Right-of-use Assets
As of December 31, 2020, the Company leases buildings and cars. The movement of the right-of-use assets during the year 2020 is summarized as follows:
2020
|
Buildings |
Vessels and floating equipment |
Other fixed assets |
Total |
|
|---|---|---|---|---|
|
Book value at 1 January |
59 |
55 |
1 |
115 |
|
Additions |
11 |
- |
1 |
12 |
|
Depreciation |
(14) |
(4) |
(1) |
(19) |
|
Impairment |
(6) |
(51) |
- |
(57) |
|
Foreign currency variations |
2 |
- |
0 |
2 |
|
Other movements |
0 |
- |
(1) |
(1) |
|
Total movements |
(7) |
(55) |
(1) |
(63) |
|
Cost |
93 |
20 |
3 |
116 |
|
Accumulated depreciation and impairment |
(41) |
(20) |
(2) |
(64) |
|
Book value at 31 December |
52 |
- |
1 |
52 |
2019
|
Buildings |
Vessels and floating equipment |
Other fixed assets |
Total |
|
|---|---|---|---|---|
|
Book value at 1 January |
61 |
63 |
1 |
126 |
|
Additions |
13 |
- |
1 |
13 |
|
Depreciation |
(14) |
(8) |
(1) |
(23) |
|
Foreign currency variations |
(1) |
- |
(0) |
(1) |
|
Total movements |
(2) |
(8) |
(0) |
(11) |
|
Cost |
84 |
71 |
3 |
158 |
|
Accumulated depreciation and impairment |
(25) |
(16) |
(1) |
(43) |
|
Book value at 31 December |
59 |
55 |
1 |
115 |
During the year 2020, the main movements regarding right-of-use assets related to (i) US$19 million of depreciation charges, (ii) US$51 million impairment of the SBM Installer right-of-use asset to nil and (iii) an impairment charge of US$6 million on right-of-use assets related to office buildings, which was a result of the Company’s restructuring activities and the reallocation of activities and resources, which also led to certain leased office buildings being vacated.
Impairment of SBM Installer
The Company leased the SBM Installer installation vessel through a charter contract, which ends in 2026. The contract included the option for the Company to acquire the vessel during the charter period. During the year of 2020, due to the COVID-19 pandemic, the Company decided to put the vessel in lay-up for a period of three months (until July 2020) in order to protect the crew and reduce the costs in a context of low activity. Furthermore, the Company downgraded expectations regarding future economic benefits to be generated by the vessel given the expected slowdown of the offshore services business in the coming few years (which may create over-supply in offshore markets and therefore reduce the vessel utilization).
Based on the performed impairment test with a pre-tax discount rate of 11.6%, the Company concluded that the entire book value of the right-of-use asset had to be impaired for a total amount of US$51 million in the first half of 2020. As a part of this impairment assessment, the Company also fully impaired other fixed assets related to the SBM Installer with a book value of US$6 million. The total impairment related to the SBM Installer recognized for the period was US$57 million. If revenue were to be increased by 10% on the relevant period, this would result in US$6 million less impairment loss.
Subsequent to the impairment, the Company decided in September 2020 to acquire the remaining 75% ownership in OS Installer Limited. As a result, the installation vessel was added to property, plant and equipment and the fully impaired right-of-use asset was derecognized.
Office leases
The other significant contracts relate to the lease of offices. The contract periods of the Company’s office rentals vary between one to ten years and most of the contracts include extension options between three to fifteen years. The extension options have been taken into account in the measurement of lease liabilities when the Company is reasonably certain to exercise these options. The lease agreements do not impose any covenants.