|At 1 January 2018||2,368,609||646||4,674||10,529||30||2,384,488|
|Transfer to assets held for sale (Note 14)||(17,170)||-||-||-||-||(17,170)|
|At 31 December 2018||2,464,911||-||5,074||9,364||28||2,479,377|
|Accumulated depreciation and impairment|
|At 1 January 2018||577,095||38||1,117||8,621||30||586,901|
|Charge for the year||114,537||1||750||1,047||-||116,335|
|Impairment charge (d)||705||-||-||-||-||705|
|Transfer to assets held for sale (Note 14)||(10,720)||-||-||-||-||(10,720)|
|At 31 December 2018||662,979||-||1,353||7,345||28||671,705|
|Net book value|
|At 31 December 2018||-||3,721||2,019||-||1,807,672|
|(a) As at 31 December 2018, vessel component costs included the aggregate cost and accumulated depreciation of US$62,045,000 (2017: US$59,630,000) and US$31,606,000 (2017: US$29,683,000) respectively.|
(b) Certain owned vessels of net book value of US$1,581,652,000 (2017: US$1,518,309,000) were pledged to banks as securities for bank loans granted to the Group.
Certain owned vessels of net book value of US$100,352,000 (2017: US$107,441,000) were effectively pledged as securities to other secured borrowings (Note 17(b)) as the rights to the vessels revert to the lessors in the event of default.
(c) During the year, the Group had no capitalised borrowing costs (2017: US$373,000) on qualifying assets (Note 21). Borrowing costs were capitalised at the weighted average rate of 4.2% for 2017 of the Group's general borrowings.
(d) The impairment charge of US$705,000 related to a Handysize vessel which was contracted in 2018 to be sold in 2019. The recoverable amount of the impaired asset was calculated as the fair value less cost to sell.
(e) The average net book values of Handysize, Supramax and Post-Panamax vessels were US$14,700,000, US$21,300,000 and US$41,300,000 respectively.
|At 1 January 2017||2,093,203||57,260||600||4,261||9,738||29||2,165,091|
|At 31 December 2017||2,368,609||-||646||4,674||10,529||30||2,384,488|
|Accumulated depreciation and impairment|
|At 1 January 2017||499,614||-||59||3,809||8,147||29||511,658|
|Charge for the year||107,603||-||4||634||1,046||-||109,287|
|At 31 December 2017||577,095||-||38||1,117||8,621||30||586,901|
|Net book value|
|At 31 December 2017||1,791,514||-||608||3,557||1,908||-||1,797,587|
|Estimated useful lives|
|for the year ended |
2018 and 2017
|Vessels: 25 years
Vessel component costs: estimated
|50 years||4 to 6
|3 to 5
|4 to 5|
Please refer to Note 5 for the accounting policy on impairment
- Vessels and vessel component costs
Vessels are stated at cost less accumulated depreciation and accumulated impairment losses. The cost of an asset comprises its purchase price and any directly attributable cost of bringing the asset to its working condition for its intended use. Cost may also include transfers from equity of any gains/losses on qualifying cash flow hedges of foreign currency purchases of vessels.
Vessel component costs include the cost of major components which are usually replaced or renewed at drydockings. The assets are stated at cost less accumulated depreciation and accumulated impairment losses. The Group subsequently capitalises drydocking costs as they are incurred.
- Vessels under construction
Vessels under construction are stated at cost and are not subject to depreciation. All cost of services relating to the construction of vessels, including borrowing costs (see below) during the construction period, are capitalised as cost of vessels. When the assets concerned are brought into use, the costs are transferred to vessels and vessel component costs and depreciated in accordance with the policy on depreciation.
- Borrowing costs
Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use. Other borrowing costs are expensed.
- Other property, plant and equipment
Other property, plant and equipment, comprising buildings, leasehold improvements, furniture, fixtures and equipment and motor vehicles, are stated at cost less accumulated depreciation and accumulated impairment losses.
- Subsequent expenditure
Subsequent expenditure is either included in the carrying amount of the assets or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the expenditure will accrue to the Group and such expenditure can be measured reliably. The carrying amount of a replaced part is written off. All other repairs and maintenance are expensed in the income statement during the financial period in which they are incurred.
Depreciation of property, plant and equipment is calculated using straight-line method to allocate their cost to their residual values over their remaining estimated useful lives.
- Residual values and useful lives
The residual values of the Group’s assets are defined as the estimated amounts that the Group would obtain from disposal of the assets, after deducting the estimated costs of disposals, as if the assets were already of the age and in the conditions expected at the end of their useful lives.
Useful lives of the Group’s vessels and vessel component costs are defined as the period over which they are expected to be available for use by the Group.
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
- Gains or losses on disposal
Gains or losses on disposal are determined by comparing the proceeds with the carrying amounts and are recognised in the income statement.
Critical accounting estimates and judgements
Residual values of property, plant and equipment
The Group estimates residual values of its vessels by reference to the lightweight tonnes of the vessels and the average demolition steel price of similar vessels in the Far East market and Indian Sub-Continent market.
With all other variables held constant, if the residual value increases/decreases by 10% from management estimates, the depreciation expense would decrease/ increase by US$2.2 million in the next year.
Useful lives of vessels and vessel component costs
The Group estimates the useful life of its vessels by reference to the average historical useful life of similar vessels, their expected usage, expected repair and maintenance programme, and technical or commercial obsolescence arising from changes or improvements in the shipping market.
The Group estimates the useful life of its vessel component costs by reference to the average historical periods between drydocking cycles of vessels of similar age, and the expected usage of the vessel until its next drydock.
With all other variables held constant, if the useful lives increase/decrease by 3 years from management estimates, the depreciation expense would decrease by US$17.0 million or increase by US$29.2 million in the next year.
Impairment of vessels and vessels under construction
The Group tests whether the carrying values of vessels and vessels under construction have suffered any impairment in accordance with the accounting policy on impairment of investments and non-financial assets (Note 5). In assessing the indicators of potential impairment, internal and external sources of information such as reported sale and purchase prices, market demand and general market conditions are considered. In assessing the fair market value and valuein- use, the information above as well as market valuations from leading, independent and internationally recognised shipbroking companies are considered.
The owned minor bulk vessels are separated as two cashgenerating units (“CGUs”) (Handysize and Supramax) as the vessels within each of these CGUs are considered to be interchangeable.
The value-in-use of the vessels is an assessment of assumptions and estimates of vessel future earnings and appropriate discount rates to derive the present value of those earnings. The discount rates used are based on the industry sector risk premium relevant to the CGU and the applicable gearing ratio of the CGU.
For the value-in-use assessments, the applicable discount rates are 7.3% (2017: 6.4%).
With all other variables held constant, increasing the discount rates by 100 basis points or reducing the estimates of future vessel earnings by US$500 per day from the original estimate would not give rise to any impairment.