Annual Report 2010 - SBM Offshore

Share based payments
Within the Company there are four types of share
based payments: share option plan (until 2008), RSU/
PSU (as of 2009), performance shares and matching
bonus shares. All types of share based payments
qualify as equity settled plans.
The estimated total amount to be expensed over the
vesting period related to share based payments is
determined by reference to the fair value of the instruments
determined at the grant date, excluding the
impact of any non-market vesting conditions. Non
market-vesting conditions are included in assumptions
about the number of options that are expected
to become exercisable or the number of shares that
the employee will ultimately receive. Main assumptions
for estimates are revised at balance sheet date. Total
cost for the period is charged or credited to the income
statement, with a corresponding adjustment to equity.
The proceeds received on exercise of the options net
of any directly attributable costs are credited to equity.
Fair value of share options is calculated using the average
of the Black & Scholes and binomial valuation
models.
When equity instruments are exercised the Company
issues new shares.
Provisions
General
A provision is recognised in the balance sheet when the
Company has a present legal or constructive obligation
as a result of a past event, it is probable that an outflow
of economic benefits will be required to settle the
obligation, and the amount has been reliably estimated.
If the effect is material, provisions are determined by
discounting the expected future cash flows at a pre
tax rate that reflects current market assessments of
the time value of money and, when appropriate, the
risk specific to the liability. Subsequently, the interest
accrued on discounted provisions will be recognised
as financial expenses. Discounting of provisions mainly
concerns fleet demobilisation obligations.
Reorganisation
Provisions for reorganisation costs relate to costs for
termination of employment and onerous contracts.
Financial Review / Financial Statements 2010
Demobilisation obligations
The provision for demobilisation obligations relates
to estimated costs for demobilisation of leased facilities
at the end of the respective lease period. The net
present value of the future obligations is included in
property, plant and equipment with a corresponding
amount included in the provision for demobilisation. As
the remaining duration of each lease reduces, and the
discounting effect on the provision unwinds, accrued
interest is recognised as part of financial expenses and
added to the provision.
Offsetting Financial Instruments
Financial assets and liabilities are offset and the net
amount reported in the balance sheet when there is
a legally enforceable right to offset the recognised
amounts and there is an intention to settle on a net
basis, or realise the asset and settle the liability
simultaneously.
Revenue
Revenue is shown net of value-added tax, returns,
rebates and discounts and after eliminating sales within
the group.
Construction work in progress
As soon as the outcome of a construction contract can
be estimated reliably, contract revenue and expenses
are recognised in the income statement using the
‘percentage-of-completion method’. The stage of
completion is measured by reference to the total cost
incurred up to the end of the reporting period as a percentage
of the total estimated cost for each contract,
unless the physical progress significantly differs. An
expected loss on a contract is recognised immediately
in the income statement.
Variations in contract work, claims and incentive payments
are included in the contract revenue to the
extent negotiations with the customer are sufficiently
advanced and it is probable that the outcome can be
reliably measured.
Lease and operate contracts
Turnover (the total of the earned day-rates) of long-term
operating lease and operate contracts are reported
annually on a straight-line basis over the period of the
SBM Offshore – Annual Report 2010 125