
Annual Report 2023
27
obtainable from the sale of an asset in an arm’s
length transaction less the costs of disposal.
Value in use is the present value of estimated
future cash flows expected to arise from the
continuing use of an asset and from its disposal
at the end of its useful life.
Significant judgment in accounting for impairment
of vessels
Value in use calculations involve a high degree
of estimation and several critical assumptions
such as time charter rates, utilisation, operation-
al expenses, dry-dockings, useful life, recycling
values and discount rates. The key assumptions
used in the impairment assessment are dis-
closed in note 11, together with sensitivity tables
showing the effect on recoverable amount from
changes in key assumptions.
Changes in circumstances and assumptions may
significantly affect the estimated recoverable
amounts, and a weak shipping market may
result in future impairment losses. Please see
note 11 for further information on impairment
of vessels.
Tests performed in 2023 and 2022
For 2023 the Group identified that the market
value of the company was less than the book
value of net assets. This is in line with observa-
tions made for 2022. As of December 31, 2023,
the share price of the company on Euronext
Oslo Børs was NOK 8.28, slightly up from the
share price December 31, 2022 of NOK 8.18. As
a result of the change in USD/NOK currency rate
the market value of the company decreased by
USD 2 million from USD 109 million to USD 107
million in the same period. Total net assets were
145 million and 126 million, respectively. As a
result, the gap between the market value of the
company and net assets increased by USD 21
million to USD 38 million.
Despite this observation, a thorough review of
operational forecasts and market conditions
revealed no significant indicators suggesting an
impairment of the two vessels was warranted.
Specifically, the Group did not observe any
trends indicative of weaker cash inflows or
larger cash outflows than previously projected.
This analysis led to the conclusion that there
was no indication of impairment for the vessels,
negating the need for further recoverable value
testing.
In 2022, the Company identified the increase in
interest rates, resulting in a heightened cost of
capital, combined with the observation that the
Company’s total net assets were higher than its
market capitalisation on the Euronext Oslo Børs,
as indicators of potential impairment of the
two vessels. Consequently, an impairment test
was performed at the year-end values. This test
confirmed that no impairment was necessary, as
the estimated recoverable amounts of the ves-
sels exceeded their respective carrying amounts.
Further elaboration on this analysis is provided
in Note 10.
Inventory
Inventories consist of bunkers and lube oil on
board the vessels. Cost is determined in accord-
ance with the first-in-first-out principle (FIFO),
and expenses related to inventory are presented
as voyage related expenses in the income state-
ment.
Taxes
The income tax expense consists of current The
income tax expense consists of current income
tax and changes in deferred tax.
Current income tax is the expected tax payable
or receivable on the taxable income or loss for
the year, using tax rates enacted or substantive-
ly enacted at the reporting date, and any adjust-
ment to tax payable in respect of previous years.
Deferred income tax is provided using the
liability method on temporary differences at the
reporting date between the tax bases of assets
and liabilities and their carrying amounts in the
consolidated financial statements.
Deferred income tax assets and liabilities is
determined using tax rates that are expected to
apply to the year when the asset is realised or
the liability is settled, based on tax rates (and tax
laws) that have been enacted or substantively
enacted at the reporting date. Deferred tax lia-
bilities and deferred tax assets are recognised at