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This excerpt taken from the SHIP 6-K filed Jul 31, 2008. (c) Vessels
Vessels are originally recorded at cost less accumulated
depreciation and accumulated impairment losses.
Vessel cost includes the contract price of the vessel and
expenditure that is directly attributable to the acquisition of
the vessel (initial repairs, delivery expenses and other
expenditure to prepare the vessel for its initial voyage) and
borrowing costs incurred during the construction period.
When parts of a vessel have different useful lives, they are
accounted for as separate items (major components) of the
vessels (see Note 2(d)).
Subsequent expenditures for major improvements are also
recognized in the carrying amount if it is probable that the
future economic benefits embodied within the part will flow to
the Group and its cost can be measured reliably. The carrying
amount of the replaced part is derecognized. Routine maintenance
and repairs are recognized in the combined statement of income
as incurred.
Vessels are subsequently measured at fair value on an annual
basis. Increases in the individual vessel’s carrying amount
as a result of the revaluation is recorded in recognized income
and expense and accumulated in equity under the caption
revaluation surplus. The increase is recorded in the combined
statements of income to the extent that it reverses a
revaluation decrease of the related asset. Decreases in the
individual vessel’s carrying amount is recorded in the
combined statements of income as a separate line item. However,
the decrease is recorded in recognized income and expense to the
extent of any credit balance existing in the revaluation surplus
in respect of the related asset. The decrease recorded in
recognized income and expense reduces the amount accumulated in
equity under the revaluation surplus. The fair value of a vessel
is determined through market value appraisal, on the basis of a
sale
Table of Contents
Goldie
Navigation Ltd., Pavey Services Ltd., Shoreline Universal
Ltd.,
Valdis Marine Corp., Kalistos Maritime S.A. and Kalithea Maritime S.A. Notes to Combined Financial Statements — (Continued)
for prompt, charter-free delivery, for cash, on normal
commercial terms, between willing sellers and willing buyers of
a vessel with similar characteristics.
Depreciation is recognized in the combined statement of income
on a straight line basis over the individual vessel’s
remaining estimated useful life, after considering the estimated
residual value. Each vessel’s residual value is equal to
the product of its light-weight tonnage and estimated scrap rate.
Management estimates the useful life of the new vessels to be
25 years from the date of initial delivery from the
shipyard. Second hand vessels are depreciated from the date of
their acquisition over their remaining estimated useful life.
Depreciation, useful lives and residual values are reviewed at
each reporting date.
A vessel is derecognized upon disposal or when no future
economic benefits are expected from its use. Gains or losses on
disposal are determined by comparing the proceeds from disposal
with the carrying amount of the vessel and are recognized in the
combined statement of income.
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