Odfjell SE Annual Report 2012

odfjell group
Note 11 Intangible assets
Intangible assets acquired through business combinations have been allocated to three individual cash generating units (CGU) as follows:
(USD 1 000)
Goodwill:
Odfjell Terminals
(Rotterdam) BV
Oiltanking
Odfjell Terminal
Singapore Pte Ltd
Odfjell Terminals
(Houston) Inc.
Book value 1.1.2011 5 244 5 516 – 10 760
Allocated fair value assets 35 453 – 35 241 70 693
Sale (5 244) – – (5 244)
Exchange rate effect (552) (73) – (625)
Book value 31.12.2011 34 901 5 443 35 241 75 584
Total
Book value 1.1.2012 34 901 5 443 35 241 75 584
Sale – – – –
Exchange rate effect 11 346 – 357
Held for sale – (2 837) – (2 837)
Book value 31.12.2012 34 912 2 952 35 241 73 105
Customer relationship:
Book value 1.1.2011 – – – –
Allocated fair value assets 35 093 – 5 865 40 958
Accumulated depreciation (1 168) – (196) (1 364)
Book value 31.12.2011 33 925 – 5 669 39 594
Book value 1.1.2012 33 925 – 5 669 39 594
Accumulated depreciation (3 504) – (588) (4 092)
Exchange rate effect 1 212 – – 1 212
Book value 31.12.2012 31 633 – 5 081 36 714
Intangible assets 31.12.2012 66 545 2 952 40 322 109 819
Customer relationships are depreciated straight-line over ten years.
The goodwill and customer relationship in 2011 occured because of the change in control of Odfjell Terminals (Houston) Inc and Odfjell
Terminals (Rotterdam) BV. See note 35 for additional information.
Held for sale is related to the letter of intent to expand its existing joint venture with Lindsay Goldberg LLC. See note 37 for additional information.
Note 12 Impairment of non-current assets and goodwill
The Management has evaluated the need for potential impairment losses in accordance with the accounting principles in note 2.14 for each CGU.
As at 31 December 2012, the market capitalization of the Group was below the book value of its equity, indicating a potential impairment of
intangible assets and of assets of the operating segments. In addition, the on-going uncertainty in business activity and thereof weak earning,
have also indicated a potential impairment. Goodwill is tested for impairment on annual basis as required by IFRS.
The WACC has been estimated as follows:
Borrowing rate: Debt ratio*(10 year swap rate + loan margin)
+ Equity return: Equity ratio*(10 year treasury rate + Beta * risk premium)
= WACC
Chemical Tankers and LPG/Ethylene:
For Odfjell’s shipping activity the net present value of future cash flows has been calculated based on expected time charter earnings and
estimated level of operating expenses for each ship over the remaining useful life of the ship. The net present value of future cash flows
was based on weighted average cost of capital (WACC) of 6% in 2012 and 6% in 2011. As both swap and treasury US dollar based rates are
currently low, the WACC ends out low as well. Odfjell has used an industry Beta based on observations of average of monthly data over five
years and weekly data over two years.
In our assumptions we believe in a better balance of supply and demand for tonnage and that we will see a growth in the time charter earning
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odfjell annual report 2012