Finanstilsynet has reviewed aspects of the annual accounts of Havfisk ASA for 2012, cf. the Securities Trading Act section 15-1 subsection (3). The review covers Havfisk ASA's accounting treatment of fishery licences.
Havfisk is Norway's largest trawler company and a dedicated fishing operation. The company holds licences to fish cod, haddock and saithe. The licences, which at end-2012 accounted for about 45 per cent of balance sheet assets, were distributed on basic quotas (about one-third) and structural quotas (two-thirds). Book values of the licences are recognised with a basis in various transactions.
Basic quotas are allocated without a predetermined time limit. As from 2007 the maximum allocation period for structural quotas is 20 years. For structural quotas initially allocated prior to 2007, the maximum allocation period is 25 years reckoned from and including 2008. Structural quotas lapse upon expiry of the allocation period. At that point the harvesting volume represented by the structural quotas is redistributed on all remaining quotas in the fishery concerned.
Fishery licences are intangible assets under IFRS. Accounting for intangible assets will depend on whether the assets' useful life is finite or indefinite. Intangible assets with a finite useful life shall be depreciated. Intangible assets with an indefinite useful life are not depreciated, but must each year, and when there are indications of value loss, be tested for value impairment.
Havfisk has assessed all licences as having a finite useful life. The company has accordingly not depreciated book values. Finanstilsynet's assessment is that structural quotas have an finite useful life and must be depreciated. The structural quotas must be depreciated even though the quota basis they represent is redistributed on remaining quotas upon expiry.
Havfisk states in a stock exchange notice of 1 April 2014 that it accepts Finanstilsynet's assessment that structural quotas must be depreciated. The stock exchange notice further states that Havfisk will revise its financial reporting. The revision entails an annual depreciation of NOK 28 million and an equity capital reduction of NOK 87 million as of 31 December 2012.
During its control process Finanstilsynet queried the company's impairment testing and the information disclosed in the company's annual accounts. Havfisk itself concluded in the course of the process that the company's impairment testing of quotas with an indefinite useful life is not compliant with IFRS. As a result, a new impairment test will be carried out as of 31 December 2012 in connection with the presentation of the 2013 annual accounts. The company will also reassess what note disclosures it needs to provide. Finanstilsynet takes note of this.
Please direct any queries to:
Gaute S. Gravir, head of section, tel. +47 22 93 99 46, mobile +47 994 75 076