Arrow Prospectus - PGS

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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. 57
ARROW SEISMIC ASA – INITIAL PUBLIC OFFERING The group capitalises expenses incurred at docking of the group’s vessels and amortises these expenses over the period until the next docking (the “capitalisation method”). Vessels under construction are classified as fixed assets and are recorded at the value of the incurred expenses related to the fixed asset. Vessels under construction are not depreciated until the vessel is placed in service. 8.3.8 Leases Group as a lessee: Financial leases The Group presents its financial leases in the financial statements in accordance with IAS 17; Leases. Financial leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in other short-term and other long-term payables. The interest element of the finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The capitalised assets acquired under finance leases is depreciated over the shorter of the useful life of the asset and the lease term, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term. Operational leases Leases where the Group does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased assets and recognised over the lease term on the same basis as rental income. Contingent rents are recognised as revenue in the period in which they are earned. Group as a lessor: Financial leases The Group presents assets it has leased to others as receivables equal to the net investment in the leases. The Group’s financial income is determined such that the same rate of return is achieved on outstanding receivables. Initial costs incurred in connection with establishing the lease are included in the receivable. Operational leases The Group presents assets it has leased to others as non-current assets in the balance sheet. The rental amount is taken to revenue in a straight line over the lease period. Initial direct costs incurred in establishing the lease relationship are included in the carrying amount of the leased asset, on the same basis as the rental amount. 8.3.9 Financial instruments According IAS 39, Financial instruments: Recognition and measurement, financial instruments are classified in the following categories: at fair value through profit or loss, held to maturity investments, loans and receivables and available-for-sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. At initial recognition of financial instruments the Group capitalise a financial instrument when and only when they has become a part of the instrument’s arrangement. When financial instruments are recognised initially, they are measured at fair value, plus, in case of investments not at fair value through profit and loss, directly attributable transaction or emission costs. All purchases and sales of financial instruments are recognised on the transaction date. Financial assets at fair value through profit or loss Financial instruments that are held with the intention of making a gain on short-term fluctuations in prices, financially motivated investments in obligations and other securities which enters into a trade portfolio or derivatives which are not classified as hedge instruments or is a financial guarantee contract, are classified as 58
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Prospectus Arrow Seismic ASA Offeri
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7.2 OVERVIEW OF THE GLOBAL SEISMIC
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Solheimsgt 13, PB 1114 Sentrum, N-5
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Arrow Prospectus - PGS

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