Chevron 2004 Annual Report Download - page 67

CHEVRONTEXACO CORPORATION 2004 ANNUAL REPORT 65


At December 31 Year ended December 31
Gross Investment at Cost Net Investment2 Additions at Cost3 Depreciation Expense4,5
 2003 2002  2003 2002  2003 2002  2003 2002

United States   $ 34,798 $ 39,986  $ 9,953 $ 10,457  $ 1,776 $ 1,658  $ 1,815 $ 1,806
International  37,402 36,382  20,572 18,908  3,246 3,343  2,227 2,132
Total Exploration
and Production  72,200 76,368  30,525 29,365  5,022 5,001  4,042 3,938

 
United States  12,959 13,423    5,881 6,296  389 671  493 570
International  11,174 11,194  5,944 6,310  388 411  655 530
Total Refining, Marketing
and Transportation  24,133 24,617  11,825 12,606  777 1,082  1,148 1,100

United States  613 614  303 317  12 16  21 21
International  719 731  404 420  24 37  38 21
Total Chemicals  1,332 1,345  707 737  36 53  59 42

United States  2,772 2,783  1,393 1,334  169 230  109 149
International   119 118   88 113   8 55   26 2
Total All Other  2,891 2,901    1,481 1,447  177 285  135 151
Total United States  51,142 56,806    17,530 18,404  2,346 2,575  2,438 2,546
Total International  49,414 48,425  27,008 25,751  3,666 3,846  2,946 2,685
Total  $ 100,556 $ 105,231  $ 44,538 $ 44,155  $ 6,012 $ 6,421  $ 5,384 $ 5,231
1 Refer to Note 25 on page 77 for a discussion of the effect on 2003 PP&E balances and depreciation expenses related to the adoption of FAS 143, “Accounting for Asset Retirement
Obligations.”
2 Net of accumulated abandonment and restoration costs of $2,263 at December 31, 2002.
3 Net of dry hole expense related to prior years’ expenditures of $58, $124 and $36 in 2004, 2003 and 2002, respectively.
4 Depreciation expense includes accretion expense of $93 and $132 in 2004 and 2003, respectively.
5 Depreciation expense includes discontinued operations of $22, $58 and $62 in 2004, 2003 and 2002, respectively.
6 Primarily coal, real estate assets and management information systems.
of฀ownership฀are฀assumed฀by฀the฀counterparties.฀At฀issue฀with฀
the฀SEC฀is฀whether฀the฀industry’s฀accounting฀for฀buy/sell฀con-
tracts฀instead฀should฀be฀shown฀net฀on฀the฀income฀statement฀and฀
accounted฀for฀under฀the฀provisions฀of฀Accounting฀Principles฀
Board฀(APB)฀Opinion฀No.฀29,฀“Accounting฀for฀Nonmonetary฀
Transactions”฀(APB฀29).
The฀topic฀is฀under฀deliberation฀by฀the฀Emerging฀Issues฀Task฀
Force฀(EITF)฀of฀the฀FASB฀as฀Issue฀No.฀04-13,฀“Accounting฀for฀Pur-
chases฀and฀Sales฀of฀Inventory฀with฀the฀Same฀Counterparty.”฀The฀EITF฀
first฀discussed฀this฀issue฀in฀November฀2004.฀Additional฀research฀is฀
being฀performed฀by฀the฀FASB฀staff,฀and฀the฀topic฀will฀be฀discussed฀
again฀at฀a฀future฀EITF฀meeting.฀While฀this฀issue฀is฀under฀delibera-
tion,฀the฀SEC฀staff฀directed฀ChevronTexaco฀and฀other฀companies฀in฀
its฀January฀and฀February฀2005฀comment฀letters฀to฀disclose฀on฀the฀
face฀of฀the฀income฀statement฀the฀amounts฀associated฀with฀buy/sell฀
contracts฀and฀to฀discuss฀in฀a฀footnote฀to฀the฀financial฀statements฀
the฀basis฀for฀the฀underlying฀accounting.฀
With฀regard฀to฀the฀latter,฀the฀company’s฀accounting฀treat-
ment฀for฀buy/sell฀contracts฀is฀based฀on฀the฀view฀that฀such฀
transactions฀are฀monetary฀in฀nature.฀Monetary฀transactions฀are฀
outside฀the฀scope฀of฀APB฀29.฀The฀company฀believes฀its฀accounting฀
is฀also฀supported฀by฀the฀indicators฀of฀gross฀reporting฀of฀purchases฀
and฀sales฀in฀paragraph฀3฀of฀EITF฀Issue฀No.฀99-19,฀“Reporting฀
Revenue฀Gross฀as฀a฀Principal฀versus฀Net฀as฀an฀Agent.”฀Addition-
ally,฀FASB฀Interpretation฀No.฀39,฀“Offsetting฀of฀Amounts฀Related฀
to฀Certain฀Contracts”฀(FIN฀39),฀prohibits฀a฀receivable฀from฀being฀
netted฀against฀a฀payable฀when฀the฀receivable฀is฀subject฀to฀credit฀
risk฀unless฀a฀right฀of฀offset฀exists฀that฀is฀enforceable฀by฀law.฀The฀


In฀January฀and฀February฀2005,฀the฀SEC฀issued฀comment฀letters฀to฀
ChevronTexaco฀and฀other฀companies฀in฀the฀oil฀and฀gas฀industry฀
requesting฀disclosure฀of฀information฀related฀to฀the฀accounting฀for฀
buy/sell฀contracts.฀Under฀a฀buy/sell฀contract,฀a฀company฀agrees฀
to฀buy฀a฀specific฀quantity฀and฀quality฀of฀a฀commodity฀to฀be฀deliv-
ered฀at฀a฀specific฀location฀while฀simultaneously฀agreeing฀to฀sell฀
a฀specified฀quantity฀and฀quality฀of฀a฀commodity฀at฀a฀different฀
location฀to฀the฀same฀counterparty.฀Physical฀delivery฀occurs฀for฀
each฀side฀of฀the฀transaction,฀and฀the฀risk฀and฀reward฀of฀owner-
ship฀are฀evidenced฀by฀title฀transfer,฀assumption฀of฀environmental฀
risk,฀transportation฀scheduling,฀credit฀risk,฀and฀risk฀of฀nonper-
formance฀by฀the฀counterparty.฀Both฀parties฀settle฀each฀side฀of฀the฀
buy/sell฀through฀separate฀invoicing.
The฀company฀routinely฀has฀buy/sell฀contracts,฀primarily฀in฀
the฀United฀States฀downstream฀business,฀associated฀with฀crude฀
oil฀and฀refined฀products.฀For฀crude฀oil,฀these฀contracts฀are฀used฀
to฀facilitate฀the฀company’s฀crude฀oil฀marketing฀activity,฀which฀
includes฀the฀purchase฀and฀sale฀of฀crude฀oil฀production,฀fulfill-
ment฀of฀the฀company’s฀supply฀arrangements฀as฀to฀physical฀delivery฀
location฀and฀crude฀oil฀specifications,฀and฀purchase฀of฀crude฀oil฀
to฀supply฀the฀company’s฀refining฀system.฀For฀refined฀products,฀
buy/sell฀arrangements฀are฀used฀to฀help฀fulfill฀the฀company’s฀supply฀
agreements฀to฀customer฀locations฀and฀specifications.
The฀company฀accounts฀for฀buy/sell฀transactions฀in฀the฀
Consolidated฀Statement฀of฀Income฀the฀same฀as฀any฀other฀mon-
etary฀transaction฀for฀which฀title฀passes,฀and฀the฀risk฀and฀reward฀