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RECENTLY ADOPTED ACCOUNTING CHANGES
SFAS No. 158
In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans—an
amendment of FASB Statements No. 87, 88, 106, and 132(R).” This statement requires an employer to recognize the overfunded or underfunded
amounts of its defined benefit pension and postretirement plans as an asset or liability and recognize changes in the funded status of these plans
in the year in which the changes occur through OCI, if they are not recognized in the income statement. The statement also requires a company
to use the date of its fiscal year-end to measure the plans. The recognition and disclosure provisions of SFAS No. 158 are effective for fiscal years
ending after December 15, 2006. The requirement to use the fiscal year-end as the measurement date is effective for fiscal years ending after
December 15, 2008. Occidental adopted this statement on December 31, 2006. See Note 13 for further information.
SAB 108
In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin (SAB) 108, “Financial Statements –
Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.” SAB 108 requires
quantification of the impact of all prior year misstatements from both an income statement and a balance sheet perspective to determine if the
misstatements are material. SAB 108 is effective for financial statements issued for fiscal years ending after November 15, 2006. Occidental
adopted SAB 108 effective December 31, 2006 and there was no material effect on the financial statements upon adoption.
SFAS No. 123(R)
On July 1, 2005, Occidental early adopted the fair value recognition provisions of SFAS No. 123(R), "Share-Based Payments", under the
modified prospective transition method. Since most of Occidental’s existing stock-based compensation was already being recorded in the income
statement, Occidental decided to early adopt SFAS 123(R) so that the remaining awards would be accounted for in a similar manner. Prior to July
1, 2005, Occidental applied the APB Opinion No. 25 intrinsic value accounting method for its stock incentive plans. Under the modified
prospective transition method, the fair value recognition provisions apply only to new awards or awards modified after July 1, 2005. Additionally,
the fair value of existing unvested awards at the date of adoption is recorded in compensation expense over the remaining requisite service period.
Results from prior periods have not been restated. As a result of adopting this statement in the third quarter of 2005, Occidental recorded a $3
million after-tax credit as a cumulative effect of a change in accounting principles. See Note 12 for more information.
EITF Issue No. 04-13
In September 2005, the EITF finalized the provisions of EITF Issue No. 04-13, "Accounting for Purchases and Sales of Inventory with the Same
Counterparty", which provides accounting guidance about whether buy/sell arrangements should be accounted for at historical cost and whether
these arrangements should be reported on a gross or net basis. Buy/sell arrangements typically are contractual arrangements where the buy and
sell agreements are entered into in contemplation of one another with the same counterparty. Occidental reports all buy/sell arrangements on a
net basis and at historical cost. This EITF Issue was effective in the first interim period beginning after March 15, 2006. Occidental prospectively
adopted this EITF Issue in the second quarter of 2006 and there was no material effect on the financial statements upon adoption.
NOTE 4 INVENTORIES
Inventories of approximately $204 million and $157 million were valued under the LIFO method at December 31, 2006 and 2005, respectively.
Inventories consisted of the following:
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   
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  
 
  
  
51