Interesting Pics of The Aliga, Turkey Cruise Ship Scrap Yard

[Mary229]

3 minutes ago, chengkp75 said:

 

30 years is a typical "design life", but just like with other things, like cars, careful maintenance can extend the life almost indefinitely.  Typically, a ship's maintenance cost is exponential over time, and the "corner" where the costs start to rise dramatically is around 15 years.

Added to the obsolescence are rapid advances in technology.  The newer ships are simply much cheaper to sail as they are much more fuel efficient.  Ships are just like all other vehicles and appliances - new efficiencies, better engineering, better materials makes them disposable.  Once tax depreciation is spent you  might as well write it off asap.  We all reminisce about this ship or that ship but I think we all like the modern conveniences we enjoy on the newer ships. I recall ships where you felt like you had to walk sideways to get into the bathroom. ( My only beef is that because of the new efficiencies they insist on building bigger and bigger ships with more and more passengers.)

[chengkp75]

49 minutes ago, Mary229 said:

Added to the obsolescence are rapid advances in technology.  The newer ships are simply much cheaper to sail as they are much more fuel efficient.  Ships are just like all other vehicles and appliances - new efficiencies, better engineering, better materials makes them disposable.  Once tax depreciation is spent you  might as well write it off asap.  We all reminisce about this ship or that ship but I think we all like the modern conveniences we enjoy on the newer ships. I recall ships where you felt like you had to walk sideways to get into the bathroom. ( My only beef is that because of the new efficiencies they insist on building bigger and bigger ships with more and more passengers.)

Due to the countries where the cruise lines are incorporated, most don't pay any taxes, so "depreciation" is non-existent.  Ships are not that much more fuel efficient than ships built 20 years ago.  The efficiencies that newer ships bring are those "of scale", where capital costs only increase marginally for a larger ship, and where things like crew cost only increase marginally with increased size and capacity.

[johnnyswitzerland]

Related from NYT: Where Cruise Ships Are Sent to Die

 

Published today.  More pics, background, and interviews.  Not really anything new though.

[iancal]

I suspect that depreciation is most certainly accounted for in a cruise lines audited statements as an expense for the investment community and their shareholders. Clearly, ship asset values decrease over time and this must be accounted for in the financial statements in order for them to fairly represent the financial position of the firm.

 

It may well be that it has no impact from a tax perspective.  Financial filings for tax purposes can be substantially different than financial filings for shareholders, investors, etc.

[Mary229]

CCL is incorporated in Panama.  Panama corporate tax law includes a provision for depreciation. Depreciation is a significant method, worldwide, to reduce taxes.  Most tax law requires a recapture of depreciation when the asset is sold.  If you owe no taxes in a given year then recapture can occur at a much lower tax rate.   as @iancal indicated, this is an important consideration in the disposal of assets.

 

Tax Law Summaries for Panama

 

Taxable income is determined by deducting from the Panamanian-source income all costs, expenses, and non-taxable income applicable and permitted by law. The deductibility of costs and expenses depend on the relation of such costs and expenses with the generation or preservation of income source. Special restrictions apply to the following:

• Depreciation. 
• Bad debt. 
• Charitable contributions.

[iancal]

Just keep in mind there are two versions of the financials.  One for the shareholders and investment community that follow generally accepted accounting principals.

 

These are the audited financial statements that public corporations issue to the public.

 

There is a second set or version of the financials that are are sent to tax authorities.  These statements reflect tax law in the jurisdiction.  Items like depreciation may or may not be including, the depreciation rates may be different.  Indeed, some expenses include here may be treated in an entirely different way in the public statements.  Many other differences between the two can exist....depending on the jurisdictional tax law.

 

[chengkp75]

38 minutes ago, Mary229 said:

Taxable income is determined by deducting from the Panamanian-source income

Cruise ships do not generate any "Panamanian-source income".  Panamanian law excludes all income from vessels from any form of taxation, including capital gains on the sale of a vessel.  This is why Panama has the largest "flag" fleet in the world.

 

Yes, depreciation can be an important figure in financial statements, but in the case of ships, it is not one in tax determination.

[Mary229]

3 hours ago, chengkp75 said:

Cruise ships do not generate any "Panamanian-source income".  Panamanian law excludes all income from vessels from any form of taxation, including capital gains on the sale of a vessel.  This is why Panama has the largest "flag" fleet in the world.

 

Yes, depreciation can be an important figure in financial statements, but in the case of ships, it is not one in tax determination.

Depreciation is for tax accounting. It has no other purpose