Annual Report 2010 - SBM Offshore

Associates
Associates are those entities for which the Company
has significant influence, but not control, over the financial
and operating policies. The financial statements
include the Company’s share of the total recognised
gains and losses of associates on an equity accounting
basis, from the date that significant influence commences
until the date that significant influence ceases.
When the Company’s share of losses exceeds its interest
in an associate, the Company’s carrying amount
is reduced to nil and recognition of further losses is
discontinued except to the extent that the Company
has incurred legal or constructive obligations or made
payments on behalf of the associate.
Investments in associates are accounted for using the
equity method of accounting and are initially recognised
at cost. The Company’s investment in associates
includes goodwill identified on acquisitions, net of any
accumulated impairment loss.
Joint ventures
The Company’s interest in joint ventures are accounted
for by proportionate consolidation, from the date that
joint control commences until the date that joint control
ceases. Joint ventures are those entities over whose
activities the Company has joint control, established by
contractual arrangement.
The Company combines its share of the joint ventures’
individual income and expenses, assets and liabilities
and cash flows on a line-by-line basis with similar items
in the Company’s financial statements. The Company
recognises the portion of gains or losses on the sale
of assets by the Company to the joint venture that is
attributable to the other venturers. The Company does
not recognise its share of profits or losses from the
joint venture that result from the Company’s purchase
of assets from the joint venture until it sells the assets
to an independent party. However, a loss on the transaction
is recognised immediately if the loss provides
evidence of a reduction in the net realisable value of
current assets, or an impairment loss.
Transactions eliminated on consolidation
Intragroup balances, and any unrealised gains and
losses or income and expenses arising from intragroup
Financial Review / Financial Statements 2010
transactions (which are made at arms length), are
eliminated in preparing the consolidated financial
statements. Accounting policies of subsidiaries have
been changed where necessary to ensure consistency
with the policies adopted by the Company. Unrealised
gains arising from transactions with associates and
jointly controlled entities are eliminated to the extent
of the Company’s interest in the entity. Unrealised
losses are eliminated in the same way as unrealised
gains, but only to the extent that there is no evidence of
impairment.
Segment reporting
Operating segments are reported in a manner consistent
with the internal reporting provided to the
Chief Operating Decision Maker. The Chief Operating
Decision Maker, who is responsible for allocating
resources and assessing performance of the operating
segments, has been identified as the Board of
Management.
Management has determined the operating segments
based on the reports reviewed by the Board of
Management that are used to make strategic decisions,
comprising information from the individual business
units and from a product and services perspective.
The Company’s reportable segments are identified as
follows:
• Lease and Operate
• Turnkey Systems
• Turnkey Services
• Other. The “other” category consists of corporate
overhead functions and other units
For management purposes, the Company is organised
into seven operating units based on their products and
services. For financial reporting purposes, the Turnkey
Systems segment combines the results of five of these
units being SBM Monaco, SBM Atlantia, SBM Gusto,
SBM MSC and SBM Malaysia.
The Turnkey Systems segment derives its revenues
from turnkey supply contracts. Turnkey supply contracts
consist of, among others: large production
systems, large mooring systems, deepwater export
systems, fluid transfer systems, tanker loading and
discharge terminals, supply of drilling units, design
SBM Offshore – Annual Report 2010 117