Arrow Prospectus - PGS

ARROW SEISMIC ASA – INITIAL PUBLIC OFFERING
8.3.4 Cash and bank deposits
Cash and bank deposits, etc. include bank deposits, cash in hand and short-term bank deposits with an original
maturity of three months or less.
8.3.5 Trade receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the
effective interest method, less provision for improvement. A provision for impairment of trade receivables is
established when there is objective evidence that the Group will not be able to collect all amounts due according
to the original terms of receivables. Significant financial difficulties of the debtor, probability that the debtor will
enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days
overdue) are considered indicators that the trade receivables are impaired. The amount of the provision is the
difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted
at the original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance
account, and the amount of the loss is recognised in the income statement within selling and marketing costs.
When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables.
Subsequent recoveries of amounts previously written off are credited against selling and marketing costs in the
income statement.
8.3.6 Inventories
Inventories are valued at the lower of cost and net realisable value. Cost incurred are accounted for using
purchase cost on a first in, first out basis, and includes costs accrued in acquiring the inventories and bringing the
inventories to its present location and condition. Net realisable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and the estimated costs necessary to make the sale.
8.3.7 Fixed assets
Fixed assets are decomposed for depreciation purposes. Components that represent a substantial portion of the
vessel’s total cost price are isolated for depreciation purposes, and are depreciated over their expected useful
lives. The useful live is the period that the group expects to use the vessel, and this period can thus be shorter
than the economic life.
If various components have approximately the same useful life and the same depreciation method as other
components, the components are depreciated collectively.
The straight line method for ordinary depreciation based on an economic life of 25 years from when the vessel
was new is used for vessels. With reference to IAS 16, Property, Plant and Equipment, the group uses the cost
price for vessels with a 5 per cent residual value. In special circumstances the group will consider an alternative
depreciation horizon if the circumstances so indicate, such as the purchase and/or upgrading of older vessels.
Improvements and upgrading will be capitalised and depreciated over the remaining life of the vessel. The
straight line method for ordinary depreciation based on a period of 2.5 to 5 years is used for periodic
maintenance. The straight line method for ordinary depreciation based on a life of 3 to 10 years is used for other
depreciable assets.
The depreciation period and method will be assessed annually to ensure that the method and period used are in
accordance with the financial realities of the fixed asset. This applies correspondingly to the scrap value.
Tangible fixed assets are valued at historical cost less any accumulated depreciation and write-downs. When
assets are sold or disposed of, the historical cost and accumulated depreciation are reversed in the accounts and
any loss or gain on the disposal will be recognised in the profit and loss statement.
The write-down of assets will be considered when there is indication of an impairment in value. If the book
value of an asset is higher than the recoverable amount the asset will be written down in the profit and loss
statement. The recoverable amount is the higher of the net sales price and discounted cash flow from continued
use. The net sales price is the amount that can be raised from sale to an independent third party less sales costs.
The recoverable amount is determined separately for all assets, or, if this is not possible, then together with the
unit the asset belongs to.
Write-downs recorded in prior periods will be reversed when there is information indicating that there is no
longer any need for the write-down or the correct write-down amount is no longer the same. The reversal is
recorded as income or an increase in other reserves. However, the reversal will not be performed if the reversal
entails that the recorded value will exceed what the recorded value would have been with normal depreciation
periods.
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