Consolidated Financial Statements - Minoan Lines

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MINOAN LINES SHIPPING S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENS (Amounts expressed in thousands of drachmae unless otherwise stated) (f) Property, plant and equipment and related depreciation Property, plant and equipment are stated at cost. Depreciation is computed based on the straight-line method over the estimated useful lives. The estimate useful lives are as follows: Buildings Transportation equipment Furniture and fittings (g) Goodwill 20 years 7 – 8 years 5 years Goodwill arising on acquisition represents the excess of the cost of the acquisition over the fair value of the net identifiable assets acquired. In respect of associates, the carrying amount of goodwill is included in the carrying amount of the investment in associate. (h) Impairment The carrying amounts of the Company’s assets, other than inventories, are reviewed to determine whether there is any indication of impairment. If any such indication exists, the assets' recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of an asset or its cashgenerating unit exceeds its recoverable amount. (i) Deferred charges Deferred charges mainly consist of the cost of the operating licenses of the vessels and other costs, such as formation expenses (legal fees, etc.) are being amortised on a straight-line basis over a maximum period of five years. (j) Inventories Inventories consist of bunkers, lubricants, engine spares and stores, deck stores, duty free goods, and consumables on board. Inventories are reflected at the lower of cost and net realisable value cost being determined by the first-in, first-out method and are expensed in the period of consumption. (k) Other investments Investments held for trading are classified as current assets and are stated at fair value, with any resultant gain or loss recognised in the consolidated income statement. Other investments held by the Group are classified as being available-for-sale are stated at fair value, with any resultant gain or loss recognised in the consolidated income statement. The fair value of investments held for trading is their quoted price, excluding disposal costs, at the balance sheet date. (l) Cash and cash equivalents All highly liquid investments with an ordinary maturity of three months or less as of the date of purchase are considered to be cash equivalents. (m) Government grants Government grants in respect of capital expenditures are credited to a deferred income account and are released to profit over the expected remaining useful lives of the relevant assets by equal annual 9
MINOAN LINES SHIPPING S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENS (Amounts expressed in thousands of drachmae unless otherwise stated) instalments. The annual amount released is credited against depreciation and amortisation in the consolidated statements of income. (n) Dividends Dividends are recognised as a liability in the period in which they are declared. (o) Provision for termination indemnities Greek labour law requires that, upon reaching retirement age, employees must be paid an amount as a retirement benefit, which is determined by reference to a formula based on employees' remuneration and years of service. The Company has based its provision for retirement benefits on actuarial valuations. (p) Provisions A provision is recognised in the balance sheet when the Company has a legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be recognised to settle the obligation. (q) Revenue recognition Revenue from vessels is recognised upon the completion of the voyage. (r) Net financing costs Net financing costs comprise interest payable on borrowings, interest income on funds invested, dividend income and gains from disposal of other investments. Interest income is recognised in the consolidated income statement as it accrues. Dividend income is recognised in the income statement on the date the dividend is declared. All interest and other costs incurred in connection with borrowings are expensed as incurred as part of net financing costs. (s) <strong>Financial</strong> instruments The estimated fair values of cash, inventories, trade and other receivables, prepayments, trade and other payables and short term borrowings approximate their carrying value because of the short term maturity of these instruments. The long term debt approximates its fair value as interest is at floating rates. (t) Taxation The Company's income tax is determined on the basis of a fixed tax rate per ton on its vessels payable annually. The amount of tax payable per ton varies according to age of ship and its gross registered tonnage and is increased annually by 4%. The Company is subject to Greek income taxation in respect of its non-shipping activities. (u) Segment reporting A segment is a distinguishable component of the Company that is engaged in providing services (business segment), or in providing services in a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments. 10
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Consolidated Financial Statements - Minoan Lines

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