Chevron 2004 Annual Report Download - page 80
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Please find page 80 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.78 CHEVRONTEXACO CORPORATION 2004 ANNUAL REPORT
Inthefirstquarter2003,thecompanyrecordedanetafter-
taxchargeof$200forthecumulativeeffectoftheadoptionof
FAS143,includingthecompany’sshareofamountsattributableto
equityaffiliates.Thecumulative-effectadjustmentalsoincreased
thefollowingbalancesheetcategories:“Properties,plantand
equipment,”$2,568;“Accruedliabilities,”$115;and“Deferred
creditsandothernoncurrentobligations,”$2,674.“Noncurrent
deferredincometaxes”decreasedby$21.
Uponadoption,nosignificantassetretirementobligations
associatedwithanylegalobligationstoretirerefining,market-
ingandtransportation(downstream)andchemicallong-lived
assetsgenerallywererecognized,asindeterminatesettlement
datesfortheassetretirementspreventedestimationofthefair
valueoftheassociatedARO.Thecompanyperformsperiodic
reviewsofitsdownstreamandchemicallong-livedassetsforany
changesinfactsandcircumstancesthatmightrequirerecognition
ofaretirementobligation.
Otherthanthecumulative-effectnetcharge,theeffectof
thenewaccountingstandardonnetincomein2003wasnot
materiallydifferentfromwhattheresultwouldhavebeenunder
FAS19accounting.Includedin“Depreciation,depletionand
amortization”were$52relatedtothedepreciationoftheARO
assetand$132relatedtotheaccretionoftheAROliability.
Thefollowingtableillustrateswhatthecompany’snetincome
beforeextraordinaryitems,netincomeandrelatedper-share
amountswouldhavebeeniftheprovisionsofFAS143hadbeen
appliedretroactively:
Year Ended December 31
2003 2002
Pro forma net income before
extraordinary items $ 7,4301 $ 1,1372
Earnings per share – basic3 $ 3.57 $ 0.53
Earnings per share – diluted3 $ 3.57 $ 0.53
Pro forma net income $ 7,4301 $ 1,1372
Earnings per share – basic4 $ 3.57 $ 0.53
Earnings per share – diluted4 $ 3.57 $ 0.53
1 Excludes cumulative-effect charge of $200 ($0.09 per basic and diluted share) for the
adoption of FAS 143.
2 Includes benefit of $5 that represents the reversal of FAS 19 depreciation related to
abandonment offset partially by pro forma expenses for the depreciation and accre-
tion of the ARO asset and liability, net of tax. There is a de minimis effect to net
income per basic or diluted share.
3 Reported net income before extraordinary items was also $3.57 per basic and diluted
shares for 2003 and $0.53 per basic and diluted shares for 2002.
4 Reported net income was $3.48 per basic and diluted shares for 2003 and $0.53 per
basic and diluted shares for 2002.
Notes to the Consolidated Financial Statements
Millionsofdollars,exceptper-shareamounts
FAS 143 – ASSET RETIREMENT OBLIGATIONS – Continued
PriortotheimplementationofFAS143,thecompanyhad
recordedaprovisionforabandonmentthatwaspartof“Accu-
mulateddepreciation,depletionandamortization.”Upon
implementationofFAS143,theprovisionforabandonmentwas
reversed,andAROliabilitywasrecorded.Theamountofthe
abandonmentreserveattheendof2002was$2,263.The2002
pro-formaAROliabilityatJanuary1andDecember31was
$2,792and$2,797,respectively.
Thefollowingtableindicatesthechangestothecompany’s
before-taxassetretirementobligationsin2004and2003:
2003
Balance at January 1 $ 2,797*
Liabilities incurred 14
Liabilities settled (128)
Accretion expense 132
Revisions in estimated cash flows 41
Balance at December 31 $ 2,856
*Includes the cumulative effect of the accounting change.
Basicearningspershare(EPS)isbaseduponnetincomeless
preferredstockdividendrequirementsandincludestheeffects
ofdeferralsofsalaryandothercompensationawardsthatare
investedinChevronTexacostockunitsbycertainofficersand
employeesofthecompanyandthecompany’sshareofstock
transactionsofaffiliates,which,undertheapplicableaccounting
rules,mayberecordeddirectlytothecompany’sretainedearn-
ingsinsteadofnetincome.DilutedEPSincludestheeffectsof
theseitemsaswellasthedilutiveeffectsofoutstandingstock
optionsawardedunderthecompany’sstockoptionprograms
(seeNote23,“StockOptions,”beginningonpage74).Thefollow-
ingtablesetsforththecomputationofbasicanddilutedEPS: