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Note 18
New Accounting Standards
Fair Value Measurement (Topic 820), Amendments to Achieve
Common Fair Value Measurement and Disclosure Requirements
in U.S. GAAP and IFRS (ASU 2011-04) In May 2011, the
FASB issued ASU 2011-04, which becomes eective for the
company on January 1, 2012. e amendments in ASU
2011-04 result in common fair value measurement and dis-
closure requirements in U.S. GAAP and IFRS. As a result of
these amendments, the requirements in U.S. GAAP for
measuring fair value and for disclosing information about
fair value measurements were changed. e company does
not anticipate changes to its existing classication and mea-
surement of fair value when the amended standard becomes
eective. However, the company’s disclosures on certain
items not required to be measured at fair value are expected
to be expanded when the amended standard becomes eec-
tive.
Comprehensive Income (Topic 220) Presentation of Com-
prehensive Income (ASU 2011-05) e FASB issued ASU
2011-05 in June 2011. is standard becomes eective for the
company on January 1, 2012. ASU 2011-05 changes the pre-
sentation requirements for comprehensive income. Adoption
of the standard is not expected to have a signicant impact
on the company’s current nancial statement presentation.
Intangibles—Goodwill and Other (Topic 350) Testing
Goodwill for Impairment (ASU 2011-08) In September 2011,
the FASB issued ASU 2011-08, which becomes eective for
the company on January 1, 2012. e standard simplies
how companies test goodwill for impairment. e company
does not anticipate any impact to its results of operations,
nancial position or liquidity when the guidance becomes
eective.
Note 19
Accounting for Suspended Exploratory Wells
Accounting standards for the costs of exploratory wells (ASC
932) provide that exploratory well costs continue to be capi-
talized after the completion of drilling when (a) the well has
found a sucient quantity of reserves to justify completion
as a producing well and (b) the entity is making sucient
progress assessing the reserves and the economic and operat-
ing viability of the project. If either condition is not met or
if an enterprise obtains information that raises substantial
doubt about the economic or operational viability of the proj-
ect, the exploratory well would be assumed to be impaired,
and its costs, net of any salvage value, would be charged to
expense. (Note that an entity is not required to complete the
exploratory well as a producing well.) e accounting stan-
dards provide a number of indicators that can assist an entity
in demonstrating that sucient progress is being made in
assessing the reserves and economic viability of the project.
e following table indicates the changes to the company’s
suspended exploratory well costs for the three years ended
December 31, 2011:
2011 2010 2009
Beginning balance at January 1 $ 2,718 $ 2,435 $ 2,118
Additions to capitalized exploratory
well costs pending the
determination of proved reserves 652 482 663
Reclassications to wells, facilities
and equipment based on the
determination of proved reserves (828) (129) (174)
Capitalized exploratory well costs
charged to expense (45) (70) (172)
Other reductions* (63) – –
Ending balance at December 31 $ 2,434 $ 2,718 $ 2,435
*Represents property sales.
e following table provides an aging of capitalized well
costs and the number of projects for which exploratory well
costs have been capitalized for a period greater than one year
since the completion of drilling.
At December 31
2011 2010 2009
Exploratory well costs capitalized
for a period of one year or less $ 557 $ 419 $ 564
Exploratory well costs capitalized
for a period greater than one year 1,877 2,299 1,871
Balance at December 31 $ 2,434 $ 2,718 $ 2,435
Number of projects with exploratory
well costs that have been capitalized
for a period greater than one year* 47 53 46
* Certain projects have multiple wells or elds or both.
Of the $1,877 of exploratory well costs capitalized for
more than one year at December 31, 2011, $939 (26 proj-
ects) is related to projects that had drilling activities under
way or rmly planned for the near future. e $938 balance
is related to 21 projects in areas requiring a major capital
expenditure before production could begin and for which
additional drilling eorts were not under way or rmly
planned for the near future. Additional drilling was not
deemed necessary because the presence of hydrocarbons had
already been established, and other activities were in process
to enable a future decision on project development.
e projects for the $938 referenced above had the fol-
lowing activities associated with assessing the reserves and the
projects’ economic viability: (a) $322 (six projects) – devel-
opment alternatives under review; (b) $283 (ve projects)
– development concept under review by government; (c) $208
(seven projects) – undergoing front-end engineering and
design with nal investment decision expected within three
years; (d) $111 (one project) – project sanction approved and