Tangible assets are measured at cost less accumulated depreciation and impairment losses. Land is not depreciated.

 

Cost comprises the acquisition price and costs directly related to the acquisition up until the time when the asset is ready for use.

 

Interest costs on loans taken up directly to finance the construction of tangible assets are included in cost over the period of construction. All other borrowing costs that are directly attributable are also included in cost.

 

The basis of depreciation is calculated as the excess of cost over the estimated scrap value. The scrap value of vessels is determined based on the market price per lightweight ton for scrapping of the vessel.

 

Depreciation is allocated on a straight-line basis over the estimated useful lives of the assets as follows:

 

 

The depreciation period for secondhand vessels is determined on the basis of the condition and age of the vessels at the time of acquisition, but the depreciation period does not exceed 20 years from delivery from the shipyard.

 

Docking costs relating to vessels recognised in the balance sheet are added to the carrying amounts of the vessels when incurred. Docking costs are allocated on a straight-line basis over the estimated useful lives of the improvements.

 

Useful lives and scrap values are reassessed annually.

 

Prepayments on newbuildings are recognised in assets as vessels under construction as payments are made. At the delivery of the vessel, they are reclassified to the item ”Vessels”.

 

The carrying amounts of tangible and financial assets are analysed annually to determine whether there are any indications of impairment in excess of the amount provided for by normal depreciation. An impairment test is conducted if there is an indication that the carrying amount of an asset may exceed the expected future cash flows from the asset. If there is such an indication, the asset is written down to the lower recoverable amount. The recoverable amount of the asset is determined as the higher of the fair value less costs to sell and the value in use. If a recoverable amount for the individual assets cannot be determined, the smallest group of assets for which it is possible to determine the recoverable amount (cash-generating unit) is analysed for impairment.

 

For investments in joint ventures, the cash-generating unit is the individual joint venture, and the recoverable amount is usually determined based on value in use. The same applies to investments in the parent company’s subsidiaries.

 

For vessels, the cash-generating unit is usually the total fleet within the Group’s individual segments, and for financial assets (other than investments in subsidiaries and joint ventures) it is the individual paper or investment. For vessels, the recoverable amount is usually determined based on the selling price including charter parties concluded, assessed by external brokers. For financial assets (other than investments in subsidiaries and joint ventures), the recoverable amount is also determined based on the selling price. In both cases, the selling price is used as a basis because active markets exist.

 

Investments in joint ventures and subsidiaries in the parent company’s financial statements are measured at the lower of cost and recoverable amount.

 

In the Group’s balance sheet, the Group’s share of the net asset value of joint ventures is included in the item ”Investments in joint ventures”, calculated on the basis of the Group’s accounting policies and after deduction or addition for the Group’s share of any unrealised intra-group gains or losses.

 

Joint ventures with negative net asset values are measured at USD 0 million. If the Group has a legal or constructive obligation to cover the associate’s negative balance, such obligation is recognised under liabilities.

 

Receivables are measured in the balance sheet at the lower of amortised cost and net realisable value, which corresponds to the nominal value less provisions for bad debts. Provisions for bad debts are determined on the basis of an individual assessment of each receivable.

 

Shares and bonds available for sale are recognised under current assets at fair value at the trade date and are subsequently measured at market price in respect of listed securities and at fair value applying a valuation method in respect of unlisted securities.

 

If securities are impaired, they are written down. Value adjustments of shares are recognised in net financials when real- ised. Until realisation, value adjustments of listed securities are recognised in equity in the reserve for securities.

 

Cash and cash equivalents are measured in the balance sheet at nominal value.

 

Tangible assets held for sale and related liabilities

Tangible assets held for sale comprise vessels which will be sold within 12 months of the balance sheet date and prepayments on newbuildings under construction which will be sold on delivery within 12 months of the balance sheet date.

 

Vessels and prepayments on vessels held for sale are measured at the lower of carrying amount and fair value less selling costs and are recognised under current assets.

 

Vessels classified as held for sale are not depreciated.

 

Assets and directly related liabilities are recognised in separate line items in the balance sheet. The items are specified in the notes.