Halliburton 2011 Annual Report Download - page 92
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77
Research and development
Research and development costs are expensed as incurred. Research and development costs were
$401 million in 2011, $366 million in 2010, and $325 million in 2009.
Cash equivalents
We consider all highly liquid investments with an original maturity of three months or less to be
cash equivalents.
Inventories
Inventories are stated at the lower of cost or market. Cost represents invoice or production cost for
new items and original cost less allowance for condition for used material returned to stock. Production
cost includes material, labor, and manufacturing overhead. Some domestic manufacturing and field service
finished products and parts inventories for drill bits, completion products, and bulk materials are recorded
using the last-in, first-out method. The remaining inventory is recorded on the average cost method. We
regularly review inventory quantities on hand and record provisions for excess or obsolete inventory based
primarily on historical usage, estimated product demand, and technological developments.
Allowance for bad debts
We establish an allowance for bad debts through a review of several factors, including historical
collection experience, current aging status of the customer accounts, and financial condition of our
customers. Our policy is to write off bad debts when the customer accounts are determined to be
uncollectible.
Property, plant, and equipment
Other than those assets that have been written down to their fair values due to impairment,
property, plant, and equipment are reported at cost less accumulated depreciation, which is generally
provided on the straight-line method over the estimated useful lives of the assets. Accelerated depreciation
methods are also used for tax purposes, wherever permitted. Upon sale or retirement of an asset, the related
costs and accumulated depreciation are removed from the accounts and any gain or loss is recognized.
Planned major maintenance costs are generally expensed as incurred. Expenditures for additions,
modifications, and conversions are capitalized when they increase the value or extend the useful life of the
asset.