26 Commitments

(a) Capital commitments

US$'000 2018 2017
Contracted but not provided for
- vessel acquisitions and vessel equipment contracts 70,247 32,335

(b) Operating lease commitments

Accounting policy – Operating leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases.

Critical accounting estimates and judgements – Classification of leases

The Group classifies its leases into either finance leases or operating leases taking into account of the spirit, intention, and application of HKAS 17 “Leases”.

Management assesses the classification of leases by taking into account the market conditions at the inception of the lease, the period of the lease and the probability of exercising purchase options, if any, attached to the lease. For those leases that would not transfer ownership of the assets to the Group at the end of the lease term, and that it is not reasonably certain that the purchase options, if any, attached to the arrangements would be exercised, they are being treated as operating leases.

(i) The Group as the lessee – payments

The Group had future aggregate minimum lease payments under non-cancellable operating leases as follows:

US$'000VesselsLand and
buildings
Total
At 31 December 2018
Within one year153,9992,261156,260
In the second to fifth year151,6448,236159,880
After the fifth year11,50240811,910
317,14510,905328,050
At 31 December 2017
Within one year135,8082,420138,228
In the second to fifth year238,0127,892245,904
After the fifth year22,64347023,113
396,46310,782407,245

The Group’s operating leases for vessels have terms ranging from less than 1 year to 10 years (2017: less than 1 year to 10 years). Certain of the leases have escalation clauses, renewal rights and purchase options.

Accounting policy – Operating leases: where the Group is the lessee

Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the lease periods.

(ii) The Group as the lessor – receipts

The Group had future aggregate minimum lease receipts under non-cancellable operating leases for vessels as follows:

US$'00020182017
At 31 December 2018
Within one year32,40832,294
In the second to fifth year38,25347,579
After the fifth year16,56023,130
87,221103,003

The Group’s operating leases have terms ranging from less than 1 year to 15 years and they mainly represent the receipts from two Post-Panamax vessels amounting to US$70.7 million (2017: US$86.6 million).

Accounting policy – Operating leases: where the Group is the lessor
When the Group leases out assets under operating leases, the assets are included in the balance sheet and, where applicable, are depreciated in accordance with the Group’s depreciation policies as set out in Note 6 Property, plant and equipment. Revenue arising from assets leased out under operating leases is recognised on a straight-line basis over the lease periods.

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