National Oilwell Varco 2015 Annual Report Download - page 77
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Table of Contents
Inventories
Inventories consist of raw materials, work-in-process and oilfield and industrial finished products, manufactured equipment and spare parts. Inventories are
stated at the lower of cost or market using the first-in, first-out or average cost methods. Allowances for excess and obsolete inventories are determined based
on our historical usage of inventory on-hand as well as our future expectations related to our installed base, the development of new products and
consideration of current market conditions. The allowance, which totaled $500 million and $370 million at December 31, 2015 and 2014, respectively, is the
amount necessary to reduce the cost of the inventory to its estimated net realizable value.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Expenditures for major improvements that extend the lives of property and equipment are capitalized
while minor replacements, maintenance and repairs are charged to operations as incurred. Disposals are removed at cost less accumulated depreciation with
any resulting gain or loss reflected in operations. Depreciation is provided using the straight-line method over the estimated useful lives of individual items.
Depreciation expense was $391 million, $413 million and $381 million for the years ended December 31, 2015, 2014 and 2013, respectively. The estimated
useful lives of the major classes of property, plant and equipment are included in Note 6 to the consolidated financial statements.
We record impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets are impaired and the
undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of those assets. The carrying value of assets used in
operations that are not recoverable is reduced to fair value if lower than carrying value. In determining the fair market value of the assets, we consider market
trends and recent transactions involving sales of similar assets, or when not available, discounted cash flow analysis. There have been no impairments of
long-lived assets for the years ended December 31, 2015, 2014 and 2013.
Intangible Assets
The Company has approximately $7.0 billion of goodwill and $3.8 billion of identified intangible assets at December 31, 2015. Goodwill is identified by
segment as follows (in millions):
Balance at December 31, 2013 $1,279 $ 906 $ 4,425 $ 2,106 $ 333 $ 9,049
Goodwill acquired and adjusted during period — — 17 150 — 167
Goodwill disposed of during the period — — — (71) (332) (403)
Currency translation adjustments and other (43) (29) (85) (116) (1) (274)
Balance at December 31, 2014 $1,236 $ 877 $ 4,357 $ 2,069 $ — $ 8,539
Goodwill acquired and adjusted during period — — 8 (8) — —
Impairment — — (1,485) — — (1,485)
Currency translation adjustments and other (4) — (6) (64) — (74)
Balance at December 31, 2015 $1,232 $ 877 $ 2,874 $ 1,997 $ — $ 6,980
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