Halliburton 2013 Annual Report Download - page 64

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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 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.
Goodwill and other intangible assets
We record as goodwill the excess purchase price over the fair value of the tangible and identifiable intangible assets
acquired. Changes in the carrying amount of goodwill are detailed below by reportable segment.
Millions of dollars
Completion and
Production
Drilling and
Evaluation
Total
Balance at December 31, 2011:
$
1,215
$
561
$
1,776
Current year acquisitions
100
62
162
Purchase price adjustments for previous acquisitions
196
1
197
Balance at December 31, 2012:
$
1,511
$
624
$
2,135
Current year acquisitions
43
10
53
Purchase price adjustments for previous acquisitions
(21
)
1
(20
)
Balance at December 31, 2013:
$
1,533
$
635
$
2,168
The reported amounts of goodwill for each reporting unit are reviewed for impairment on an annual basis, during the
third quarter, and more frequently should negative conditions such as significant current or projected operating losses exist. In
2012 and 2011, we elected to perform a qualitative assessment for our annual goodwill impairment test. If a qualitative
assessment indicates that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then we
would be required to perform a quantitative impairment test for goodwill. In 2013, we elected to bypass the qualitative
assessment and perform a quantitative impairment test. This two-step process involves comparing the estimated fair value of
each reporting unit to the reporting unit’s carrying value, including goodwill. If the fair value of a reporting unit exceeds its
carrying amount, goodwill of the reporting unit is not considered impaired, and the second step of the impairment test is
unnecessary. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test
would be performed to measure the amount of impairment loss to be recorded, if any. Our goodwill impairment assessment for
2013 indicated the fair value of each of our reporting units exceeded its carrying amount by a significant margin. Based on our
qualitative assessment of goodwill in 2012 and 2011, we concluded that it was more likely than not that the fair value of each of
our reporting units was greater than their carrying amount, and therefore no further testing was required. In addition, there were
no triggering events that occurred in 2013, 2012, or 2011 requiring us to perform additional impairment reviews. As such, there
were no impairments of goodwill recorded in the three-year period ended December 31, 2013.
We amortize other identifiable intangible assets with a finite life on a straight-line basis over the period which the asset
is expected to contribute to our future cash flows, ranging from three to twenty years. The components of these other intangible
assets generally consist of patents, license agreements, non-compete agreements, trademarks, and customer lists and contracts.
Evaluating impairment of long-lived assets
When events or changes in circumstances indicate that long-lived assets other than goodwill may be impaired, an
evaluation is performed. For an asset classified as held for use, the estimated future undiscounted cash flows associated with the
asset are compared to the asset’s carrying amount to determine if a write-down to fair value is required. When an asset is
classified as held for sale, the asset’s book value is evaluated and adjusted to the lower of its carrying amount or fair value less
cost to sell. In addition, depreciation and amortization is ceased while it is classified as held for sale.
Income taxes
We recognize the amount of taxes payable or refundable for the year. In addition, deferred tax assets and liabilities are
recognized for the expected future tax consequences of events that have been recognized in the financial statements or tax
returns. A valuation allowance is provided for deferred tax assets if it is more likely than not that these items will not be
realized.