Occidental Petroleum 2003 Annual Report Download - page 37

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that companies provide more details about their plan assets, benefit
obligations, cash flows and other relevant information, such as plan assets by
category. A description of investment policies and strategies for these asset
categories and target allocation percentages or target ranges are also required
25
in financial statements. This statement is effective for financial statements
with fiscal years ending after December 15, 2003. Occidental adopted this
statement in the fourth quarter of 2003 and provided the required disclosure in
this report.
SFAS NO. 150
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity." SFAS
No. 150 establishes accounting standards for how a company classifies and
measures financial instruments that have characteristics of liabilities and
equity. Occidental adopted the provisions of this statement on July 1, 2003. As
a result of the adoption, Occidental's mandatorily redeemable trust preferred
securities are now classified as a liability and the payments to the holders of
the securities, which were previously recorded as minority interest on the
statement of operations, are recorded as interest expense. On January 20, 2004,
all of the trust preferred securities were redeemed.
SFAS NO. 149
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." SFAS No. 149 amends and
clarifies financial accounting and reporting for derivative instruments. This
statement is effective for contracts entered into or modified after June 30,
2003. Occidental adopted this statement in the third quarter of 2003 and it did
not have a material effect on its financial statements.
FIN 46 AND FIN 46-R (REVISED)
In January 2003, the FASB issued FIN 46, "Consolidation of Variable
Interest Entities." FIN 46 requires a company to consolidate a VIE if it is
designated as the primary beneficiary of that entity even if the company does
not have a majority of voting interests. A VIE is generally defined as an entity
whose equity is unable to finance its activities or whose owners lack the risks
and rewards of ownership. The statement also imposes disclosure requirements for
all the VIEs of a company, even if the company is not the primary beneficiary.
The provisions of this statement apply at inception for any entity created after
January 31, 2003. Occidental adopted the provisions of this Interpretation for
its existing entities on April 1, 2003, which resulted in the consolidation of
its OxyMar investment. As a result of the OxyMar consolidation, assets increased
by $166 million and liabilities increased by $178 million. There was no material
effect on net income as a result of the consolidation. In September 2003,
Marubeni indicated it would exercise its option to put its interest in OxyMar to
Occidental by paying approximately $25 million to Occidental. In connection with
the transfer, which is expected to be complete in April 2004, Occidental will
assume Marubeni's guarantee of OxyMar's debt. As all the OxyMar debt is already
consolidated in Occidental's financial statements with the adoption of FIN 46,
the exercise of the put will not have a material effect on Occidental's
financial position or results of operations.
See "Off-Balance-Sheet Arrangements - Elk Hills Power" for information on
VIEs where Occidental is not the primary beneficiary.
In December 2003, the FASB revised FIN 46 to exempt certain entities from
its requirements and to clarify certain issues arising during the initial
implementation of FIN 46. Occidental will adopt the revised interpretation in
the first quarter of 2004 and it is not expected to have an impact on the
financial statements when adopted.
FIN 45
In January 2003, the FASB issued FIN 45, "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others." FIN 45 requires a company to recognize a liability for