Chevron 2011 Annual Report Download - page 29

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Chevron Corporation 2011 Annual Report 27
example, the costs from settlement of claims and litigation
can vary from estimates based on diering interpretations
of laws, opinions on culpability and assessments on the
amount of damages. Similarly, liabilities for environmental
remediation are subject to change because of changes in laws,
regulations and their interpretation, the determination of
additional information on the extent and nature of site con-
tamination, and improvements in technology.
Under the accounting rules, a liability is generally
recorded for these types of contingencies if management
determines the loss to be both probable and estimable.
ecompany generally reports these losses as “Operating
expenses” or “Selling, general and administrative expenses”
on the Consolidated Statement of Income. An exception to
this handling is for income tax matters, for which benets are
recognized only if management determines the tax position
is“more likely than not” (i.e., likelihood greater than 50per-
cent) to be allowed by the tax jurisdiction. For additional
discussion of income tax uncertainties, refer to Note 15
beginning on page 51. Refer also to the business segment
discussions elsewhere in this section for the eect on earnings
from losses associated with certain litigation, environmen-
tal remediation and tax matters for the three years ended
December 31, 2011.
An estimate as to the sensitivity to earnings for these
periods if other assumptions had been used in recording
these liabilities is not practicable because of the number of
contingencies that must be assessed, the number of underly-
ing assumptions and the wide range of reasonably possible
outcomes, both in terms of the probability of loss and the
estimates of such loss.
New Accounting Standards
Refer to Note 18, on page 55 in the Notes to Consolidated
Financial Statements, for information regarding new
accounting standards.