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Variable Interest Entities (VIEs) | 6 Months Ended
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Jun. 30, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
Variable Interest Entities (VIEs) | Note 23 – Variable Interest Entities (VIEs) As at June 30, 2018, we leased two semi-submersible rigs, and one jack-up rig from Ship Finance VIEs under capital leases. Each of the units had been sold by us to single purpose subsidiaries of Ship Finance and simultaneously leased back by us on bareboat charter contracts for a term of 15 years. We have several options to repurchase the units during the charter periods, and obligations to purchase the assets at the end of the 15-year lease period. The following table gives a summary of the sale and leaseback arrangements, as at June 30, 2018:
Unit |  | Effective from |  |  | Sale value (In $ millions) |  |  | First repurchase option (In $ millions) |  |  | Month of first repurchase option |  |  | Last repurchase option (In $ millions) |  |  | Month of last repurchase Option* |
West Taurus |  |  | Nov 2008 |  |  |  | 850 |  |  |  | 418 |  |  |  | Feb 2015 |  |  |  | 149 | (1) |  |  | Nov 2023 |
West Hercules |  |  | Oct 2008 |  |  |  | 850 |  |  |  | 580 |  |  |  | Aug 2011 |  |  |  | 135 | (1) |  |  | Aug 2023 |
West Linus |  |  | June 2013 |  |  |  | 600 |  |  |  | 370 |  |  |  | June 2018 |  |  |  | 170 | (2) |  |  | June 2028 |
(1) | Purchase obligations at the end of the 15-year lease period
(2) | Ship Finance has a right to require us to purchase the West Linus rig on the 15th anniversary for $100 million if we do not exercise the final repurchase option
We determine that the Ship Finance subsidiaries, which own the units, are VIEs, and that we are the primary beneficiary of the risks and rewards connected with the ownership of the units and the charter contracts. Accordingly, these VIEs are fully consolidated in our consolidated financial statements. We did not record any gains from the sale of the units, as they continued to be reported as assets at their original cost in our consolidated balance sheet at the time of each transaction. The equity attributable to Ship Finance in the VIEs is included in non-controlling interests in our consolidated financial statements. At June 30, 2018 and at December 31, 2017 the units are reported under drilling units in our consolidated balance sheet. The bareboat charter rates are set on the basis of a base LIBOR interest rate for each bareboat charter contract, and thereafter are adjusted for differences between the LIBOR fixing each month and the base LIBOR interest rate for each contract. A summary of the bareboat charter rates per day for each unit is given below.
|  | (In $ thousands) |
Unit |  | 2018 |  |  | 2019 |  |  | 2020 |  |  | 2021 |  |  | 2022 |  |  | 2023 |
West Taurus |  |  | 112 |  |  |  | 103 |  |  |  | 101 |  |  |  | 97 |  |  |  | 96 |  |  |  | 181 |
West Hercules |  |  | 118 |  |  |  | 101 |  |  |  | 100 |  |  |  | 96 |  |  |  | 96 |  |  |  | 184 |
West Linus |  |  | 158 |  |  |  | 122 |  |  |  | 99 |  |  |  | 99 |  |  |  | 93 |  |  |  | 189 |
The assets and liabilities in the financial statements of the VIEs as at June 30, 2018 and as at December 31, 2017 are as follows:
|  | As at June 30, 2018 |  |  | As at December 31, 2017 |
(In $ millions) |  | SFL Deepwater Limited |  |  | SFL Hercules Limited |  |  | SFL Linus Limited |  |  | SFL Deepwater Limited |  |  | SFL Hercules Limited |  |  | SFL Linus Limited |
Name of unit |  | West Taurus |  |  | West Hercules |  |  | West Linus |  |  | West Taurus |  |  | West Hercules |  |  | West Linus |
Investment in finance lease |  |  | 326 |  |  |  | 316 |  |  |  | 414 |  |  |  | 335 |  |  |  | 326 |  |  |  | 431 |
Amount due from related parties |  |  | 3 |  |  |  | 4 |  |  |  | — |  |  |  | 4 |  |  |  | 4 |  |  |  | — |
Other assets |  |  | 6 |  |  |  | 6 |  |  |  | 7 |  |  |  | 6 |  |  |  | 6 |  |  |  | 8 |
Total assets of the VIEs |  |  | 335 |  |  |  | 326 |  |  |  | 421 |  |  |  | 345 |  |  |  | 336 |  |  |  | 439 |
Short-term interest bearing debt |  |  | 19 |  |  |  | 28 |  |  |  | 45 |  |  |  | 226 |  |  |  | 27 |  |  |  | 48 |
Long-term interest bearing debt |  |  | 196 |  |  |  | 210 |  |  |  | 240 |  |  |  | — |  |  |  | 224 |  |  |  | 261 |
Other liabilities |  |  | 10 |  |  |  | 10 |  |  |  | — |  |  |  | 3 |  |  |  | 2 |  |  |  | — |
Short-term amounts due to related parties |  |  | — |  |  |  | — |  |  |  | 12 |  |  |  | — |  |  |  | — |  |  |  | 4 |
Long-term debt due to related parties |  |  | 106 |  |  |  | 73 |  |  |  | 115 |  |  |  | 113 |  |  |  | 80 |  |  |  | 121 |
Total liabilities of the VIEs |  |  | 331 |  |  |  | 321 |  |  |  | 412 |  |  |  | 342 |  |  |  | 333 |  |  |  | 434 |
Equity of the VIEs |  |  | 4 |  |  |  | 5 |  |  |  | 9 |  |  |  | 3 |  |  |  | 3 |  |  |  | 5 |
Book value of units in the Company’s consolidated financial statements |  |  | 373 |  |  |  | 525 |  |  |  | 504 |  |  |  | 385 |  |  |  | 508 |  |  |  | 515 |
We present balances due to/from Ship Finance on a net basis, due to the fact there is a right of offset established in the long-term loan agreements, and the balances are intended to be settled on a net basis. As at June 30, 2018, we presented receivable balances (current assets) of $7 million related to SFL Deepwater Ltd, $7 million related to SFL Hercules Ltd, and $6 million related to SFL Linus Ltd against “Long-term debt due to related parties” within “Non-current liabilities” in the consolidated balance sheet. As at December 31, 2017, we had no receivable balances presented against “Long-term debt due to related parties” within “Non-current liabilities” in the Consolidated Balance Sheets. In the period ended June 30, 2018 the VIEs declared no dividends (June 30, 2017: $14 million).

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- Definition The entire disclosure for a variable interest entity (VIE), including but not limited to, judgments and assumptions in determining whether to consolidate and in identifying the primary beneficiary, gain (loss) recognized on the initial consolidation of the VIE, terms of arrangements, amounts and classification of the VIE's assets and liabilities, and the entity's maximum exposure to loss. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -URI http://asc.fasb.org/topic&trid=2197479 + Details
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