Review of financial reporting – Polarcus Ltd
Published: 19 April 2016
Last updated: 18 March 2019
Finanstilsynet has reviewed certain matters in the financial statements of Polarcus Limited for 2014. The review focuses mainly on disclosures related to the going concern assumption and corresponding disclosures in the annual report for 2014 and interim reports for the second and third quarters of 2015.
Finanstilsynet's assessment is that in view of the company's challenging economic situation and the uncertainty related to the going concern assumption during this period these disclosures should have been more specific and comprehensive. The company should especially take note that information given in presentation materials and other ongoing disclosures has been more specific than in the periodic financial reporting.
Finanstilsynet notes that the company's disclosures surrounding going concern risk were more comprehensive in the Q2 and Q3 reports for 2015 than in the Annual Report for 2014. In general, going concern risk disclosures are improved in the later financial reports. In Finanstilsynet's view, however, the company still needed to provide more detailed information about the current situation and as far as possible its view of future prospects.
The company informed Finanstilsynet that in the future it will be attentive as to what specific information should be included in a going concern assessment, particularly with regard to the disclosures that should be included when a material uncertainty regarding the going concern assumption exists.
Another topic under review is vessel impairment. Polarcus performed the impairment test on a fair value less costs to sell basis in 2014. The company used independent valuers' appraisal valuations for this purpose. In Finanstilsynet's view additional attentivness is required of companies that use third party valuations in periods when the market is weak, and the number of transactions is limited. Finanstilsynet encourages companies to request more supplementary information on the assumptions underlying third party valuations.
At the year end 2015, Polarcus did not consider the fair value less costs to sell method appropriate on a stand-alone basis in the current marked with no observable transactions. The company has chosen to use the value in use method for the impairment test for the year end 2015. This led to an impairment of vessels and equipment of USD 242m in Q4 2015.