The Goodwill is mainly related to Siem Offshore Contractors. As also disclosed in Note and Subsequent Events , the shares in this company has been sold in 2018. The sales price for the shares does not indicate any need for impairment as of December 31, 2017. Trademarks and licences refer to Siem WIS AS patented technology for the drilling industry. The figures include assets under development and developed assets, and the depreciation refers to developed assets that are not yet commercialized.

Impairment

Tangible and intangible assets with finite lives are tested for impairment if indicators are identified that would suggest that the carrying amount of the assets exceed the recoverable amount. The Group performs an assessment to determine any indicators of impairment. An impairment loss is recognized if the carrying amount exceeds recoverable amount. The recoverable amount is the higher of an asset’s fair value less cost of disposal (FVLCOD) and value in use (VIU) and each vessel is considered a separate cash generating unit (CGU).

As of December 31, 2017, impairment indicators were identified for all OSV vessels, mainly due to lower freight rates, and impairment testing has been performed.

Value in use (VIU)

VIU is based on the present value of discounted cash flows for each separate CGU for its remaining life based on market views for future periods.

Discount rate

The discount rate used in the value-in-use calculation is a real average cost of capital after tax ranging from 7.24%–9.51%

Operating expenses

Operational expenses that are directly attributable to the CGU are based on budget with an annual escalation as applicable. Dry-docking costs are included as scheduled.

Fair value less cost of disposal

FVLCOD (level 3) is determined as the amount that would be obtained from sale of the asset in a regular market, less cost of sales, based on an average of third party valuation reports from two independent shipbrokers. The company understand that shipbrokers apply newbuilding price parity as basis for their appraisals. Newbuilding prices have been adjusted for building supervision costs and other additional costs, which results in an estimated delivered cost of a newbuilding with prompt delivery adjusted for age of each vessel.

Impairment testing

Based on the assessment an impairment charge of USD 126.3 million has been recognized which represents a write down of OSV vessels to their recoverable amount. The recoverable amount was based on the higher of FVLCOD and VIU calculation with each vessel as a separate cash generating unit. Impairment of USD 126.3 million is related to 28 vessels in the Group’s fleet.

Sensitivities

Impairment of USD 126.3 million was recognized as of December 31, 2017. The VIU calculation is mainly affected by changes in WACC and freight rate assumptions.

A reduction of freight rate assumption of USD 1,000 per day for remaining life for each vessel would increase the total impairment by approximately USD 43.7 million. An increase in freight rate assumption of USD 1,000 per day would imply an impairment of approximately USD 84.7 million, relevant for only 19 of the vessels. With an increase in freight rate assumptions of USD 1,000 day, VIU would become higher than FVLCOD for certain vessels.

An increase in WACC of 0.5% would increase the total impairment by approximately USD 32.3 million. A decrease in WACC of 0.5% would imply an impairment of approximately USD 93.1 related to only 20 of the vessels. With a decrease in WACC of 0.5%, VIU would become higher than FVLCOD for certain vessels.