New IFRS for consolidated accounts could raise issues for shipping

International accountant and shipping adviser Moore Stephens says shipping companies and their financiers could be among those affected by the introduction of the new International Financial Reporting Standard for consolidated financial statements.

The new standard, IFRS 10, which deals with consolidated accounts, comes into force in 2014 in the EU, but is already in force outside the EU. It adopts a new approach to the definition of a parent in consolidated accounts by identifying three key elements of control relating to a subsidiary: (1) who has the power to direct the key activities; (2) who gets a variable return as a result of the activities; and (3) is there a connection between the exercise of power and the variable return. Where a party has all three elements, then it is a parent; where at least one element is missing, then it is not.

Michael Simms, a partner with the shipping team at Moore Stephens, says, “In every case, IFRS 10 looks to the substance of the arrangement and not just to its legal form. So there is no simple answer to the three key questions it poses. Each situation needs to be assessed individually.

“Many shipping groups will find the new standard has minimal impact on them. While it redefines what it means to be - or to have - a subsidiary, the majority of situations will be straightforward. Where a parent has a wholly owned subsidiary under the current rules, and no unusual arrangements with other parties, it will still have a wholly owned subsidiary under the new rules.

“The standard makes changes, however, in the case of more complex arrangements. For example, there have been a number of cases in recent years of shipping companies being unable to meet their debt obligations. If the vessels operated by such companies are then sold, no accounting issues arise and the bank has simply realised its loss. In some cases, though, the bank does not wish to sell the vessel and it is transferred to a new entity in which the bank retains some form of interest. The question is whether, in such cases, that entity is a subsidiary of the bank. The new IFRS10 definition is already raising issues and more are likely to arise with the forthcoming implementation in the EU.”

Moore Stephens LLP is noted for a number of industry specialisations and is widely acknowledged as a leading shipping and insurance adviser. Moore Stephens LLP is a member firm of Moore Stephens International Limited, one of the world's leading accounting and consulting associations, with 624 offices of independent member firms in over 100 countries, employing 21,224 people and generating revenues in 2012 of $2.3 billion. www.moorestephens.co.uk

For more information:
Michael Simms
Moore Stephens
Tel: +44 (0)207 334 9191
michael.simms@moorestephens.com

Shipping companies to be hit hard by cost of addressing MNOPF funding shortfall

International accountant and shipping adviser Moore Stephens has warned that the latest valuation relating to the post-1978 (new) section of the Merchant Navy Officers Pension Fund (MNOPF) will place further financial strain on shipping companies involved in the scheme. 

Under the valuation, the MNOPF trustees reported a funding shortfall as at 31 March 2012 of £492m. Although this is less than had been anticipated, it nevertheless represents an increase of £152m (discounted to £120m) on the deficit recorded in the 31 March 2009 valuation. 

To eliminate the funding shortfall, the trustees have called for additional contributions with a present value of £120m as at 31 March 2012 under a recovery plan beginning from 30 September 2013 and ending on 30 September 2025. There is a payment by instalment option, but companies with a deficit of more than £250,000 will have to submit to a new credit assessment in order to qualify for this.  

Employers’ contributions for existing members are also increasing, from 15.5 per cent to 20 per cent, while active member contributions are going up from 9.5 per cent to 12.2 per cent. 

Michael Simms, a partner with the shipping group at Moore Stephens, says, “These changes will come as a further body-blow to companies which have been under severe financial pressure for the past five years due to the global financial downturn and the combination of declining freight rates, increased competition and higher operating costs in the shipping industry.  In addition to the principal sums required, companies will also have to factor in the cost of their accounting requirements and assess the impact on loan covenants and other banking arrangements. For those opting to pay by instalments, meanwhile, there is the additional cost of undergoing a new credit assessment, which is not insignificant. For shipowners already struggling to keep their heads above water, these increased pension costs represent an unwelcome, if not entirely unexpected, additional financial burden.”  

l Moore Stephens LLP is noted for a number of industry specialisations and is widely acknowledged as a leading shipping and insurance adviser. Moore Stephens LLP is a member firm of Moore Stephens International Limited, one of the world's leading accounting and consulting associations, with 624 offices of independent member firms in over 100 countries, employing 21,224 people and generating revenues in 2012 of $2.3 billion.

 

For more information:                                                             

Michael Simms                                                                         
Moore Stephens LLP                                                                
Tel: +44 (0)20 7334 9191                                                           
michael.simms@moorestephens.com    

RINA commits to IACS chairmanship

International classification society RINA has committed major resources to support IACS (International Association of Classification Societies) during its year of chairmanship.

Roberto Cazzulo, Chairman of RINA Services SpA, was elected as Chairman of IACS Council at the end of June. He will lead an active team of senior personnel from RINA who will seek to continue the global technical leadership of IACS and to ensure it meets the needs of both the international shipping and shipbuilding industries and also regulators.

Says Cazzulo, “We firmly believe that by collaborating through IACS the leading classification societies of the world help raise safety, environmental and performance standards for the global shipping fleet. To that end RINA is willing to contribute the time and expertise of a serious team. I personally commit myself to driving forward IACS’ priorities this year and to helping to ensure a healthy and continuing dialogue with all stakeholders in our global maritime industry. In this complex global world no class society can go it alone. By working together we achieve much more than we could as the sum of a lot of societies trying to work by themselves.”

In addition to the chairmanship of Roberto Cazzulo, RINA has also committed the following senior staff to IACS:

Michele Francioni is RINA Chief Operating Officer and serves as RINA IACS Council Member.

Laura Scuteri is RINA Manager of Relations with Regulatory Bodies-Marine and Chairman of IACS General Policy Group.

Giovanna Carosi works on RINA’s relations with Regulatory Bodies-Marine, and serves as a member of the IACS General Policy Group.

Paolo Salza, RINA Chief Technical Officer, is the Chairman of the IACS Joint Working Group with the industry on a structured approach for the development of regulations.

Dino Cervetto is RINA Director of Technical Services. He participates in the IACS Steering Group on the Common Structural Rules (CSR) for Oil Tankers and Bulk Carriers.

Claudio Abbate is RINA Manager of Safety Unit and Co-ordinator of the Cruise Ships Centre of Excellence. In IACS he is a Member of the Statutory Panel and he is also the Vice-Chairman of the IMO Fire Protection Sub-Committee

Carlo Aiachini is RINA Manager of Machinery and Automation Unit. He serves as a member of the IACS Machinery Panel.

Gianluca Mantegazza is RINA Manager of Damage Analysis and Risk Assessment Section unit. He is the incoming Chairman of the IACS Survey Panel.

Enrico Gombi is RINA Manager of Calculation Tools. He serves as a member of the IACS Hull Panel.

Mikhael Markogiannis is Manager of the Greek Engineering Centre. He supports the IACS team for the RINA chairmanship and he is the contact point between the IACS Chairman and the Greek Marine Industry.

Claudia Filippone, RINA Manager of Communications, supports the IACS chairman on communication matters.

Cinzia Pica, Intercompany Communication Co-ordinator of RINA Group, supports the press office during RINA IACS chairmanship.

Detailed information on IACS’ strategy and work plan for the forthcoming year can be found at www.iacs.org.uk

 RINA Services S.p.A. is the RINA Group’s company active in ship classification, testing, inspection and certification services. RINA Group is a multi-national group which delivers verification, certification, conformity assessment, ship classification, environmental enhancement, product testing, site and vendor supervision, training and engineering consultancy across a wide range of industries and services. RINA Group operates through a network of companies covering Marine, Energy, Infrastructures & Real Estate, Transport & Logistics, Food & Agriculture, Environment & Sustainability, Finance & Public Institutions and Business Governance. With a turnover of around 280 million Euros in 2012, over 2,100 employees, and 150 offices in 53 countries worldwide, RINA Group is recognized as an authoritative member of key international organizations and an important contributor to the development of new legislative standards.  www.rina.org      

For more information:

Claudia Filippone

Head of Communications

RINA

+39 010 538 5643

Iacs.press@rina.org