Siem Offshore Inc. was established on July 1, 2005 as an exempted company under the laws of the Cayman Islands and is listed on the Oslo Stock Exchange. All references to “Siem Offshore Inc.” and the “Company” shall mean Siem Offshore Inc. and its subsidiaries and associates unless the context indicates otherwise. All references to “Parent” shall mean Siem Offshore Inc. as a parent company only.
The financial statements are presented at and for the year ended December 31, 2015. All figures are in USD thousands unless otherwise clearly stated. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgment or complexity or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed under “Critical accounting estimates and judgments” presented below.
The consolidated and parent company financial statements were prepared in accordance with International Financial Reporting Standards (“IFRS”) and IFRS Interpretations Committee (“IFRIC”) interpretations endorsed by the European Union and the regulations of the Oslo Stock Exchange. As of December 31, 2015, there were no differences relevant to the Company between these standards and International Financial Reporting Standards, as issued by the International Accounting Standards Board, and the policies adopted by the Company. The consolidated financial statements have been prepared under the historical cost convention, as modified by fair value of non-current assets held for sale, and financial assets, including derivative instruments at fair value through profit or loss. The financial statements have been prepared under the assumption that the Company is a going-concern. A summary of the principal accounting policies applied in the preparation of these financial statements are set out below.
(a) New and amended standards adopted by the Company
There are no new standards or amendments to exisiting standards of relevance for the Company’s financial statement for 2015.
(b) New standards and interpretations not yet adopted
IFRS 9 addresses the classification, measurement and derecognition of financial assets and financial liabilities and introduces new rules for hedge accounting. In July 2014, the IASB made further changes to the classification and measurement rules and also introduced a new impairment model. These latest amendments now complete the new financial instruments standard.
IFRS 15 Revenue from Contracts with Customers
The IASB has issued a new standard for the recognition of revenue. This will replace IAS 18 which covers contracts for goods and services and IAS 11 which covers construction contracts. The new standard is based on the principle that revenue is recognised when control of a good or service transfers to a customer – so the notion of control replaces the existing notion of risks and rewards. The standard permits a modified retrospective approach for the adoption. Under this approach entities will recognise transitional adjustments in retained earnings on the date of initial application (eg 1 January 2017), ie without restating the comparative period. They will only need to apply the new rules to contracts that are not completed as of the date of initial application.
There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group.
Subsidiaries are entities over which the Company has the power to govern the financial and operating policies by controlling more than one half of the voting rights in the relevant entity. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Company controls another entity.
The Company also assesses existence of control where it does not have more than 50% of the voting power but is able to govern the financial and operating policies by virtue of de-facto control. De-facto control may arise in circumstances where the size of the Company’s voting rights relative to the size and dispersion of holdings of other shareholders give the Company the power to govern the financial and operating policies, etc.
Subsidiaries are fully consolidated from the date on which control is transferred to the Company. They are deconsolidated from the date that control ceases. The Company applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred and the liabilities assumed from to the former owners of the acquirer and the equity interests issued by the Company.
The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Company recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognised amounts of acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred.
If the business combination is achieved in stages, fair value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss.
Any contingent consideration to be transferred by the Company is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not remeasured and its subsequent settlement is accounted for within equity.
Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss.
Intercompany transactions, balances, income and expenses on transactions between group companies are eliminated. Profits and losses resulting from intercompany transactions that are recognised in assets are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Company.
(b) Associated companies Associates are entities over which the Company has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting and are initially recognized at cost. The Company’s investment in associates includes goodwill (net of any accumulated impairment loss) identified on acquisition. The share of earnings recorded in the consolidated financial statements are based on the after-tax earnings of the associates. In the income statement, the share of earnings from associates is shown as a financial item.
The Company’s share of its associates’ post-acquisition profits or losses is recognized in the income statement and its share of post-acquisition movements in reserves is recognized Other Comprehensive Income. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Company’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Company does not recognize further losses unless it has incurred obligations or made payments on behalf of the associate.
Unrealized gains on transactions between the Company and its associates are eliminated to the extent of the Company’s interest in the associates. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been reconciled where necessary to ensure consistency with the policies adopted by the Company.
Assets designated for long-term ownership or use and receivables due later than one year after drawdown have been recorded as non-current assets. Other assets are classified as current assets. Receivables are stated at par value less provision for doubtful accounts. Liabilities due later than one year after the end of the accounting year are posted as non-current liabilities. Other liabilities are classified as current liabilities.
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the steering committee that makes strategic decisions.
The Company is organized into eight different segments, platform supply vessels (“PSVs”), offshore subsea construction Vessel (“OSCVs), anchor-handling tug supply vessels (“AHTS vessels”), Brazilian vessels (consisting of fast crew vessels (“FCVs”), fast supply vessels (“FSVs”) and oil spill recovery vessels (“OSRVs”)), combat management systems (“CMS”), Cable installation, Scientific core-drilling and Other, in which the Company operates.
(a) Functional and presentation currency
Items included in the financial statements of each of the Company’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The consolidated financial statements are presented in USD, which is the Company’s functional and presentation currency.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions.
Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the income statement.
The exchange rates vs USD used in 2015 are shown in the table below.
(c) Group companies
The results and financial position of all the group companies (none of which have the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
(i) assets and liabilities for each reporting presented are translated at the closing rate at the date of that statement of financial position;
(ii) income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and
(iii) all resulting exchange differences are recognized as a separate component of equity.
The relevant exchange rates vs. USD are:
NOK (Norwegian kroner)
GBP (Pound Sterling)
REAS (Brazilian Reals)
In consolidation, exchange differences arising from the translation of the net investment in foreign operations is recorded over Other Comprehensive Income (OCI) and taken into shareholders’ equity. When a foreign operation is sold, exchange differences that were recorded over OCI are recognized in the income statement as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.
Vessels are measured in the consolidated statement of financial position at cost less accumulated depreciation and impairment loss. Depreciation is on a straight-line basis and determined by an estimate of the remaining useful economic life of the asset. Estimated residual value is determined as the estimated sales price for steel less the costs associated with scrapping a vessel. The estimate is reassessed at each balance sheet date.
The vessels presently owned by the Company are considered to have an economic life of 30 years. Some components of the vessels have a shorter economic life than 30 years. The vessels are decomposed into different components and amortized over estimated economic life time. For further information, see Note 5. Other fixed assets are depreciated on a straight-line basis over the anticipated useful life.
Each part of a fixed asset that is significant to the total cost of the asset is separately identified and depreciated over that component’s useful lifetime. Components with similar useful lives will be included in one component. The Company has identified 7 significant components relating to its different types of vessels. In accordance with IAS 16 and the cost model, dry-dock costs are considered a separate component of the ship’s cost at purchase with a different pattern of benefits and, therefore, need to be amortized separately.
Day-to-day maintenance costs are charged to the income statement during the financial period in which they are incurred. The cost of major renovations and periodic maintenance of vessels is capitalized as dry-docking costs and depreciated over the useful lifetime of the parts replaced. The useful life of the regular vessels dry-docking costs will be the period until the next docking, normally from 2 to 3 years.
The residual value and expected useful lifetime assumptions of fixed assets are reviewed at each reporting date and, where they differ significantly from previous estimates, the rate of depreciation charges are changed accordingly.
Certain vessel contracts require an investment prior to commencing the contract to fulfil requirements set by the charterer. These investments are capitalized as project costs and are amortized over the term of the specific charter contracts. Gains and losses on disposals are determined by comparing the disposal proceeds with the carrying amount and are included in operating profit.
Instalments on newbuild contracts are recorded as non-current assets. Costs related to the on-site supervision and other pre-delivery construction costs are capitalized per vessel.
Borrowing costs related to newbuilding contracts commenced before December 31, 2008 are recognized as an expense immediately. For newbuilding contracts where the commencement date for capitalization is on or after January 1, 2009, the Company capitalizes borrowing costs directly attributable to the construction as a part of the cost of the asset. 1.10 Impairment of fixed assets
Non-current assets are reviewed for potential impairment at each reporting date and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The asset’s cash generating ability either through use or sale is reviewed and compared to the asset’s carrying amount in the statement of financial position. If the carrying amount is higher, the difference must be written off as an impairment loss. Fair value reduced by estimated sales costs is the amount achievable on sale to an independent third party.
The recoverable amount is established individually for all assets, except for AHTS vessels which operates in a pool and is considered as one cash generating unit. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time and the risk specific to the asset that is considered impaired.
A previously recognized impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. Reversal of previously recognized impairment is limited to the amount that the carrying value of the asset would have been had the initial impairment charge not taken place.
Intangible assets that are acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is recognized at fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses.
Internally-generated intangible assets, excluding capitalized development costs, are not capitalized and expenditure is charged against profits in the year in which the expenditure is incurred. The useful lives of intangible assets are assessed to be either finite or infinite. Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method are reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortization period or method, as appropriate, and treated as a change in accounting estimate. The amortization expense on intangible assets with finite lives is recognized in the income statement in the expense category consistent with the function of the intangible asset.
Intangible assets with infinite useful lives are tested for impairment annually either individually or at the cash-generating unit level. Such intangibles are not amortized. The useful life of an intangible asset with an infinite life is reviewed annually to determine whether the infinite life assessment continues to be supportable. If not, the change in the useful life assessment from infinite to finite is made on a prospective basis.
Goodwill arises on the acquisition of subsidiaries, associates and joint ventures and represents the excess of the consideration transferred over Company’s interest in net fair value of the net identifiable assets, liabilities and contingent liabilities of the acquiree and the fair value of the non-controlling interest in the acquiree.
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the CGUs, or groups of CGUs, that is expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.
Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs to sell. Any impairment is recognised immediately as an expense and is not subsequently reversed.
The Company classifies its financial assets in the following categories: Financial assets at fair value through profit or loss, Loans and receivables, and Available for sale Financial assets. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition and re-evaluates this designation at every reporting date.
(a) Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if expected to be settled within 12 months; otherwise, they are classified as non-current.
(b) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for those which maturities greater than 12 months after the reporting date. These are classified as non-current assets.
Lubricating oil and bunkers inventories are valued at the lower of historical cost and replacement cost as measurement of net reliable value. The Company makes inventory provisions based on an assessment of excess and obsolete inventories.
Cash and cash equivalents includes cash in hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less. Bank overdrafts are shown within borrowings in current liabilities in the statement of financial position.
Accounts receivable are reported at amortized cost. The interest factor is ignored as it is considered as insignificant. In the case of objective evidence of a fall in value, the difference between reported value and the present value of the future cash flow is discounted with the original effective interest rate for the receivable and reported as a loss.
Provisions for losses are recognized when there are objective indicators that the Company will not receive settlement in accordance with the original terms. Significant financial problems facing the customer, probability that the customer will go bankrupt or undergo financial restructuring, postponements and non-payment are regarded as indicators that the receivables from customers must be written-down.
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. When the Company purchases its own shares, the consideration paid, including any directly attributable incremental costs (net of income taxes), is deducted as appropriate from share capital and share premium reserve and the shares are cancelled.
Borrowings are recognized initially at fair value, net of transaction costs incurred and are subsequently stated at amortized cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the income statement over the period of the borrowings using the effective interest method. Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.
The Company has applied for three Commercial Interest Reference Rate (CIRR) loans from the Norwegian Export Credit Agency. The duration of the loans is 12 years from draw-down and the cash proceeds from the loans have been deposited in fixed deposit account with a Norwegian bank at the same interest rate as the loans. The agreed periods of the deposits are identical with the periods of the loans.
Tax expense/benefit includes current taxes and the change in deferred taxes. Deferred income tax is provided for all temporary differences between the book value and the tax basis of assets and liabilities and for tax losses carried forward. Deferred tax assets made probable through prospective earnings that can be utilized against the tax reducing temporary differences are recognized as intangible assets.
Deferred tax assets and deferred tax liabilities are recognized independently of when the differences will be reversed and, as a rule, at nominal value. Deferred tax assets and tax liabilities are measured on the basis of estimated future tax rate.
Part of the Company’s activities under the Norwegian subsidiaries are structured to be in compliance with the regulations for the Norwegian Tonnage Tax Regime. The Company has estimated a tax rate of 0% for the companies subject to Norwegian Tonnage Tax Regime. Financial income within the regime is taxable at a rate of 27%. For companies not included in the tonnage tax regime, the Company applies a tax rate of 27%. The tax expense consists of tax payable and changes in deferred tax assets/liabilities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements.
Deferred tax assets are recognized to the extent it is probable that future taxable profits will be generated to utilize the temporary differences forming basis for the deferred tax assets.
The Company has a defined benefit plan for its employees in Norway. The pension scheme is financed through contributions to insurance companies or pension funds. A defined benefit plan defines the amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.
The liability recognized on the statement of financial position relating to defined benefit plans is the net present value for the defined benefits on the reporting date less the fair value of the pension fund assets adjusted for unrecognized estimate deviations and costs relating to pension benefits earned from prior periods. The pension obligations are calculated annually by an independent actuary on the basis of a linear model. The present value of the defined obligation is determined by discounting the estimated futrure cash outflows using interest rates of high-quality corporated bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximately to the terms of the related pension obligation. In countries where there is no deep market in such bonds, the market rates on government bonds are used.
Since Norwegian government bonds are not issued for terms exceeding 10 years, a supplement to this bond rate is calculated by means of estimation techniques to establish a discount rate that is approximately the same as the term of the pension obligation.
The Company recognizes provisions for any environmental improvements and legal requirements when there is a legal or self-imposed obligation to do so as a result of earlier events, there is a preponderance of evidence that the obligation will be settled by a transfer of economic resources and the size of the obligation can be estimated with an adequate degree of reliability.
In cases where there are additional obligations of the same nature, the probability that the litigation will be settled will be assessed for the Company as a whole. Provisions for the Company are recognized even if the probability for settlement related to the Company’s individual elements may be low.
Provisions are measured as the net present value of the expected payments to redeem the obligation. A pre-tax discount rate is used that reflects the current market situation and risk specific to the obligation. An increase in the obligation as the result of a change in the time value is recognized as an interest cost. At year-end 2015, no contingent liabilities are recognized in the Statements of Financial Position.
The Company enters into derivative instruments, primarily foreign currency contracts, and interest rate derivatives, to hedge the foreign currency and interest rate fluctuations. The criteria for qualifying as a hedge under IFRS are strict. The Company’s foreign currency contracts do not qualify as hedging. The fair market value of these contracts is recorded as a receivable or liability and any change in the valuation is recognized in the profit and loss as operating expenses.
The Company’s activity is to employ different types of offshore support vessels, including PSVs, OSCVs, AHTS vessels, OSRVs, standby vessels and crew-boats and one scientific core-drilling vessel. In addition, the Company holds interest in one limited liability partnership with ownership in one well-stimulation vessel. In one of the subsidiaries of the Company, revenues are partly generated from income from construction contracts.
Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Company’s activities. Revenue is shown net of value-added tax, withholding tax, returns, rebates and discounts and after elimination of sales within the Company. Revenue is recognized as follows:
Charter rate contracts
Charter contracts are classified as operating leases under IAS 17. Revenue derived from charter contracts is recognized in the period over the lease term on a straight line basis. Related services are recognized as revenue in accordance with the services being rendered.Revenues from time charters and bareboat charters accounted for as operating leases are recognized over the rental periods of such charters, as service is performed on a straight line basis. Certain contracts include mobilization fees payable at the start of the contract, and are recognized as revenue in the mobilization period until contract commencement. In cases where the fee covers specific upgrades or equipment specific to the contract, the mobilization fees are recognized as revenue over the estimated contract period. The related investment is depreciated over the estimated contract period. In cases where the fee covers specific operating expenses at the start of the contract, the fees are recognized in the same period as the expenses.
Vessels without signed contracts in place at discharge have no revenue before a new contract is signed. Charter-related expenses incurred for vessels in the idle time are expensed.
The Company accounts for long-term construction, engineering and project management contracts on the percentage-of-completion basis as costs are incurred. Under this method, when the outcome of a construction contract can be estimated reliably and it is probably that the contract will be profitable, contract revenue is recognized over the period of the contract by reference to the stage of completion.
It is determined that profit on a contract is not able to be estimated reliably until progress has reached at least 25% completion. Contract costs are recognized as expenses by reference to the stage of completion of the contract activity at the end of the reporting period. For projects that are expected to result in a loss, the total estimated loss is recognized immediately.
Interest income is recognized using the effective interest method. When a receivable is impaired, the Company reduces the carrying amount to its recoverable amount, which is determined as the estimated future cash flow discounted at original effective interest rate of the instrument and continues unwinding the discount as interest income. Interest income on impaired loans is recognized using the original effective interest rate.
Dividend income is recognized when the right to receive payment is established.
Rendering of services
Service revenue is generally recognized when a signed contract or other persuasive evidence of an arrangement exists, the service has been provided, the fee is fixed or determinable and collection of resulting receivables is reasonably assured. Other services are recognized on percentage-of-completion basis.
Management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities. Further information is set out in Note 3.
Earnings per share are calculated by dividing the net profit/loss for shareholders of the Company by the weighted average number of outstanding shares over the period in question. Diluted earnings per share include the effect of the assumed conversion of potentially dilutive instruments such as stock options. The impact of share equivalents is computed using the treasury stock method for share options.
The Statements of Cash Flows are prepared in accordance with the indirect method.
All transactions, agreements and business activities with related parties are determined on an arm’s length basis in a manner similar to transactions with third parties.
New information regarding the Company’s financial position on the reporting date is included in the accounts. Events occurring after the reporting date which do not impact the Company’s standing on the reporting date, but which have a significant impact on future periods, are presented in the notes to the accounts.
Grants relating to net wages arrangement in Norway are recognized as a reduction of wage cost.
All foreign exchange gains and losses related to account receivables and account payable are recognized in the income statement under net currency gain/(loss).
Leases for which most of the risk and return associated with the ownership of the asset have not been transferred to the Company are classified as operating leases. Lease payments are classified as operating costs and recognized in the income statement in a straight line during the contract period.
The group operates an equity-settled, share-based compensation plan, under which the entity receives services from employees as consideration for equity instruments (options) of the group. The fair value of the employee services received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed is determined by reference to the fair value of the options granted:
Non-market performance and service conditions are included in assumptions about the number of options that are expected to vest. The total expense is recognized over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied.
In addition, in some circumstances employees may provide services in advance of the grant date and therefore the grant date fair value is estimated for the purposes of recognizing the expense during the period between service commencement period and grant date.
At the end of each reporting period, the group revises its estimates of the number of options that are expected to vest based on the non-market vesting conditions. It recognizes the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity.
Each option gives the holder the right, but not the obligation, to acquire one share at the exercise price on the terms and subject to the conditions set out in the Stock Option Plan. When the options are exercised, the company issues new shares. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium.
The grant by the company of options over its equity instruments to the employees of subsidiary undertakings in the group is treated as a capital contribution. The fair value of employee services received, measured by reference to the grant date fair value, is recognized over the vesting period as an increase to investment in subsidiary undertakings, with a corresponding credit to equity in the parent entity accounts.
The social security contributions payable in connection with the grant of the share options is considered an integral part of the grant itself, and the charge will be treated as a cash-settled transaction.