Chevron 2009 Annual Report Download - page 43

Chevron Corporation 2009 Annual Report 41
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following accounting standards for asset retirement and envi-
ronmental obligations. Refer to Note 23, on page 67, for
a discussion of the company’s AROs.
For federal Superfund sites and analogous sites under
state laws, the company records a liability for its designated
share of the probable and estimable costs and probable
amounts for other potentially responsible parties when man-
dated by the regulatory agencies because the other parties are
not able to pay their respective shares.
The gross amount of environmental liabilities is based
on the company’s best estimate of future costs using currently
available technology and applying current regulations and
the company’s own internal environmental policies. Future
amounts are not discounted. Recoveries or reimbursements
are recorded as assets when receipt is reasonably assured.
Currency Translation The U.S. dollar is the functional cur-
rency for substantially all of the company’s consolidated
operations and those of its equity affiliates. For those opera-
tions, all gains and losses from currency translations are
currently included in income. The cumulative translation
effects for those few entities, both consolidated and affiliated,
using functional currencies other than the U.S. dollar are
included in “Currency translation adjustment” on the
Consolidated Statement of Equity.
Revenue Recognition Revenues associated with sales of crude
oil, natural gas, coal, petroleum and chemicals products,
and all other sources are recorded when title passes to the
customer, net of royalties, discounts and allowances, as
applicable. Revenues from natural gas production from prop-
erties in which Chevron has an interest with other producers
are generally recognized on the entitle ment method. Excise,
value-added and similar taxes assessed by a governmental
authority on a revenue- producing transaction between a seller
and a customer are presented on a gross basis. The associated
amounts are shown as a footnote to the Consolidated State-
ment of Income on page 34 Purchases and sales of
inventory with the same counterparty that are entered into
in contemplation of one another (including buy/sell arrange-
ments) are combined and recorded on a net basis and reported
in “Purchased crude oil and products” on the Consolidated
Statement of Income.
Stock Options and Other Share-Based Compensation The
company issues stock options and other share-based compen-
sation to its employees and accounts for these transactions
under the accounting standards for share-based compensa-
tion (ASC 718). For equity awards, such as stock options,
total compensation cost is based on the grant date fair value
and for liability awards, such as stock appreciation rights,
total compensation cost is based on the settlement value. The
company recognizes stock-based compensation expense for
all awards over the service period required to earn the award,
which is the shorter of the vesting period or the time period
an employee becomes eligible to retain the award at retire-
ment. Stock options and stock appreciation rights granted
under the company’s Long-Term Incentive Plan have graded
vesting provisions by which one-third of each award vests on
the first, second and third anniversaries of the date of grant.
The company amortizes these graded awards on a straight-
line basis.
Note 2
Noncontrolling Interests
The company adopted accounting standards for noncon-
trolling interests (ASC 810) in the consolidated financial
statements effective January 1, 2009, and retroactive to the
earliest period presented. Ownership interests in the com-
pany’s subsidiaries held by parties other than the parent are
presented separately from the parent’s equity on the Consoli-
dated Balance Sheet. The amount of consolidated net income
attributable to the parent and the noncontrolling interests
are both presented on the face of the Consolidated Statement
of Income. The term “earnings” is defined as “Net Income
Attributable to Chevron Corporation.”
Activity for the equity attributable to noncontrolling
interests for 2009, 2008 and 2007 is as follows:
2009 2008 2007
Balance at January 1 $ 469 $ 204 $ 209
Net income 80 100 107
Distributions to noncontrolling interests (71) (99) (77)
Other changes, net 169 264 (35)
Balance at December 31 $ 647 $ 469 $ 204
Note 3
Equity
Retained earnings at December 31, 2009 and 2008, included
approximately $8,122 and $7,951, respectively, for the com-
pany’s share of undistributed earnings of equity affiliates.
At December 31, 2009, about 94 million shares of
Chevron’s common stock remained available for issuance from
the 160 million shares that were reserved for issuance under
the Chevron Corporation Long-Term Incentive Plan (LTIP).
In addition, approximately 342,000 shares remain available
for issuance from the 800,000 shares of the company’s com-
mon stock that were reserved for awards under the Chevron
Corporation Non-Employee Directors’ Equity Compensation
and Deferral Plan (Non-Employee Directors’ Plan).
Note 1 Summary of Significant Accounting Policies – Continued