2 years ago

Annual Report 2012

Annual Report 2012

GROUPImpairment of

GROUPImpairment of financial assetsEitzen Chemical assesses at each balance sheet date whether an asset or portfolio of assets are impaired. Aportfolio is the lowest levels for which there are separate identifiable cash flows (cash-generating units).If there is objective evidence that an impairment loss on loans and receivables carried at amortised cost hasoccurred, the amount of the loss is measured as the difference between the asset’s carrying amount and thepresent value of estimated future cash flows (excluding future credit losses that have not occurred) discountedat the financial asset’s original effective interest rate i.e. the effective interest rate computed at initialrecognition). If the amount of impairment loss subsequently decreases and the decrease can be relatedobjectively to an event occurring after the impairment was recognised, the previously recognised impairmentloss is reversed. Any subsequent reversal of an impairment loss is recognised in the income statement, to theextent that the carrying value of the asset does not exceed its amortised cost at the reversal date.InventoriesInventories are valued at the lower of cost and net realisable value. Cost is determined as a first-in, first-out(FIFO) basis. Net realisable value is the estimated selling price in the ordinary course of business, lessapplicable variable selling expense.Cash and cash equivalentsCash and cash equivalents in the balance sheet comprise cash at bank and in hand and short-term depositswith an original maturity of three months or less. For the purpose of the consolidated cash flow statement,cash and cash equivalents consist of cash and cash equivalents, net of outstanding bank overdrafts.ProvisionsProvisions are recognised when Eitzen Chemical has a present obligation (legal or constructive) as a result of apast event, it is probable that the obligation has to be settled and that a reliable estimate of the obligation canbe made.Segment reportingOperating segments are reported in a manner consistent with the internal reporting provided to the chiefoperating decision-maker. The chief operating decision-maker whom is responsible for allocating resourcesand assessing performance of the operating segments, has been identified as the Board of Directors.TaxesIncome taxTax payable for the current and prior periods is measured at the amount paid or expected to be paid to the taxauthorities. The tax rates and tax laws used to compute the amount are those that are enacted orsubstantively enacted at the balance sheet date. Deferred tax is provided using the liability method ontemporary differences at the balance sheet date between the tax basis of assets and liabilities and theircarrying amounts for financial reporting purposes. Deferred tax liabilities are recognized for all taxabletemporary differences, except:• where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in atransaction that is not a business combination, and at the time of the transaction affects neither theaccounting profit nor taxable profit or loss; and• in respect of taxable temporary differences associated with investments in subsidiaries, associates andinterests in joint ventures, where the timing of the reversal of the temporary differences can becontrolled and it is probable that the temporary differences will not reverse in the foreseeable future.Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off currenttax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the sametax authority, and are the basis for deferred tax assets for the Company. The Company’s total deferred taxassets and liabilities are measured at the tax rates that are expected to apply at the time when the asset isrealized or the liability is settled, based on the tax rates and tax laws that have been enacted or substantivelyenacted at the balance sheet date.32

GROUPDeferred tax assets made probable through prospective earnings, and which can be utilized against the taxreducing temporary differences are recognized as intangible assets. The carrying amount of deferred tax assetsis reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficienttaxable profit will be available to allow all or part of the deferred income tax asset to be utilized. The carryingamount of the tax positions in local currency are translated to USD applying the rate of exchange at year-end.Eitzen Chemical's main shipping activity is in Singapore, Denmark and Norway. Eitzen Chemical has also taxableactivities in the United States.Income tax relating to items recognized directly in equity or other comprehensive income is recognized inequity and not in the income statement.Singapore AIS tax schemeThe Company is granted the status of Approved International Shipping Enterprise (AIS) In Singapore. Allqualified shipping income derived from the shipping activity is exempt from taxation for the duration of the AISstatus. The AIS status has been granted for a period of ten years commencing November 2004. There is no taxon dividend paid from the Singapore companies to the parent companies in Singapore and Norway.Danish tax schemeThe companies in Denmark are taxable according to the normal company tax scheme. The corporate tax rate is25 per cent.Norwegian tax schemeThe activities in Norway are taxable in accordance with the normal company tax scheme. The tax rate is 28 percent.US tax schemeThe commercial management activities are taxable in accordance with the normal tax scheme. The tax rate isapproximately 35 per cent.Note 2.4 - Changes in accounting policy and disclosures(a) New and amended standards adopted by the GroupThere are no IFRSs or IFRIC interpretations that are mandatory for the first time for the financial yearbeginning on or after 1 January 2012 that had a significant impact on the group.The following amendment to an existing standard is early adopted by the Group:IAS 1 Presentation of financial statements (amendment)The IASB has issued an amendment to IAS 1. The amendment changes the disclosure of itemspresented in other comprehensive income (OCI) in the statement of comprehensive income. Theamendment was endorsed by the EU in June, 2012. The Company has implemented the amendedstandard in its Consolidated Statement of Comprehensive Income.(b) New and amended standards, and interpretations mandatory for the first time for the financial yearbeginning 1 January 2012 but not currently considered relevant to the group (although they may affect theaccounting for future transactions and events)The following standards and amendments to existing standards have been published and are mandatory forthe group’s accounting periods beginning on or after 1 January 2012 or later periods.IFRS 7 Financial instruments (amendment), applies to annual periods beginning on or after 1 July2011. The amendments will assist users to understand the implications of transfers of financial assetsand the potential risks that may remain with the transferor.33

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