Halliburton 2015 Annual Report Download - page 56

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critical assumptions and estimates used in determining benefit obligations and cost, including demographic factors such as
retirement age, mortality, and turnover, are evaluated periodically and updated accordingly to reflect our actual experience.
Discount rates are determined annually and are based on the prevailing market rate of a portfolio of high-quality debt
instruments with maturities matching the expected timing of the payment of the benefit obligations. Expected long-term rates of
return on plan assets are determined annually and are based on an evaluation of our plan assets and historical trends and
experience, taking into account current and expected market conditions. These assumptions differ based on varying factors
specific to each particular country or economic environment.
The discount rate utilized in 2015 to determine the projected benefit obligation at the measurement date for our United
Kingdom pension plan, which constituted 81% of our international plans’ pension obligations, was 3.90%, compared to a
discount rate of 3.75% utilized in 2014. The expected long-term rate of return assumption used for our United Kingdom
pension plan expense was 6.0% in 2015 and 6.5% in 2014.
The following table illustrates the sensitivity to changes in certain assumptions, holding all other assumptions
constant, for our United Kingdom pension plan.
Effect on
Millions of dollars
Pretax Pension
Expense in 2015
Pension Benefit Obligation
at December 31, 2015
50-basis-point decrease in discount rate $ 2 $ 92
50-basis-point increase in discount rate (2) (80)
50-basis-point decrease in expected long-term rate of return 4 NA
50-basis-point increase in expected long-term rate of return (4) NA
Our international defined benefit plans reduced pretax income by $42 million in 2015, $36 million in 2014, and $32
million in 2013. Included in these amounts was income from expected return on plan assets of $48 million in 2015, $52 million
in 2014, and $44 million in 2013. Actual returns on international plan assets totaled $34 million in 2015, compared to $69
million in 2014. Our net actuarial loss, net of tax, related to international pension plans was $205 million at December 31, 2015
and $298 million at December 31, 2014. In our international plans where employees earn additional benefits for continued
service, actuarial gains and losses will be recognized in operating income over a period of two to 20 years, which represents the
estimated average remaining service of the participant group expected to receive benefits. In our international plans where
benefits are not accrued for continued service, actuarial gains and losses will be recognized in operating income over a period
of 17 to 31 years, which represents the estimated average remaining lifetime of the benefit obligations. These ranges reflect
varying maturity levels among the plans.
During 2015, we made contributions of $18 million to our international defined benefit plans. We expect to make
contributions of approximately $14 million to our international defined benefit plans in 2016.
The actuarial assumptions used in determining our pension benefit obligations may differ materially from actual
results due to changing market and economic conditions, higher or lower withdrawal rates, and longer or shorter life spans of
participants. While we believe that the assumptions used are appropriate, differences in actual experience or changes in
assumptions may materially affect our financial position or results of operations. See Note 15 to the consolidated financial
statements for further information related to defined benefit and other postretirement benefit plans.
Allowance for bad debts
We evaluate our accounts receivable through a continuous process of assessing our portfolio on an individual customer
and overall basis. This process consists of a thorough review of historical collection experience, current aging status of the
customer accounts, financial condition of our customers, and whether the receivables involve retainages. We also consider the
economic environment of our customers, both from a marketplace and geographic perspective, in evaluating the need for an
allowance. Based on our review of these factors, we establish or adjust allowances for specific customers and the accounts
receivable portfolio as a whole. This process involves a high degree of judgment and estimation, and frequently involves
significant dollar amounts. Accordingly, our results of operations can be affected by adjustments to the allowance due to actual
write-offs that differ from estimated amounts. Our estimates of allowances for bad debts have historically been accurate. Over
the last five years, our estimates of allowances for bad debts, as a percentage of notes and accounts receivable before the
allowance, have ranged from 1.6% to 2.7%. At December 31, 2015, allowance for bad debts totaled $145 million, or 2.7% of
notes and accounts receivable before the allowance. At December 31, 2014, allowance for bad debts totaled $137 million, or
1.8% of notes and accounts receivable before the allowance. A hypothetical 100 basis point change in our estimate of the
collectability of our notes and accounts receivable balance as of December 31, 2015 would have resulted in a $53 million
adjustment to 2015 total operating costs and expenses. See Note 5 to the consolidated financial statements for further
information.