Chevron 2012 Annual Report Download - page 40

38 Chevron Corporation 2012 Annual Report
mineral-producing properties, a liability for an ARO is made
in accordance with accounting standards for asset retirement
and environmental obligations. Refer to Note 23, on
page 66, 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.
e 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 e U.S. dollar is the functional
currency 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 remeasurement are
included in current period income. e cumulative trans-
lation eects 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, 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 using 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. e associated
amounts are shown as a footnote to the Consolidated State-
ment of Income, on page 31. 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 e
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. e
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 rst, second and third anniversaries of the date of grant.
e company amortizes these graded awards on a straight-
line basis.
Note 2
Noncontrolling Interests
Ownership interests in the company’s subsidiaries held by
parties other than the parent are presented separately from
the parent’s equity on the Consolidated Balance Sheet. e
amount of consolidated net income attributable to the par-
ent and the noncontrolling interests are both presented on
the face of the Consolidated Statement of Income. e term
“earnings” is dened as “Net Income Attributable to Chevron
Corporation.”
Activity for the equity attributable to noncontrolling
interests for 2012, 2011 and 2010 is as follows:
2012 2011 2010
Balance at January 1 $ 799 $ 730 $ 647
Net income 157 113 112
Distributions to noncontrolling interests (41) (71) (72)
Other changes, net* 393 27 43
Balance at December 31 $ 1,308 $ 799 $ 730
* Includes components of comprehensive income, which are disclosed separately in the
Consolidated Statement of Comprehensive Income.
Note 1 Summary of Significant Accounting Policies – Continued
Notes to the Consolidated Financial Statements
Millions of dollars, except per-share amounts