Significant Accounting Policies and Pronouncements

6 Months Ended

Jun. 30, 2023

Accounting Policies [Abstract]

Significant Accounting Policies and Pronouncements

Significant Accounting Policies and PronouncementsThe Company's significant accounting policies are described in Note 2. Significant Accounting Policies, in the notes to the consolidated financial statements included in the Annual Report. Included herein are certain updates to those policies.

Vessels and Vessel Improvements, At Cost

Vessels are stated at cost, which consists of the contract price, and other direct costs relating to acquiring and placing the vessels in service. Major vessel improvements, such as scrubbers and ballast water treatment systems (“BWTS”), are capitalized and depreciated over the remaining useful lives of the vessels. Depreciation is calculated on a straight-line basis over the estimated useful lives of the vessels based on the cost of the vessels reduced by the estimated scrap value of the vessels as discussed below. The Company estimates the useful life of the Company's vessels to be 25 years from the date of initial delivery from the shipyard to the original owner.

Effective January 1, 2023, we increased our estimated vessel scrap value from $300 per light weight ton (“lwt”) to $400 per lwt. This change was driven by increases in 15-year average scrap price trends sourced from a third-party data provider as well as similar increases by certain of our industry peer companies. The change in the estimated scrap value will result in a decrease in depreciation expense over the remaining life of our vessel assets. We expect depreciation to decrease by approximately $4.0 million for the year ended December 31, 2023 solely as a result of the prospective change in this estimate. The impact of this change on Net income and basic and diluted net income per share for the three and six months ended June 30, 2023 is as follows:

	Three Months Ended		Six Months Ended
	June 30, 2023
Increase to Net income	$	999	$	1,997
Increase to Basic net income per share	$	0.08	$	0.15
Increase to Diluted net income per share	$	0.06	$	0.12

Recently Adopted Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). ASU 2020-04 provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. ASU 2020-04 establishes (1) a general contract modification principle that entities can apply in other areas that may be affected by reference rate reform and (2) certain elective hedge accounting expedients. ASU 2020-04 is optional and effective for all entities as of March 12, 2020 and may be applied prospectively to contract modifications made on or before December 31, 2024 (as extended by ASU 2022-06, Deferral of the Sunset Date of Topic 848). In June 2023, the Company modified certain interest rate swap agreements to coincide with the Global Ultraco Refinancing (as defined below). The Company utilized certain expedients under ASU 2020-04 to conclude that the modifications should be accounted for as continuations of the existing swap agreements, which had no impact on our condensed consolidated financial statements. See Note 4. Debt and Note 5. Derivative Instruments, for additional information on the Global Ultraco Refinancing and the Company’s outstanding interest rate swap agreements, respectively.