Financial market risk
The functional currency of the company is USD and the presentation currency is NOK. Balance sheet items in USD have been converted to NOK at currency rate 8.6200 (8.8090), which was Norges Bank’s exchange rate at 31 December 2016. Income and expenses related to the ships occurs in USD. The company makes ongoing currency exchanges to cover the administrative expenses in NOK. At year end the company had a cash balance of NOK 2.9 (3.8) million.
No hedging agreement towards NOK are concluded.
The company does not use hedge accounting.
Interest swap agreement
An interest swap agreement was entered into in 2015 at a rate of 1.9% and with a duration of 5 years covering USD 20 million, reducing by USD 2 million per year. Market value of this agreement amounts to -1 480 (-2 400) at year end and is recorded as long-term liability.
There will always exist a credit risk related to the company’s business. Belships monitors this risk and the strategy is to carefully select counterparts. Historical losses have been limited.