Accounting for Vessels in European Shipping Companies Accounting Choices

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Accounting for Vessels in European Shipping
Companies - Accounting Choices

• Anna Karin Pettersson
• School of Business, Economics and Law Business
  Ship
• 2009-04-07

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Content

• Background
• Research questions
• Research design
• Preliminary findings

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Background

• The shipping industry is a somewhat unique
  industry and its distinctive characteristics
  raise particular accounting issues.
• Capital-intensive
• Markets are volatile and subject to economic
  cycles
• Substantial need for financing

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Background

• The focus in this study is how vessels are
  accounted for, involving issues such as
• Depreciation
• Impairment
• Leasing

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Background

• Even if companies follow the same accounting
  rules, judgments and estimations are often
  required when financial statements are prepared,
  resulting in that a number of accounting choices
  have to be made.

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Carrying amount of the vessel
Time
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Research questions

• How are vessels in European shipping companies
  accounted for?
• Focus is on issues such as depreciation,
  impairment and leasing.
• Observations of differences in practise may give
  some understanding of why shipping companies
  present their financial information the way they
  do.

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Existing literature related to accounting choices

• Institutional theory The importance of existing
  practice Institutional setting
• Positive accounting theory Individuals are
  rational utility maximizers

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Research design

• Interviews with auditors in order to specify
  important accounting issues
• Empirical study of annual reports for 2007
• Population European shipping companies within
  the EU and the EES that apply IFRS (International
  Financial Reporting Standards).
• Requires definition of shipping companies

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No of gt (100 largest companies in Europe)
Source Lloyds Register
Fairplay
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No of ships (100 largest companies in Europe)
Source Lloyds Register
Fairplay
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No of companies (100 largest in Europe)
Source Lloyds Register
Fairplay
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Preliminary findings

• There are differences in accounting choices and
  the way companies present their financial
  information and disclosures