Chevron 2004 Annual Report Download - page 68
Download and view the complete annual report
Please find page 68 of the 2004 Chevron annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.
Year ended December 31
2003 2002
Taxes on income1
U.S. federal
Current $ 1,133 $ (80)
Deferred2 121 (414)
State and local 133 21
Total United States 1,387 (473)
International
Current 3,864 3,138
Deferred2 43 333
Total International 3,907 3,471
Total taxes on income $ 5,294 $ 2,998
1 Excludes income tax expense of $100, $50 and $26 related to discontinued opera-
tions for 2004, 2003 and 2002, respectively.
2 Excludes a U.S. deferred tax benefit of $191 and a foreign deferred tax expense of
$170 associated with the adoption of FAS 143 in 2003 and the related cumulative
effect of changes in accounting method in 2003.
In2004,thebefore-taxincomeforU.S.operations,including
relatedcorporateandothercharges,was$7,776,comparedwitha
before-taxincomeof$5,664in2003andabefore-taxlossof$2,162
in2002.Forinternationaloperations,before-taxincomewas
$12,775,$7,012and$6,262in2004,2003and2002,respectively.
U.S.federalincometaxexpensewasreducedby$176,$196and
$208in2004,2003and2002,respectively,forbusinesstaxcredits.
Thecompany’seffectiveincometaxratevariedfromthe
U.S.statutoryfederalincometaxratebecauseofthefollowing:
Year ended December 31
2003 2002
U.S. statutory federal income tax rate 35.0% 35.0%
Effect of income taxes from inter-
national operations in excess of
taxes at the U.S. statutory rate 12.8 29.9
State and local taxes on income, net
of U.S. federal income tax benefit 0.5 1.1
Prior-year tax adjustments (1.6) (7.1)
Tax credits (1.5) (5.1)
Effects of enacted changes in tax laws 0.3 2.0
Impairment of investments in
equity affiliates – 12.6
Capital loss tax benefit (0.8) –
Other (1.9) –
Consolidated companies 42.8 68.4
Effect of recording income from
certain equity affiliates on an
after-tax basis (1.0) 4.7
Effective tax rate 41.8% 73.1%
Internationaltaxesin2004werereducedbyapproximately
$129relatedtochangesinincometaxlaws.Thecompanyrecords
itsdeferredtaxesonatax-jurisdictionbasisandclassifiesthosenet
amountsascurrentornoncurrentbasedonthebalancesheetclas-
sificationoftherelatedassetsorliabilities.
companyalsoviewsnettingtheseparatecomponentsofbuy/sell
contractsintheincomestatementtobeinconsistentwiththe
grosspresentationthatFIN39requiresfortheresultingreceiv-
ableandpayableonthebalancesheet.
Thecompany’sbuy/selltransactionsarealsosimilarto
the“barrelback”exampleusedinotheraccountingliterature,
includingEITFIssueNo.03-11,“ReportingRealizedGainsand
LossesonDerivativeInstrumentsThatAreSubjecttoFASBState-
mentNo.133andNot‘HeldforTradingPurposes’asDefined
inIssueNo.02-3”(whichindicatesacompany’sdecisionto
showbuy/sell-typesoftransactionsgrossontheincomestate-
mentasbeingamatterofjudgmentoftherelevantfactsand
circumstancesofthecompany’sactivities)andDerivatives
ImplementationGroup(DIG)IssueNo.K1,“Miscellaneous:
DeterminingWhetherSeparateTransactionsShouldbeViewed
asaUnit.”
Thecompanyfurthernotesthattheaccountingforbuy/sell
contractsasseparatepurchasesandsalesisincontrasttothe
accountingforothertypesofcontractstypicallydescribedby
theindustryasexchangecontracts,whichareconsiderednon-
monetaryinnatureandappropriatelyshownnetontheincome
statement.Underanexchangecontract,forexample,onecom-
panyagreestoexchangerefinedproductsinonelocationfor
anothercompany’ssamequantityofrefinedproductsinanother
location.Upontransfer,theonlyamountsthatmaybeinvoiced
arefortransportationandqualitydifferentials.Amongother
things,unlikebuy/sellcontracts,theobligationsofeachparty
toperformunderthecontractarenotindependentandtherisks
andrewardsofownershiparenotseparatelytransferred.
Asshownonthecompany’sConsolidatedStatementof
Income,“Salesandotheroperatingrevenues”forthethreeyears
endingDecember31,2004,included$18,650,$14,246and$7,963,
respectively,forbuy/sellcontracts.Thecostsassociatedwiththese
buy/sellrevenueamountsareincludedin“Purchasedcrudeoiland
products”ontheConsolidatedStatementofIncomeineachperiod.
66 CHEVRONTEXACO CORPORATION 2004 ANNUAL REPORT
Notes to the Consolidated Financial Statements
Millionsofdollars,exceptper-shareamounts
ACCOUNTING FOR BUY/SELL CONTRACTS – Continued