PwC Greece shared insights on emerging developments from an accounting reporting perspective but also on shipping market trends during the virtual event “The Annual Finance Update for the Shipping Industry”.
Lease Modifications
PwC’s overview of the market indicated that contract renewals of time charters are on the rise and companies need to make sure they are properly assessing the charter renewals under lease modifications accounting.
Other than an increase in the number of time charter contracts, there has also been a rise in the number of renewals that are being agreed up to 6 months to 1 year in advance of the current time charter contract termination, especially in the containership sector.
Asset acquisitions
There has been significant activity in Asset acquisitions with a high level of Sales & Purchases transactions being recorded. These transactions include large vessels and their time charter contracts.
Climate change
As Mariela Mylona, Senior Manager, and a member of the Global Accounting Consulting Services team at PwC Greece explains, the main focus from an accounting perspective has been on climate-risk disclosures. From a shipping perspective climate change impacts key areas such as:
- Impairment of non-financial assets
- Fair value measurements
- Expected credit loss models for financial assets
- Financial statement disclosures
- Emission trading schemes
- Accounting for green loans.
In the event that a green loan’s interest rate is linked to a certain sustainability (green) measure such as compliance with emissions standards, energy efficiency metrics, or even a combination of different green measures, the borrower should first consider whether such a feature gives rise to an embedded derivative, which should be separately accounted for as a derivative.
said Ms. Mylona.
Covid-19 accounting and reporting reminders
One of PwC’s key highlights is that companies need to continuously evaluate its impact on liquidity and the ability to continue as a going concern, as well as focus on having appropriate and transparent disclosures in the financial statements.
In fact, the latest Crew Change Indicator shows that the number of seafarers onboard vessels beyond the expiry of their contract has increased from 3.7% to 4.2% in the last month, while the number of seafarers onboard vessels for over 11 months has remained stable at 0.4%.
The Neptune Indicator also reports a 7% increase in seafarer vaccinations, from 59.8% in January to 66.8% in February, as seafarers are increasingly gaining access to first and second vaccine shots.
Moreover, ship managers describe new challenges to crew changes that confirm the worsening crew change trend. Because of the fresh wave of omicron infections in several major crewing nations, large numbers of seafarers are falling ill, leading to the postponement of crew changes. This has also led to some reported crew shortages.
How shipping technology can support ESG requirements
Dimitris Sakipis, ESG Leader, PwC Greece, emphasised that ESG is vital because of the regulatory initiatives, investor expectations and stakeholders demand.
He also commented that the 2020s will be a decade of action for climate for the shipping industry, with long-term investment scenarios suggesting that approximately $1 trillion of newbuild orders may be needed for fleet renewal this decade.
Shipping companies need to consider their approach to designing ESG and decarbonization strategies, creating a new operating model with governance, roles and responsibilities and compliance and reporting
said PwC.
In addition, the required technology to cover the ESG agenda and transformation, as explained by Ilias Oikonomakis, Advisory Manager, PwC Greece, can be provided by the SAP Profitability and Performance Management solution.
Cyber security and the shipping industry
The past year was again a disruptive year when it came to cyber attacks, especially for the maritime sector, as since February 2020, there has been a 400% increase in attempted hacks.
With the maritime industry entering the digitization era fast, George Vavitsas, Advisory Senior Manager, PwC Greece, comments that “it is important more than ever for shipping companies to have cyber security at the core of their operations. It is not about reducing risk to zero, it’s about rebalancing risk as the context shifts.”
He then explained that the weakest links in cyber security are still the users and that 90% of intrusions begin with a phishing email. To keep data safe a layered defence needs to be built.
6 behaviors that indicate poor cyber culture at the workplace
- Use of company’s devices at home;
- The “Bring Your Own Device (BYOD) in the workplace” trend;
- Neglecting the systematic and regular update of passwords;
- Neglecting annual review of company’s cyber security policy;
- Allowing public building access without the use of an ID card;
- Employees using computers to access bank accounts or initiate money transfers.
New incentive tax regimes
In this regard, Dimitra Giantamidou, Senior Tax Manager in PwC Greece, focused to the new tax incentive schemes that have been recently introduced to attract non-Greek tax residents and legal entities in Greece, as long as certain conditions are met.
Those more interesting to the shipping community are the High Net worth Individuals / Investors (5A regime) and Employees (5C regime) regimes along with the family offices.
As an overview, more than 80 foreign investors have applied to become Greek tax residents and 75 of them have already remitted taxes of €9.4m for 2020 and 2021. Most have come from the UK, Switzerland and Cyprus, but applications are also coming from Monaco, UAE, Hong Kong.
Moreover, more than 1.000 applications have been filed for 2021 by individuals being employed in Greece under new employment positions.
These numbers show that there is a high attraction of individuals wanting to establish themselves in Greece. It verifies that Regimes 5A and 5C have proven to be very successful
Ms. Giantamidou.
MyData: New tax regulation impacting ship management companies
Recently AADE issued the Ministerial Circular 1138/2020 which specifies to what extent ebooks apply, the exceptions, the data to be transmitted, the timing, the transmission method, the classification of revenues/expenses and the entities’ obligations.
In accordance with the Ministry of Finance, myData also applies to ship-management companies with operating offices in Greece under L.89/1967and important to note that here, simplifications apply.
