Authors: John Sorros, Nicholas Belesis, Alkiviadis Karagiorgos

Title: The Validity of Value in Use Tests in Shipping Sector

Abstract

For a typical ship owning company, the vessel is the most valuable and important asset. In most cases, the vessel is the dormant element of Assets. International Accounting Standards (IAS) and also United States Generally Accepted Accounting Principles, entities require from Companies each year to conduct impairment tests in order to detect any impairment for these assets. If there is an indication of impairment then Value in Use tests have to be executed. It is of high importance that the assumptions and the methodology of these tests be right, in order to ensure the validity of the results. Always, there is the risk that the accountants manipulate these tests in order to avoid the post any impairment losses. Our purpose is to examine the way that the results from these tests are related with market values. Also, we aim to examine under what test assumptions the results from these tests are close enough to market values of vessels.