Halliburton 2015 Annual Report Download - page 68

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Allowance for bad debts
We establish an allowance for bad debts through a review of several factors, including historical collection experience,
current aging status of the customer accounts, and financial condition of our customers. Our policy is to write off bad debts
when the customer accounts are determined to be uncollectible.
Property, plant, and equipment
Other than those assets that have been written down to their fair values due to impairment, property, plant, and
equipment are reported at cost less accumulated depreciation, which is generally provided on the straight-line method over the
estimated useful lives of the assets. Accelerated depreciation methods are used for tax purposes, wherever permitted. Upon sale
or retirement of an asset, the related costs and accumulated depreciation are removed from the accounts and any gain or loss is
recognized. Planned major maintenance costs are generally expensed as incurred. Expenditures for additions, modifications,
and conversions are capitalized when they increase the value or extend the useful life of the asset.
Goodwill and other intangible assets
We record as goodwill the excess purchase price over the fair value of the tangible and identifiable intangible assets
acquired. Changes in the carrying amount of goodwill are detailed below by reportable segment.
Millions of dollars
Completion
and Production
Drilling and
Evaluation Total
Balance at December 31, 2013: $ 1,533 $ 635 $ 2,168
Current year acquisitions 77 79 156
Purchase price adjustments for previous acquisitions (4) 10 6
Balance at December 31, 2014: $ 1,606 $ 724 $ 2,330
Current year acquisitions 27 26 53
Purchase price adjustments for previous acquisitions 1 1 2
Allocation to assets held for sale
—
(276) (276)
Balance at December 31, 2015: $ 1,634 $ 475 $ 2,109
As of December 31, 2015, we allocated $276 million of goodwill in the Drilling and Evaluation segment to assets held
for sale. See Note 2 for further information.
The reported amounts of goodwill for each reporting unit are reviewed for impairment on an annual basis, during the
third quarter, and more frequently should negative conditions exist such as significant current or projected operating losses. In
2013, 2014, and 2015, we elected to bypass the qualitative assessment and perform a quantitative impairment test. This two-
step quantitative process, which consists of a discounted cash flow analysis based on management’s short-term and long-term
forecast of operating performance, compares the estimated fair value of each reporting unit to the reporting unit’s carrying
value, including goodwill. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not
considered impaired, and the second step of the impairment test is unnecessary. If the carrying amount of a reporting unit
exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss
to be recorded, if any. As a result of our annual goodwill impairment assessments performed in 2015, 2014, and 2013, we
determined that the fair value of each reporting unit exceeded its net book value and, therefore, no goodwill impairments were
deemed necessary.
In 2015, the energy market continued to experience a considerable downturn as a result of a significant reduction in
crude oil prices, including the period subsequent to our annual goodwill impairment testing date. Due to this pricing decline and
its corresponding impact on our short-term business outlook, we determined that these recent events constituted a triggering
event that would require us to update our goodwill impairment assessment through December 31, 2015. As a result of our
analysis, we determined that the fair value of each reporting unit exceeded its net book value and therefore, no goodwill
impairment was necessary as of December 31, 2015. Should current market conditions worsen or persist for an extended period
of time, an impairment of the carrying value of our goodwill could occur, particularly in our Completion and Production
operating segment.
We amortize other identifiable intangible assets with a finite life on a straight-line basis over the period which the asset
is expected to contribute to our future cash flows, ranging from two to fifteen years. The components of these other intangible
assets generally consist of patents, license agreements, non-compete agreements, trademarks, and customer lists and contracts.
Evaluating impairment of long-lived assets
When events or changes in circumstances indicate that long-lived assets other than goodwill may be impaired, an
evaluation is performed. For an asset classified as held for use, the estimated future undiscounted cash flows associated with the
asset are compared to the asset’s carrying amount to determine if a write-down to fair value is required. When an asset is
classified as held for sale, the asset’s book value is evaluated and adjusted to the lower of its carrying amount or fair value less
cost to sell. In addition, depreciation and amortization is ceased while it is classified as held for sale.