95
95
2015/2016 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
for the financial year ended 31 March 2016
9. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Where the recoverable amounts were derived from value-in-use calculations, discounted cash flow
projections are used which are based on contractual cash flows arising from the charter of the vessels
over the lease term. These cash flows take into account contractual charter rates, management’s
assessment of projected off-hire periods and expectations for market development which are supported
by the Group’s historical experience and past observable data. The cash flows are then discounted
at rates determined using the appropriate weighted average cost of capital which approximates the
specific risks relating to the vessels.
Based on management’s assessment, no impairment loss has been identified.
Depreciation, useful lives and residual values of vessels
The Group reviews the estimated useful lives of the vessels regularly in order to determine the amount
of depreciation expense to be recorded for each financial year. Changes in the expected level of use
of the vessels could impact the economic useful lives and the residual values of the vessels. Any
changes in the economic useful lives and the residual values could impact the depreciation charges
and consequently affect the Group’s financial results. The residual values are reviewed at each
reporting date, with any changes in estimates accounted for as a change in estimate and therefore
prospectively.
The residual values of the vessels for the purpose of calculating the annual depreciation expense for
the financial year is estimated using up to five years average scrap steel price per light displacement
ton less estimated costs of disposal of a complete vessel with all normal machinery and equipment on
board.
Drydocking costs are depreciated on a straight-line basis over the period to the next anticipated
drydocking date. The Group determines the next anticipated drydocking date of each individual
vessel by reviewing the condition of each vessel and taking into consideration the Group’s historical
experience with similar vessels and the relevant regulations governing such vessels. Any changes
to the next anticipated drydocking date could impact the depreciation and consequently affect the
Group’s financial results. The next anticipated drydocking date is reviewed at each reporting date.
As the economic useful lives and the residual values of the vessels are reviewed at each reporting
date, any changes in estimates are accounted for prospectively.
Security
At 31 March 2016, the vessels of the Group with carrying amount of US$126.8 million (2015: US$131.8
million) have been mortgaged as security to secure a bank borrowings (note 20).
