Chevron 2014 Annual Report Download - page 67

Notes to the Consolidated Financial Statements
Millions of dollars, except per-share amounts
Employee Savings Investment Plan Eligible employees of Chevron and certain of its subsidiaries participate in the Chevron
Employee Savings Investment Plan (ESIP). Compensation expense for the ESIP totaled $316, $163 and $243 in 2014, 2013
and 2012, respectively. The amounts for ESIP expense in 2013 and 2012 are net of $140 and $43, respectively, which reflect
the value of common stock released from the former leveraged employee stock ownership plan (LESOP). LESOP debt was
retired in 2013, and all remaining shares were released.
Benefit Plan Trusts Prior to its acquisition by Chevron, Texaco established a benefit plan trust for funding obligations under
some of its benefit plans. At year-end 2014, the trust contained 14.2 million shares of Chevron treasury stock. The trust will
sell the shares or use the dividends from the shares to pay benefits only to the extent that the company does not pay such
benefits. The company intends to continue to pay its obligations under the benefit plans. The trustee will vote the shares held
in the trust as instructed by the trust’s beneficiaries. The shares held in the trust are not considered outstanding for earnings-
per-share purposes until distributed or sold by the trust in payment of benefit obligations.
Prior to its acquisition by Chevron, Unocal established various grantor trusts to fund obligations under some of its benefit
plans, including the deferred compensation and supplemental retirement plans. At December 31, 2014 and 2013, trust assets
of $38 and $40, respectively, were invested primarily in interest-earning accounts.
Employee Incentive Plans The Chevron Incentive Plan is an annual cash bonus plan for eligible employees that links awards
to corporate, business unit and individual performance in the prior year. Charges to expense for cash bonuses were $965,
$871 and $898 in 2014, 2013 and 2012, respectively. Chevron also has the LTIP for officers and other regular salaried
employees of the company and its subsidiaries who hold positions of significant responsibility. Awards under the LTIP
consist of stock options and other share-based compensation that are described in Note 21, beginning on page 58.
Note 23
Other Contingencies and Commitments
Income Taxes The company calculates its income tax expense and liabilities quarterly. These liabilities generally are subject
to audit and are not finalized with the individual taxing authorities until several years after the end of the annual period for
which income taxes have been calculated. Refer to Note 16, beginning on page 53, for a discussion of the periods for which
tax returns have been audited for the company’s major tax jurisdictions and a discussion for all tax jurisdictions of the
differences between the amount of tax benefits recognized in the financial statements and the amount taken or expected to be
taken in a tax return.
Settlement of open tax years, as well as other tax issues in countries where the company conducts its businesses, are not
expected to have a material effect on the consolidated financial position or liquidity of the company and, in the opinion of
management, adequate provision has been made for income and franchise taxes for all years under examination or subject to
future examination.
Guarantees The company’s guarantee of $485 is associated with certain payments under a terminal use agreement entered
into by an equity affiliate. Over the approximate 13-year remaining term of the guarantee, the maximum guarantee amount
will be reduced as certain fees are paid by the affiliate. There are numerous cross-indemnity agreements with the affiliate and
the other partners to permit recovery of amounts paid under the guarantee. Chevron has recorded no liability for its obligation
under this guarantee.
Indemnifications In the acquisition of Unocal, the company assumed certain indemnities relating to contingent
environmental liabilities associated with assets that were sold in 1997. The acquirer of those assets shared in certain
environmental remediation costs up to a maximum obligation of $200, which had been reached at December 31, 2009. Under
the indemnification agreement, after reaching the $200 obligation, Chevron is solely responsible until April 2022, when the
indemnification expires. The environmental conditions or events that are subject to these indemnities must have arisen prior
to the sale of the assets in 1997.
Although the company has provided for known obligations under this indemnity that are probable and reasonably estimable,
the amount of additional future costs may be material to results of operations in the period in which they are recognized. The
company does not expect these costs will have a material effect on its consolidated financial position or liquidity.
Long-Term Unconditional Purchase Obligations and Commitments, Including Throughput and Take-or-Pay Agreements
The company and its subsidiaries have certain contingent liabilities with respect to long-term unconditional purchase
obligations and commitments, including throughput and take-or-pay agreements, some of which relate to suppliers’ financing
arrangements. The agreements typically provide goods and services, such as pipeline and storage capacity, drilling rigs,
utilities, and petroleum products, to be used or sold in the ordinary course of the company’s business. The aggregate
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