Laxputs Posted February 27, 2015 Share Posted February 27, 2015 Looking at HOS. Pg F-7. When they purchase a ship they depreciate the original purchase price over 25 years and, in theory, sell that asset for 25% of the original purchase price and the end of its useful life. So you are spreading the cost of buying the vessel over 25 years, and accounting for it via depreciating the asset. In 25 years when you need a new vessel you repeat the process. Thus there is no one time hit to earnings on the cost of a new vessel. Questions: 1. Depreciation, therefore, accounts for the money to retain the earnings power of the business, i.e. not just the cost to keep that asset working but the full lifecycle of the asset; maintain it in good working order and assume it gets sold or expires at the end of its useful life? 2. In regards to HOS, what are they amortizing? What intangible asset has capital expenses? They are not repaying a loan quarterly so I don't believe it is debt servicing? TIA Link to comment Share on other sites More sharing options...
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