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 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 consolidated statement of income as they arise. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualified for hedge accounting. At that time, for forecast transactions, any cumulative gain or loss on the hedging instrument recognized in equity is retained in equity until the forecasted transactions occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognized in equity is transferred to consolidated statement of income for the period. S- Statutory reserve In accordance with article (125) of Saudi Arabian Regulations for Companies, the company is required to transfer 10% of net income to the statutory reserve. The Company may discontinue such transfers when the reserve equals to half of the paid-up capital. The reserve is not available for distribution to shareholders. T- Revenue recognition The Group follows the accrual basis of accounting for the recognition of revenues and expenses for the period as follows: Transport of Crude Oil, Petrochemicals, and Dry Bulk: Revenues from transport of oil, petrochemicals, and dry bulk are recognized when earned over the agreed-upon period of the contract, voyage and services. General Cargo Transportation: the Group follows the complete voyage policy in determining the revenues and expenses of the period for vessels transporting general cargo. A voyage is considered to be a “Complete Voyage” when a vessel has sailed from the last discharging port of a voyage. Shipping revenues, direct and indirect operating expenses of incomplete voyage are deferred until it is completed. Incomplete voyages are shown at the net amount in the consolidated balance sheet as “Incomplete Voyages”. Revenues from charter-in and other associated activities. These are recorded when services are rendered over the dura- tion of the related contractual services.
Other income is recorded when earned.
U- Bunker subsidy Bunker subsidy is computed on bunker quantities purchased and consumed by the Group, and these are recorded in the con- solidated statement of income. Provisions are made for doubtful amounts.
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Annual Report 2014
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