Singapore Shipping Corp

[valuebuddies]

I think for company like SSC which acquires assets solely for the purpose of leasing, the interest could be consider as direct COGS for financing the CGU. The question here is whether it is possible to apply straight-line method in recognizing the interest, which the auditor has not suggested, I guess due to the following reasons:

1. the LTV ratio is low and thus cannot justify that the loan is obtained exclusively for acquiring the vessel or vice-versa,
2. due to the present low interest rate, the impact of applying straight-line method to account the interest would not change the true and fairness of the financial results,
3. due inability to reasonably predict the future interest rate, it is therefore not possible to apply the straight-line method to account for the total interest,

However, I do agree with the deceleration in recognizing the revenues and depreciation. Auditor might disagree owing to the usual "prudent" reason.