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CHEVRON CORPORATION 2005 ANNUAL REPORT 49
NEW ACCOUNTING STANDARDS
FASB Statement No. 151, “Inventory Costs, an Amendment of
ARB No. 43, Chapter 4” (FAS 151) In November 2004, the
FASB issued FAS 151, which became effective for the com-
pany on January 1, 2006. The standard amends the guidance
in Accounting Research Bulletin (ARB) No. 43, Chapter 4,
“Inventory Pricing” to clarify the accounting for abnormal
amounts of idle facility expense, freight, handling costs and
spoilage. In addition, the standard requires that allocation
of fi xed production overheads to the costs of conversion be
based on the normal capacity of the production facilities.
The adoption of this standard will not have an impact on the
company’s results of operations, fi nancial position or liquidity.
EITF Issue No. 04-6, “Accounting for Stripping Costs
Incurred during Production in the Mining Industry” (Issue
04-6) In March 2005, the FASB ratifi ed the earlier EITF
consensus on Issue 04-6, which became effective for the
company on January 1, 2006. Stripping costs are costs of
removing overburden and other waste materials to access
mineral deposits. The consensus calls for stripping costs
incurred once a mine goes into production to be treated
as variable production costs that should be considered a
component of mineral inventory cost subject to ARB No.
43, “Restatement and Revision of Accounting Research
Bulletins.” Adoption of this accounting for its coal, oil sands
and other mining operations will not have a signifi cant effect
on the company’s results of operations, fi nancial position or
liquidity.