to 20%

10 to 25%

Containers and trailers

Containers yard equipment

10%

7 to 15%

Furniture and fixtures

Others

2.5 to 25%

Tools and office equipment

*RoCons vessels and VLCCs are depreciated over a period of twenty-five years. Used vessels are depreciated based on their estimated remaining useful lives, 10% of the vessels’ cost is calculated as residual value. RoCon vessel equipment is depreciated over a period of fifteen years.

fair value less cost to sell and value in use. If the recoverable amount cannot be determined for an asset, the group will estimate the recoverable amount at the cash-generating units to which belongs to. When the estimated recoverable amount is less than the carrying amount of the assets or cash- generating unit, carrying amounts reduced to the recoverable amount and the impairment loss is recognized as an expense immediately in the consolidated statement of income. Except for goodwill, where the impairment loss is subsequently reverses, the carrying amount of the asset or cash-generatingunit 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 in prior years. A reversal on an impairment loss is recognized as income immediately in the consolidated statement of income.

Ships under construction are stated at actual cost plus all other attributable costs until to be ready for use. Upon completion, ships under construction are transferred to fixed assets and are depreciated over their estimated useful lives. Gains or losses from disposal of fixed asset is determined by comparing proceeds from disposal with the carrying value and are recognized in the consolidated statement of income. Expenditures for maintenance and routine repairs which do not materially extend the estimated useful life of an asset are charged to the consolidated statement of income when incurred. Major renewals and improvements, if any, are capitalized and the assets replaced are retired. The carrying value of non- current assets is reviewed for any indication of a loss as a result of impairment. If such indication exists, the recoverable amount is determined. The recoverable amount is the higher of the asset’s n. Impairment of non-current assets