Halliburton 2011 Annual Report Download - page 91

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HALLIBURTON COMPANY
Notes to Consolidated Financial Statements
Note 1. Description of Company and Significant Accounting Policies
Description of Company
Halliburton Company’ s predecessor was established in 1919 and incorporated under the laws of
the State of Delaware in 1924. We are one of the world’ s largest oilfield services companies. Our two
business segments are the Completion and Production segment and the Drilling and Evaluation segment.
We provide a comprehensive range of services and products for the exploration, development, and
production of oil and natural gas around the world.
Use of estimates
Our financial statements are prepared in conformity with United States generally accepted
accounting principles, requiring us to make estimates and assumptions that affect:
- the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements; and
- the reported amounts of revenue and expenses during the reporting period.
We believe the most significant estimates and assumptions are associated with the forecasting of
our effective income tax rate and the valuation of deferred taxes, legal and environmental reserves,
indemnity valuations, long-lived asset valuations, purchase price allocations, pensions, allowance for bad
debts, and percentage-of-completion accounting for long-term contracts. Ultimate results could differ from
our estimates.
Basis of presentation
The consolidated financial statements include the accounts of our company and all of our
subsidiaries that we control or variable interest entities for which we have determined that we are the
primary beneficiary. All material intercompany accounts and transactions are eliminated. Investments in
companies in which we have significant influence are accounted for using the equity method of accounting.
If we do not have significant influence, we use the cost method of accounting.
In 2011, we adopted the provisions of new accounting standards. See Note 14 for further
information. All periods presented reflect these changes.
Revenue recognition
Overall. Our services and products are generally sold based upon purchase orders or contracts
with our customers that include fixed or determinable prices but do not include right of return provisions or
other significant post-delivery obligations. Our products are produced in a standard manufacturing
operation, even if produced to our customer’ s specifications. We recognize revenue from product sales
when title passes to the customer, the customer assumes risks and rewards of ownership, collectability is
reasonably assured, and delivery occurs as directed by our customer. Service revenue, including training
and consulting services, is recognized when the services are rendered and collectability is reasonably
assured. Rates for services are typically priced on a per day, per meter, per man-hour, or similar basis.
Software sales. Sales of perpetual software licenses, net of any deferred maintenance and support
fees, are recognized as revenue upon shipment. Sales of time-based licenses are recognized as revenue over
the license period. Maintenance and support fees are recognized as revenue ratably over the contract period,
usually a one-year duration.
Percentage of completion. Revenue from certain long-term, integrated project management
contracts to provide well construction and completion services is reported on the percentage-of-completion
method of accounting. Progress is generally based upon physical progress related to contractually defined
units of work. Physical percent complete is determined as a combination of input and output measures as
deemed appropriate by the circumstances. All known or anticipated losses on contracts are provided for
when they become evident. Cost adjustments that are in the process of being negotiated with customers for
extra work or changes in the scope of work are included in revenue when collection is deemed probable.