Exxon 2011 Annual Report Download - page 41

SUMMARY OF ACCOUNTING POLICIES AND PRACTICES
The Corporation’s accounting and financial reporting fairly reflect its straightforward business model involving the extracting, refining, and marketing of hydrocarbons and
hydrocarbon-based products. The preparation of financial statements in conformity with U.S. Generally Accepted Accounting Principles (GAAP) requires management to
make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and the disclosure of contingent assets and liabilities. Actual
results could differ from these estimates.
The summary financial statements include the accounts of those subsidiaries the Corporation controls. They also include the Corporation’s share of the undivided interest
in certain Upstream assets and liabilities. Amounts representing the Corporation’s percentage interest in the net assets and net income of the less-than-majority-owned
companies are included in “Investments, advances, and long-term receivables” on the Balance Sheet and “Income from equity affiliates” on the Income Statement.
The “functional currency” for translating the accounts of the majority of Downstream and Chemical operations outside the United States is the local currency. The
local currency is also used for Upstream operations that are relatively self-contained and integrated within a particular country. The U.S. dollar is used for operations in
countries with a history of high inflation and certain other countries.
Revenues associated with sales of crude oil, natural gas, petroleum and chemical products are recognized when the products are delivered and title passes
to the customer.
Inventories of crude oil, products, and merchandise are carried at the lower of current market value or cost (generally determined under the last-in, first-out method –
LIFO). Inventories of materials and supplies are valued at cost or less.
The Corporation makes limited use of derivative instruments. When derivatives are used, they are recorded at fair value, and gains and losses arising from changes in
their fair value are recognized in earnings.
The Corporation’s exploration and production activities are accounted for under the “successful efforts” method. Depreciation, depletion, and amortization are primarily
determined under either the unit-of-production method or the straight-line method. Unit-of-production rates are based on the amount of proved developed reserves of
oil, gas, and other minerals that are estimated to be recoverable from existing facilities. The straight-line method is based on estimated asset service life.
The Corporation incurs retirement obligations for certain assets at the time they are installed. The fair values of these obligations are recorded as liabilities on a
discounted basis and are accreted over time for the change in their present value. The costs associated with these liabilities are capitalized as part of the related assets
and depreciated. Liabilities for environmental costs are recorded when it is probable that obligations have been incurred and the amounts can be reasonably estimated.
The Corporation recognizes the underfunded or overfunded status of defined benefit pension and other postretirement plans as a liability or asset in the balance sheet
with the offset in equity, net of deferred taxes.
A variety of claims have been made against ExxonMobil and certain of its consolidated subsidiaries in a number of pending lawsuits and tax disputes. For further
information on litigation and tax contingencies, see Notes 15 and 18 to the Consolidated Financial Statements in ExxonMobil’s 2011 Financial Statements and
Supplemental Information booklet.
The Corporation awards share-based compensation to employees in the form of restricted stock and restricted stock units. Compensation expense is measured
by the market price of the restricted shares at the date of grant and is recognized in the income statement over the requisite service period of each award.
Further information on the Corporation’s accounting policies, estimates, and practices can be found in ExxonMobil’s 2011 Financial Statements and Supplemental
Information booklet (Critical Accounting Estimates and Note 1 to the Consolidated Financial Statements).
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To The Shareholders of Exxon Mobil Corporation:
We have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the Consolidated Balance Sheets of Exxon Mobil Corporation and its subsidiaries as of December 31, 2011 and 2010, and the related
Consolidated Statements of Income, Comprehensive Income, Changes in Equity and Cash Flows for each of the three years in the period ended
December 31, 2011, and in our report dated February 24, 2012, we expressed an unqualified opinion thereon. The consolidated financial statements
referred to above (not presented herein) appear in ExxonMobil’s 2011 Financial Statements and Supplemental Information booklet.
In our opinion, the information set forth in the accompanying condensed consolidated financial statements (pages 41-43) is fairly stated,
in all material respects, in relation to the consolidated financial statements from which it has been derived.
Dallas, Texas
February 24, 2012
Financial Information
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