
Solstad Offshore ASA | Annual Report 202250
Contents
Annual Report 2022
in different markets, and management review operating results
within these markets. The Group focuses on the renewable
market, and as a consequence vessel operating renewable
contracts has been highlighted as a separate segment.
The segments coincide with the operational structure of
the Company, being four departments responsible for each
segment. Comparative figures have been restated.
Any other activities, including vessels under construction,
are included in a separate segment. Overhead expences are
apportioned between the segments based on the share of
operating expenses. All accounting policies applied in the
segment reporting are the same as used in the Group reporting.
The Group presents activities by geographical markets in the
segment note based on the location of the Group’s vessels and
operations throughout the year.
Property, Plant and Equipment - Impairment Charges
and Depreciation
Property, plant and equipment acquired by Group companies
are stated at historical expences, except the assets of acquired
subsidiaries that are stated at the fair value at the date of
acquisition. Depreciation is calculated on a straight-line basis
and adjusted for residual value and impairment, if any. Residual
value is the current estimated amount that would be obtained
from disposal of the asset, after deducting the estimated
expences of disposal, as if the asset were already of the age and
in the condition anticipated at the end of its useful lifespan. The
book value of the property, plant and equipment on the balance
sheet represents the expences less accumulated depreciation
and any impairment.
Each part of a fixed asset that is significant to the total expences
of the item are separately identified and depreciated over that
component’s useful lifetime. Based on the Group’s periodic
maintenance program and running replacement the vessels vital
parts, the expected lifetime of the assets is set to 20 years for
all of the components, except for planned periodic maintenance.
The residual value and expected useful lifetime assumptions
of long-lived assets are reviewed at each balance sheet date,
and where they differ significantly from previous estimates,
depreciation charges are amended accordingly.
Ordinary repairs and maintenance expences are charged to the
income statement in the period in which they are incurred. The
expences of major conversions and periodic maintenance of
vessels is capitalized and depreciated over the useful lifespan of
the parts replaced. The useful lifespan of periodic maintenance
will normally be the period until the next interim- or main
classification of the vessel, which usually is five years.
The book values of plant and equipment are reviewed for
impairment if events or changes in circumstances indicate
that the booked value may not be recoverable. If any such
indications exist and where the book value exceeds the
estimated recoverable amount, the asset or cash-generating
units are depreciated to their recoverable amount. The
recoverable amount of plant and equipment is the greater of
the net selling price and the value in use. When determining
value in use, estimated future cash flows are discounted to their
current value using a pre-tax discount rate that reflects current
market assessments of the monetary value and the specific risk
to the asset. For an asset that does not generate cash inflow,
a recoverable amount is calculated for the cash-generating
unit to which the asset belongs. Any previously calculated and
recognized impairment write-downs are reversed if there are
any changes to the estimates of recoverable amount. Reversals
of previous impairments are limited to the book value of the
asset if its value had not been impaired.
The business segments are the Group’s strategic units of
control. However, while calculating the recoverable amount,
each vessel is treated as one cash-generating unit.
Gains and losses on disposal are determined by comparing the
disposal proceeds with the book value and any profit or loss is
included in operating profit.
New Build Contracts
Instalments on new build contracts are recorded in the
balance sheet as fixed assets. Expences related to the on-
site supervision and other pre-delivery construction expences
including construction loan interest are capitalized per vessel.
The depreciation starts from when a new build is delivered from
the yard.
Leases
Right-of-use-assets
Right-of-use-assets are recognized at expences, less
depreciation and impairment losses at the commencement of
the lease. The expences of the assets includes the recognized
lease liabilities, initial direct expences, and lease payments
made prior to commencement. Straight-line depreciations over
the lease term are used, unless the Company is reasonably
certain to obtain ownership of the assets at the end of the
leasing period, in which case straight-line depreciations over the
estimated economic life of the assets are used. The assets are
subject to impairment assessments under the same principles
as other assets.
The Group primarily leases vessels, but also has lease contracts
related to various offices used in its operations.
Lease liabilities
Lease liabilities are recognized at the commencement of the
lease measured at the present value of lease payments over
the lease period. The lease payments include both fixed and
variable lease payments. If a purchase option is likely to be
exercised, the option price is included. Variable lease payments
that do not depend on an index are recognized as expense in the
period when the payment trigger occurs.
When calculating present value of the lease the incremental
borrowing rate at the beginning of the lease is used, if the
implicit rate is unavailable. Subsequently, the amount of the
lease liability is increased to reflect the accretion of interest and
reduced for lease payments made. The liability is remeasured if
modifications or changes to the lease terms occur.
Contracts with renewal options
The Company determines the lease term as the non-cancellable
part of the lease. In addition, any periods covered by an option
for extended lease that is reasonably certain to be exercised
are included.
Cash and cash equivalents
Cash and cash equivalents comprise of cash in hand, short-term
deposits and other short-term highly liquid investments with
maturity dates of less than three months. Bank overdrafts are
included within borrowings in current liabilities on the balance
sheet.
Restricted bank deposits are funds on separate bank accounts
for tax deductions.
Assets Held for Sale
Non-current assets held for sale consist of vessels that have
been decided to be disposed of, by sale or otherwise, and
the sale is considered highly probable. Non-current assets
classified as held for sale are measured at the lower of their
previous carrying amount and their fair value less expences
of disposal. Any excess of the carrying amount over the fair
value less expences of disposal is recognized as an impairment
loss. Depreciation of such assets is discontinued as from their
classification as held for sale.
Treasury Shares
The nominal value of treasury shares held is deducted from
registered share capital. Any differences between the nominal
value and the acquisition price of treasury shares, together
with any gains or losses on transactions therein, are recorded
directly to reserves.
Provisions
Provisions are made in the financial statements if the Group
considers it more likely than not, based on the legal provisions
or business liabilities of past events, that an outflow of resources
will be required to cover its liabilities and if the amount can be
accurately estimated. All provisions are reviewed at balance
sheet date and adjusted, if necessary, to reflect best estimate.
In instances where the timeframe may be of significance, a
provision is made for the current value of future payments to
cover liabilities.
Excess Values Contracts
Identified excess values in charter contracts acquired through
business combinations are classified as intangible fixed assets
and are amortized over the remaining duration of each charter
contract.
Tax
Tax consists of tax payable and changes in deferred tax.
Tax payable is based on taxable profit for the year and calculated
using tax rates that have been enacted as of the balance sheet
date.
Operations on foreign continental shelves are, in a number
of cases, taxable to the state of operation. In such cases the
tax is computed according to the tax legislation of the current
state, combined with any double taxation avoidance agreement
between the state where the ship owner is registered and the
state where the operation is performed. Income tax based on a
net result is classified as income tax. Other taxes are classified
as contract related expenses.
Deferred tax is calculated using the liability method at tax rate
expected to be applied of all temporary differences between the
taxable value of assets and liabilities and their booked amounts
at the end of the accounting year. Any temporary differences
that may increase or decrease tax are offset and recorded as
a net figure.
Deferred tax is calculated for assets and liabilities for which
future realization will lead to tax payable.
The recognized amount of deferred tax assets is reviewed at
each balance sheet date. If it is no longer likely that adequate
taxable profit will be generated, then the deferred tax asset
will be reduced. Anticipated utilization of tax losses are not
discounted when calculating the deferred tax asset.
Pension Obligations
The Group has a defined benefit plan for seafarers and
administrative personnel, and a contribution plan for
administrative personnel hired after 1 January 2007, which is
recognized in profit and loss when incurred. The liability of the
defined benefit pension plan is the present value of the defined
benefit liability at the balance sheet date minus the fair value
of plan assets. The defined benefit liability is calculated by
independent actuaries using the projected unit credit method
and is measured as the present value of the estimated future
cash outflows using interest rates of government securities that
have terms maturing at the same time as the liability.
The expence of providing pensions is charged to profit and
loss to spread the regular expence over the working lives of
the employees. Actuarial gains and losses are recognized in
comprehensive income in the period they occur.
Income from Contracts with Customers - Charter
Rental Income
Income and expenses relating to charter contracts are
apportioned according to the number of days for each contract
occurring before and after the end of the accounting period.
The contract begins when the vessel is “delivered” to the
charterer and ends when the vessel is “redelivered”. Freight
income is recorded net after deduction for direct, contract-
related charter expence. Any loss on contracts is accrued
when a loss is probable. Income from bareboat agreements
is regulated by IFRS 16. The time charter contracts contains
both a lease component that is regulated by IFRS 16 and a
service component that is regulated by IFRS 15. Both the
lease component and the service component are recognized
together as income in operating income (ref. note 4 for split).
Leases, in which a significant portion of the risks and rewards of