2.7.1 Useful life and depreciation Depreciation is calculated on a straight-line basis over the useful life of the asset once the asset is ready for use. The estimated useful life of major assets is as follows: Seismic vessels Seismic equipment Maritime equipment Furniture and fixtures Office IT equipment
30 Years 3-30 Years 5-30 Years 3-5 Years 3-5 Years
Each component of the vessels, with a cost significant to the total cost, is separately identified and depreciated on a straight-line basis over that component’s economic life. Day-to-day maintenance costs are charged to the income statement during the financial period in which they are incurred. The cost of major renovations and periodic maintenance of vessels is capitalized and depreciated over the useful lifetime. Maintenance and classification costs for vessels are capitalized and charged to expenses over the period up to the next occasion when maintenance is carried out, normally 30 months. Maintenance and repairs, including periodic maintenance and class surveys for seismic vessels, are expensed as incurred. When vessels are acquired or constructed a proportion of the acquisition cost is capitalized as periodic maintenance. The assets’ residual values and useful lives are reviewed and adjusted if appropriate at least every balance sheet date. Adjustments, where applicable, are made on a prospective basis. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are presented net in the income statement.
2.7.2 Vessels under construction Vessels under construction are carried at cost, less any impairment loss. Cost includes project related overheads capitalized and for qualifying assets, the borrowing costs capitalized in accordance with the Group’s accounting policy as described below. Depreciation of these vessels commences when the vessels are ready for their intended use.
2.8 Leases
The determination whether an arrangement is or contains a lease is based on the substance of the arrangement at the inception date and whether fulfillment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset.
2.8.1 Group as a lessee Finance leases, which transfer to the Group substantially all the risks and rewards incidental to ownership of the leased asset, are capitalized at the commencement of the lease at the fair value of the leased asset or, if lower, at the present value of minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized in the income statement. Leased assets are depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and lease term. Operating lease payments are recognized as an expense in the income statement on a straight line basis over the lease term.
2.9 Borrowings
Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is
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