Chevron 2012 Annual Report Download - page 44

42 Chevron Corporation 2012 Annual Report
Notes to the Consolidated Financial Statements
Millions of dollars, except per-share amounts
natural gas and rened products. Derivatives classied
as Level 1 include futures, swaps and options contracts
traded in active markets such as the New York Mercantile
Exchange.
Derivatives classied as Level 2 include swaps,
options, and forward contracts principally with nancial
institutions and other oil and gas companies, the fair val-
ues of which are obtained from third-party broker quotes,
industry pricing services and exchanges. e company
obtains multiple sources of pricing information for the
Level 2 instruments. Since this pricing information is
generated from observable market data, it has historically
been very consistent. e company does not materi-
ally adjust this information. e company incorporates
internal review, evaluation and assessment procedures,
including a comparison of Level 2 fair values derived from
the company’s internally developed forward curves (on a
sample basis) with the pricing information to document
reasonable, logical and supportable fair value determina-
tions and proper level of classication.
Properties, plant and equipment e company did not
have any material long-lived assets measured at fair value
on a nonrecurring basis to report in 2012 or 2011.
Investments and advances e company did not have
any material investments and advances measured at fair
value on a nonrecurring basis to report in 2012 or 2011.
Note 8 Fair Value Measurements – Continued
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
At December 31 At December 31
Total Level 1 Level 2 Level 3
Before-Tax
Loss
Year 2012 Total Level 1 Level 2 Level 3
Before-Tax
Loss
Year 2011
Properties, plant and
equipment, net
(held and used) $ 84 $ – $ – $ 84 $ 213 $ 67 $ – $ – $ 67 $ 81
Properties, plant and
equipment, net
(held for sale) 16 – – 16 17 167 – 167 – 54
Investments and advances – – – – 15 – – – – 108
Total Nonrecurring
Assets at Fair Value $ 100 $ – $ – $ 100 $ 245 $ 234 $ – $ 167 $ 67 $ 243
Level 3: Unobservable inputs. e company does not
use Level 3 inputs for any of its recurring fair value
measurements. Level 3 inputs may be required for
the determination of fair value associated with cer-
tain nonrecurring measurements of nonnancial assets
and liabilities.
e table below shows the fair value hierarchy for assets
and liabilities measured at fair value on a recurring basis at
December 31, 2012, and December 31, 2011.
Marketable Securities e company calculates fair value for
its marketable securities based on quoted market prices for
identical assets and liabilities. e fair values reect the cash
that would have been received if the instruments were sold at
December 31, 2012.
Derivatives e company records its derivative instru-
ments – other than any commodity derivative contracts that
are designated as normal purchase and normal sale – on the
Consolidated Balance Sheet at fair value, with the osetting
amount to the Consolidated Statement of Income. For deriv-
atives with identical or similar provisions as contracts that
are publicly traded on a regular basis, the company uses the
market values of the publicly traded instruments as an input
for fair value calculations.
e company’s derivative instruments principally include
futures, swaps, options and forward contracts for crude oil,
Assets and Liabilities Measured at Fair Value on a Recurring Basis
At December 31, 2012 At December 31, 2011
Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3
Marketable securities $ 266 $ 266 $ – $ – $ 249 $ 249 $ – $ –
Derivatives 86 21 65 – 208 104 104 –
Total Assets at Fair Value $ 352 $ 287 $ 65 $ – $ 457 $ 353 $ 104 $ –
Derivatives 149 148 1 – 102 101 1 –
Total Liabilities at Fair Value $ 149 $ 148 $ 1 $ – $ 102 $ 101 $ 1 $ –