Hess 2014 Annual Report Download - page 74

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59
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
59
Fair value measurements based on Level 3 inputs: Measurements that are least observable are estimated from related market
data, determined from sources with little or no market activity for comparable contracts or are positions with longer durations. Fair
values determined using discounted cash flows and other unobservable data are also classified as Level 3.
Share-based Compensation: The fair value of all share-based compensation is recognized as expense on a straight-line basis over
the full vesting period of the awards. The Corporation estimates the fair value of employee stock options at the date of grant using a
Black-Scholes valuation model, performance share units using a Monte Carlo simulation model, and restricted stock based on the
market value of the underlying shares at the date of grant.
Foreign Currency Translation: The U.S. Dollar is the functional currency (primary currency in which business is conducted) for
most foreign operations. Adjustments resulting from translating monetary assets and liabilities that are denominated in a currency
other than the functional currency are recorded in Other, net in the Statement of Consolidated Income. For operations that do not use
the U.S. Dollar as the functional currency, primarily those in Norway where the Norwegian Krone is used, adjustments resulting from
translating foreign currency assets and liabilities into U.S. Dollars are recorded in the Consolidated Balance Sheet in a separate
component of equity titled Accumulated other comprehensive income (loss).
Maintenance and Repairs: Maintenance and repairs are expensed as incurred. Capital improvements are recorded as additions in
Property, plant and equipment.
Environmental Expenditures: The Corporation accrues and expenses the undiscounted environmental costs necessary to
remediate existing conditions related to past operations when the future costs are probable and reasonably estimable. At year-end
2014, the Corporation’s reserve for estimated remediation liabilities was approximately $80 million and was included within accrued
liabilities. Environmental expenditures that increase the life or efficiency of property or reduce or prevent future adverse impacts to
the environment are capitalized.
New Accounting Pronouncements: In April 2014, the Financial Accounting Standards Board (FASB) issued Accounting
Standards Update (ASU) 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. The
ASU amends the criteria for reporting discontinued operations to include only disposals representing a strategic shift in operations.
The ASU also requires expanded disclosures regarding the assets, liabilities, income, and expenses of discontinued operations. This
ASU is effective for the Corporation in the first quarter of 2015 and early adoption is permitted. The Corporation did not elect early
adoption of this ASU and does not expect adoption to have a significant impact on its consolidated financial statements.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, as a new Accounting Standards
Codification (ASC) Topic ASC 606. This ASU is effective for the Corporation beginning in the first quarter of 2017 and early
adoption is not permitted. The Corporation is currently assessing the impact of the ASU on its consolidated financial statements.