Occidental Petroleum 2002 Annual Report Download - page 47

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the disclosure requirements for stock-based compensation. The provisions of this
statement apply to financial statements for fiscal years ending after December
15, 2002. The statement is not expected to have a material impact on the
financial statements when adopted.
SFAS NO. 146
In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." SFAS No. 146 requires that a
liability be recognized for exit and disposal costs only when the liability has
been incurred and when it can be measured at fair value. The statement is
effective for exit and disposal activities that are initiated after December 31,
2002. Occidental will adopt SFAS No. 146 in the first quarter of 2003 and it is
not expected to have a material impact on its financial statements.
SFAS NO. 145
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections." In addition to amending or rescinding other existing authoritative
pronouncements to make various technical corrections, clarify meanings, or
describe their applicability under changed conditions, SFAS No. 145 precludes
companies from recording gains and losses from the extinguishment of debt as an
extraordinary item. Occidental implemented SFAS No. 145 in the fourth quarter of
2002 and all comparative financial statements have been reclassified to conform
to the 2002 presentation. Since Occidental had no 2002 extraordinary items,
there was no effect on the 2002 presentation. The effects of the statement on
prior years include the reclassification of an extraordinary loss to net income
from continuing operations of $8 million ($0.02 per share) in 2001 and of $1
million (no per share effect) in 2000. There was no effect on net income or
basic earnings per common share upon adoption.
SFAS NO. 144
In August 2001, the 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 and
broadens the presentation of discontinued operations for long-lived assets. The
provisions of this statement are effective for financial statements issued for
fiscal years beginning after December 15, 2001. Occidental adopted this
statement in the first quarter of 2002 and it did not have an impact on the
financial statements when adopted.
SFAS NO. 143
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. Occidental's current policy
for dismantlement, restoration and reclamation costs is to accrue the estimated
future abandonment and removal costs of offshore production platforms, net of
salvage value, over their operating lives. For onshore oil and gas production,
Occidental estimates that the salvage value of the oil and
31
gas properties generally will approximate the dismantlement, restoration and
reclamation costs or that the net cost will not be material; therefore, no
accrual is recorded. Occidental makes capital renewal expenditures for its
chemical plants on a continual basis while an asset is in operation. Thus,
retirement obligations are provided for when a decision is made to dispose of a
property or when operations have been curtailed on other than a temporary basis.
Under SFAS No. 143, companies are required to recognize the fair value of a
liability for an asset retirement obligation in the period in which the
liability is incurred if there is a legal obligation to dismantle the asset and
reclaim or remediate the property at the end of the useful life. Occidental will
adopt SFAS No. 143 in the first quarter of 2003. The initial adoption is
expected to result in an after-tax charge of $50 - $60 million, which will be
recorded as a cumulative effect of a change in accounting principles. The