The National Shipping Company of Saudi Arabia (A Saudi Joint Stock Company) Notes To The Consolidated Financial Statements December 31, 2013 (In Thousands Saudi Riyals)
g) Accounting for finance leases The present value of lease payments for assets sold under finance leases together with the unguaranteed residual value at the 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. h) Inventories Inventories consist of fuel and lubricants on board of the vessels are shown as inventories at the consolidated statement of balance sheet date, and the cost is determined using the First in First out (FIFO) method which is considered more appropriate to the Group’s operations, The differences between the weighted average method and 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 upon 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 fully amortized at the consolidated statement of income at the period in which the new dry- docking operation is started.
d) Use of estimates The preparation of consolidated financial statements in accordance with generally accepted accounting principles requires the use of estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management’s best knowledge of current events and actions, actual results ultimately may differ from those estimates. e) Cash and cash equivalents For the purpose of preparation the consolidated statement of cash flows, cash and cash equivalents comprise bank balances and cash, murabaha and short-term deposits, and investments convertible into known amounts of cash, and maturing within three months or less from the date of acquisition, which is available to the Group without any restrictions. f) Trade accounts receivable Trade accounts receivable are stated at net realizable value, net of provision for doubtful debts. A provision against doubtful debts is provided when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of the receivables, Such provision is charged to the consolidated statement of income within “General and administrative expenses”, When an account receivable is uncollectible, it is written-off against the provision for doubtful debts, Any subsequent recoveries of amounts previously written-off are reversed against “General and administrative expenses” in the consolidated statement of income.
2. Significant Accounting Policies a) Accounting convention
The accompanying consolidated financial statements are prepared in accordance with the accounting standards issued by the Saudi Organization for Certified Public Accountants (SOCPA) and under the historical cost convention, except for the measurement at fair value of investments held for trading and available for sale. The Company follows the accruals basis of accounting in preparing its consolidated financial statements. b) Period of financial statements According to Company’s by-laws, the fiscal year of the Company starts on the 1st of January and ends on December 31st of each Gregorian year. c) Basis of consolidation − These consolidated financial statements include assets, in which the Company has, direct or indirect long term investment, comprising an interest of more than 50% in the voting capital and over which it exercises practical control. The subsidiary company is consolidated from the date the company obtains control until such control ceases. − All significant inter-group accounts and transactions as well as realized gains (losses) on these transactions are eliminated on consolidation. − Non-controlling interest represents liabilities and results of operations of the Company and its subsidiaries listed in Note 1 above. − The subsidiary company is that
portion of profit or loss and net assets not hold by the Company, and is included as a separate item in the consolidated statement of balance sheet and consolidated statement of income.
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