Chevron 2014 Annual Report Download - page 40

Notes to the Consolidated Financial Statements
Millions of dollars, except per-share amounts
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 mandated 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 currency for substantially all of the company’s consolidated
operations and those of its equity affiliates. For those operations, all gains and losses from currency remeasurement are
included in current period 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, 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 properties in which Chevron has an interest with other producers are generally
recognized using the entitlement 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 Statement 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 arrangements) 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
compensation to certain employees. 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
retirement. 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
Changes in Accumulated Other Comprehensive Losses
The change in Accumulated Other Comprehensive Losses (AOCL) presented on the Consolidated Balance Sheet and the
impact of significant amounts reclassified from AOCL on information presented in the Consolidated Statement of Income for
the year ending December 31, 2014, are reflected in the table below.
Year Ended December 31, 20141
Currency
Translation
Adjustment
Unrealized
Holding Gains
(Losses) on
Securities Derivatives
Defined
Benefit Plans Total
Balance at January 1 $ (23) $ (6) $ 52 $ (3,602) $ (3,579)
Components of Other Comprehensive Income (Loss):
Before Reclassifications (73) (2) (43) (1,689) (1,807)
Reclassifications2— — (11) 538 527
Net Other Comprehensive Income (Loss) (73) (2) (54) (1,151) (1,280)
Balance at December 31 $ (96) $ (8) $ (2) $ (4,753) $ (4,859)
1All amounts are net of tax.
2Refer to Note 22, Employee Benefit Plans for reclassified components totaling $783 that are included in employee benefit costs for the year ending December 31, 2014. Related
income taxes for the same period, totaling $245, are reflected in Income Tax Expense on the Consolidated Statement of Income. All other reclassified amounts were
insignificant.
38 Chevron Corporation 2014 Annual Report