Occidental Petroleum 2001 Annual Report Download - page 58

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control revenue bonds due on December 1, 2005. As a result of this transaction,
Occidental recognized an after-tax extraordinary loss of $3 million in the first
quarter of 2001.
In August 2001, the Financial Accounting Standards Board (FASB) issued SFAS
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS
No. 144 addresses financial accounting and reporting for the impairment or
disposal of long-lived assets. The provisions of this statement are effective
for financial statements issued for fiscal years beginning after December 15,
2001. Occidental will adopt this statement in the first quarter of 2002 and it
is not expected to have an impact on the financial statements.
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." SFAS No.143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. The provisions of this
statement are effective for financial statements issued for fiscal years
beginning after June 15, 2002. Occidental must implement SFAS No. 143 in the
first quarter of 2003 and has not yet determined its impact on the financial
statements.
In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 142 changes the accounting and reporting requirements for
acquired goodwill and intangible assets. The provisions of this statement must
be applied starting with fiscal years beginning after December 15, 2001. Certain
transitional provisions of the statement can be implemented as late as the
fourth quarter of 2002, provided that the transitional effect, if any, is
recorded retroactive to the first quarter of 2002. At December 31, 2001, the
balance sheet included approximately
47
$108 million of goodwill and intangible assets with annual amortization expense
of approximately $6 million recorded in the income statement. Occidental expects
to implement SFAS No. 142 in the first quarter of 2002. The adoption of this
accounting standard is expected to result in a cumulative effect of changes in
accounting principles after-tax reduction in net income of approximately $95
million due to the anticipated impairment of the goodwill.
In June 2001, the FASB issued SFAS No. 141, "Business Combinations." SFAS
No. 141 establishes new standards for accounting and reporting business
combinations including eliminating the pooling method of accounting. The
standard applies to all business combinations initiated after June 30, 2001.
Occidental has implemented the provisions of SFAS No. 141, which had no impact
on the financial statements.
On January 1, 2001, Occidental adopted SFAS No. 133, as amended. These
statements established accounting and reporting standards for derivative
instruments and hedging activities and required an entity to recognize all
derivatives in the statement of financial position and measure those instruments
at fair value. Changes in the derivative instrument's fair value must be
recognized in earnings unless specific hedge accounting criteria are met.
Adoption of these new accounting standards resulted in cumulative after-tax
reductions in net income of approximately $24 million and OCI of approximately
$27 million in the first quarter of 2001. The adoption also increased total
assets by $588 million and total liabilities by $639 million as of January 1,
2001.
2000
The 2000 results included pre-tax charges of $120 million for the
write-down of the chemical intermediate businesses to net realizable value, $53
million for the write-down of various oil and gas assets and investments and $15
million for the write-down of various chemical assets.
During the third and fourth quarters of 2000, Occidental repurchased some
of its outstanding public debt securities in open market transactions, with
principal balances totaling $154 million, at current market prices. Occidental
recorded an after-tax extraordinary gain of $1 million that resulted from these
purchases.
In the fourth quarter of 2000, Occidental adopted the provisions of EITF
Issue No. 00-10, "Accounting for Shipping and Handling Fees and Costs", which
establishes accounting and reporting standards for the treatment of shipping and
handling costs. Among its provisions, EITF Issue No. 00-10 requires that
transportation costs that had been accounted for as deductions from revenues
should now be recorded as an expense. The implementation of EITF Issue No. 00-10