Annual Report 2010 - SBM Offshore

Lease income is, as of the commencement date of the
lease contract, recognised over the term of the lease
using the net investment method, which reflects a
constant periodic rate of return. During the construction
period of the facility, the contract is treated as a
construction contract, whereby the stage of completion
method is applied.
When assets are leased out under an operating lease,
the asset is included in the balance sheet based on
the nature of the asset. Lease income from operating
leases is recognised over the term of the lease on
a straight line basis. This implies the recognition of
deferred income in the balance sheet when the contractual
dayrates are not constant during the original
term of the lease contract.
Property, plant and equipment
Property, plant and equipment is stated at historical
cost less accumulated depreciation and impairment,
with the exception of land, which is shown at cost less
impairment. Historical cost includes expenditure that
is directly attributable to the acquisition of such items.
The capital value of a facility to be leased and operated
for a client is the sum of external costs (such as
shipyards, subcontractors, suppliers), internal costs
(design, engineering, construction supervision, etc.),
third party financial costs including interest paid during
construction and attributable overheads.
Subsequent costs are included in the asset’s carrying
amount or recognised as a separate asset, as appropriate,
only when it is probable that future economic
benefits associated with the item will flow to the
Company and the cost of the item can be measured
reliably. The costs of assets include the initial estimate
of costs of demobilisation of the asset. All other
repairs and maintenance are charged to the income
statement during the financial period in which they
are incurred.
The assets are depreciated by using the straight-line
method over their anticipated useful life, taking into
account a residual value for the vessels and floating
equipment, with the exception of the ThunderHawk
facility. The depreciation charge for the ThunderHawk
facility is calculated based on its future anticipated
economic benefits. This results in a depreciation
charge partly based on the units of production method
and for the other part based on the straight line
method. Investment subsidies (with the exception of
investment premiums) are directly deducted from the
historical costs of the assets.
The anticipated useful lives of the categories of
property, plant and equipment are as follows:
Land and Buildings (Unless unlimited lives) 30-50 years
Vessels and floating equipment
- converted tankers, including refurbishment;
-'non-recoverable' investments
costs which are incurred for a specific project, e.g. installation costs, transport costs,costs of anchor lines, anchor points, risers
etc., are depreciated over the period of the contract to which they relate;
- investments in facilities
which include the mooring system, swivel stack, vessel conversion, process equipment if relevant etc. In case of long-term
contracts these items are fully depreciated over the contract duration, For shorter-term contracts, a decision is taken as to
which percentage of these costs should be depreciated.
Machinery and equipment
Other fixed assets
Financial Review / Financial Statements 2010
10-20 years
3-15 years
3-15 years
5-20 years
2-20 years
SBM Offshore – Annual Report 2010 119