Occidental Petroleum 2008 Annual Report Download - page 56

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Notes to Consolidated Financial Statements Occidental Petroleum Corporation
and Subsidiaries
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
In this report, "Occidental" or "the Company" refers to Occidental Petroleum Corporation, a Delaware corporation, (OPC), and/or one
or more entities in which it owns a majority voting interest (subsidiaries). Occidental is a multinational organization whose subsidiaries and
affiliates operate in the oil and gas, chemical and midstream, marketing and other segments. The oil and gas segment explores for,
develops, produces and markets crude oil, natural gas liquids (NGLs), condensate and natural gas. The chemical segment (OxyChem)
manufactures and markets basic chemicals, vinyls and performance chemicals. The midstream, marketing and other segment (midstream
and marketing) gathers, treats, processes, transports, stores, trades and markets crude oil, natural gas, NGLs, condensate and carbon
dioxide (CO2) and generates and markets power. Unless otherwise indicated hereafter, discussion of oil or oil and liquids refers to crude oil,
NGLs and condensate. In addition, discussions of oil and gas production or volumes, in general, refer to sales volumes unless context
requires or it is indicated otherwise.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of OPC, its subsidiaries and its undivided interests in oil and gas
exploration and production ventures. Occidental's proportionate share of oil and gas exploration and production ventures, in which it has a
direct working interest, is accounted for by reporting its proportionate share of assets, liabilities, revenues, costs and cash flows within the
relevant lines on the balance sheets, income statements and cash flow statements.
Certain financial statements, notes and supplementary data for prior years have been reclassified to conform to the 2008 presentation.
INVESTMENTS IN UNCONSOLIDATED ENTITIES
Investments in unconsolidated entities include both equity-method and available-for-sale investments. Amounts representing
Occidental’s percentage interest in the underlying net assets of affiliates (excluding undivided interests in oil and gas exploration and
production ventures) in which it does not have a majority voting interest but as to which it exercises significant influence, are accounted for
under the equity method. Occidental reviews equity-method investments for impairment whenever events or changes in circumstances
indicate that an other-than-temporary decline in value may have occurred. The amount of impairment, if any, is based on quoted market
prices, where available, or other valuation techniques, including discounted cash flows.
Investments in which Occidental does not exercise significant influence are accounted for as available-for-sale investments and are
carried at fair value, based on quoted market prices, with unrealized gains and losses reported in other comprehensive income (OCI), net of
taxes, until such investment is realized. Upon disposal, the accumulated unrealized gain or loss included in OCI is transferred to income.
REVENUE RECOGNITION
Revenue is recognized from oil and gas production when title has passed to the customer, which occurs when the product is shipped.
In international locations where oil is shipped by tanker, sale is recognized when the tanker is loaded. This process occasionally causes a
difference between actual production in a reporting period and sales volumes that have been recognized as revenue. Revenue from
marketing and trading activities is recognized on net settled transactions upon completion of contract terms, and for physical deliveries upon
title transfer. For unsettled transactions, contracts that meet specified accounting criteria are recorded at fair value. Revenue from all
marketing and trading activities is reported on a net basis.
Revenue from chemical product sales is recognized when the product is shipped and title has passed to the customer. Prices are fixed
at the time of shipment. Certain incentive programs may provide for payments or credits to be made to customers based on the volume of
product purchased over a defined period. Total customer incentive payments over a given period are estimated and recorded as a reduction to
revenue ratably over the contract period. Such estimates are evaluated and revised as warranted.
Occidental records revenue net of taxes that are assessed by governmental authorities on Occidental's customers.
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RISKS AND UNCERTAINTIES