Occidental Petroleum 2003 Annual Report Download - page 63

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amounts to reflect the adoption of this requirement. For the years ended
December 31, 2002 and 2001, net sales and cost of sales were reduced from
amounts previously reported by approximately $2.2 billion (representing amounts
for the first two quarters of 2002) and $5.8 billion, respectively, to conform
to the current presentation.
Since 1999, Occidental has accounted for certain energy-trading contracts
in accordance with EITF Issue No. 98-10, "Accounting for Contracts Involved in
Energy Trading and Risk Management Activities." EITF Issue No. 98-10 required
that all energy-trading contracts must be marked to fair value with gains and
losses included in earnings, whether the contracts were derivatives or not. In
October 2002, the EITF rescinded EITF Issue No. 98-10 thus precluding
mark-to-market accounting for all energy-trading contracts that are not
derivatives and fair value accounting for inventories purchased from third
parties. Also, the rescission requires derivative gains and losses to be
presented net on the income statement, whether or not they are physically
settled, if the derivative instruments are held for trading purposes. Occidental
adopted this accounting change in the first quarter of 2003 and recorded a
cumulative effect of a change in accounting principles charge of approximately
$18 million, after tax.
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 adopted SFAS No. 146 in the first quarter of 2003 and it did
not have a material effect on its financial statements.
47
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. There was no
effect on net income or basic earnings per common share upon adoption.
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. 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 adopted SFAS No. 143 in the first quarter of
2003. The initial adoption resulted in an after-tax charge of $50 million, which
was recorded as a cumulative effect of a change in accounting principles. The
adoption increased net property, plant and equipment by $73 million, increased
asset retirement obligations by $151 million and decreased deferred tax
liabilities by $28 million. The pro-forma asset retirement obligation, if the
adoption of this statement had occurred on January 1, 2002, would have been $131
million at January 1, 2002 and $151 million at December 31, 2002.
SFAS NO. 142
In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible