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Summary of Accounting Policies | 12 Months Ended
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Dec. 31, 2018
Accounting Policies [Abstract] |
Summary of Accounting Policies | 2. Summary of Accounting Policies The Consolidated Financial Statements of Schlumberger have been prepared in accordance with accounting principles generally accepted in the United States of America. Use of Estimates The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. On an ongoing basis, Schlumberger evaluates its estimates, including those related to collectibility of accounts receivable; revenue recognized for certain long-term construction-type contracts over time; recoverability of fixed assets, goodwill, intangible assets, Schlumberger Production Management investments and investments in affiliates; income taxes; multiclient seismic data; contingencies and actuarial assumptions for employee benefit plans. Schlumberger bases its estimates on historical experience and other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Revenue Recognition In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers. This ASU amended the existing accounting standards for revenue recognition and requires companies to recognize revenue when control of the promised goods or services is transferred to a customer at an amount that reflects the consideration a company expects to receive in exchange for those goods or services. Schlumberger adopted this ASU on January 1, 2018 using the modified retrospective transition method applied to those contracts which were not completed as of January 1, 2018. Prior period amounts have not been adjusted and continue to be reflected in accordance with Schlumberger’s historical accounting. The adoption of this ASU did not have a material impact on Schlumberger’s Consolidated Financial Statements. Schlumberger recognizes revenue upon the transfer of control of promised products or services to customers at an amount that reflects the consideration it expects to receive in exchange for these products or services. The vast majority of Schlumberger’s services and product offerings are short-term in nature. The time between invoicing and when payment is due under these arrangements is generally between 30 to 60 days. Revenue is occasionally generated from contractual arrangements that include multiple performance obligations. Revenue from these arrangements is allocated to each performance obligation based on its relative standalone selling price. Standalone selling prices are generally determined based on the prices charged to customers or using expected costs plus margin. Revenue is recognized for certain long-term construction-type contracts over time. These contracts involve significant design and engineering efforts in order to satisfy custom designs for customer-specific applications. Revenue is recognized as work progresses on each contract. Progress is measured by the ratio of actual costs incurred to date on the project in relation to total estimated project costs. The estimate of total project costs has a significant impact on both the amount of revenue recognized as well as the related profit on a project. Revenue and profits on contracts can also be significantly affected by change orders and claims. Due to the nature of these projects, adjustments to estimates of contract revenue and total contract costs may be required as work progresses. Progress billings are generally issued upon completion of certain phases of work as stipulated in the contract. Any expected losses on a project are recorded in full in the period in which they become probable. Due to the nature of its businesses, Schlumberger does not have significant backlog. Total backlog was $2.7 billion at December 31, 2018, of which approximately 50% is expected to be recognized as revenue during 2019. Short-term Investments Short-term investments are comprised primarily of money market funds, time deposits, certificates of deposit, commercial paper, bonds and notes, substantially all of which are denominated in US dollars and are stated at cost plus accrued interest, which approximates fair value. For purposes of the Consolidated Statement of Cash Flows, Schlumberger does not consider Short-term investments to be cash equivalents. Investments in Affiliated Companies Investments in companies in which Schlumberger does not have a controlling financial interest, but over which it has significant influence, are accounted for using the equity method. Schlumberger’s share of the after-tax earnings of equity method investees is included in Interest and other income. Investments in privately held companies in which Schlumberger does not have the ability to exercise significant influence are accounted for using the cost method. Equity and cost method investments are classified as Investments in Affiliated Companies in the Consolidated Balance Sheet. Multiclient Seismic Data Schlumberger’s multiclient library consists of completed and in-process seismic surveys that are licensed on a nonexclusive basis. Schlumberger capitalizes costs directly incurred in acquiring and processing the multiclient seismic data. Such costs are charged to Cost of services based on the percentage of the total costs to the estimated total revenue that Schlumberger expects to receive from the sales of such data. However, under no circumstance will an individual survey carry a net book value greater than a 4-year, straight-line amortized value. The carrying value of the multiclient library is reviewed for impairment annually as well as when an event or change in circumstance indicating impairment may have occurred. Adjustments to the carrying value are recorded when it is determined that estimated future cash flows, which involve significant judgment on the part of Schlumberger, would not be sufficient to recover the carrying value of the surveys. Significant adverse changes in Schlumberger’s estimated future cash flows could result in impairment charges in a future period. Schlumberger Production Management Schlumberger Production Management (“SPM”) projects are focused on developing and managing production on behalf of Schlumberger’s clients under long-term agreements. Schlumberger will invest its own services and products, and in some cases cash, into the field development activities and operations. Although in certain arrangements Schlumberger is paid for a portion of the services or products it provides, generally Schlumberger will not be paid at the time of providing its services or upon delivery of its products. Instead, Schlumberger is compensated based upon cash flow generated or on a fee-per-barrel basis. This includes certain arrangements whereby Schlumberger is only compensated based upon incremental production it helps deliver above a mutually agreed baseline. Revenue from SPM arrangements, which is recognized as the related production is achieved, represented less than 5% of Schlumberger’s consolidated revenue during each of 2018, 2017 and 2016. Schlumberger capitalizes its cash investments in a project as well as the direct costs associated with providing services or products for which Schlumberger will be compensated when the related production is achieved. These capitalized investments are amortized to the Consolidated Statement of Income (Loss) as the related production is achieved based on the units of production method, whereby each unit produced is assigned a pro-rata portion of the unamortized costs based on estimated total production, resulting in a matching of revenue with the applicable costs. Amortization expense relating to these capitalized investments was $568 million, $465 million and $449 million in 2018, 2017 and 2016, respectively. The unamortized portion of Schlumberger’s investments in SPM projects was $4.201 billion and $4.065 billion at December 31, 2018 and 2017, respectively. These amounts are included within Other Assets in Schlumberger’s Consolidated Balance Sheet. Concentration of Credit Risk Schlumberger’s assets that are exposed to concentrations of credit risk consist primarily of cash, short-term investments, receivables from clients and derivative financial instruments. Schlumberger places its cash and short-term investments with financial institutions and corporations and limits the amount of credit exposure with any one of them. Schlumberger regularly evaluates the creditworthiness of the issuers in which it invests. By using derivative financial instruments to hedge certain exposures, Schlumberger exposes itself to some credit risk. Schlumberger minimizes this credit risk by entering into transactions with high-quality counterparties, limiting the exposure to each counterparty and monitoring the financial condition of its counterparties. Schlumberger operates in more than 85 countries and as such, its accounts receivable are spread over many countries and customers. Accounts receivable in the United States represented 22% of Schlumberger’s accounts receivable balance at December 31, 2018. No other country accounted for greater than 10% of Schlumberger’s accounts receivable balance. Earnings per Share The following is a reconciliation from basic to diluted earnings (loss) per share of Schlumberger for each of the last three years:
(Stated in millions, except per share amounts) |
|  | Net Income (Loss) Attributable to Schlumberger |  |  | Average Shares Outstanding |  |  | Earnings (Loss) per Share |
2018: |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | 2,138 |  |  |  | 1,385 |  |  | $ | 1.54 |
Assumed exercise of stock options |  |  | - |  |  |  | - |  |  |  |  |
Unvested restricted stock |  |  | - |  |  |  | 8 |  |  |  |  |
Diluted |  | $ | 2,138 |  |  |  | 1,393 |  |  | $ | 1.53 |
2017: |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | (1,505 | ) |  |  | 1,388 |  |  | $ | (1.08 | )
Assumed exercise of stock options |  |  | - |  |  |  | - |  |  |  |  |
Unvested restricted stock |  |  | - |  |  |  | - |  |  |  |  |
Diluted |  | $ | (1,505 | ) |  |  | 1,388 |  |  | $ | (1.08 | )
2016: |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | (1,687 | ) |  |  | 1,357 |  |  | $ | (1.24 | )
Assumed exercise of stock options |  |  | - |  |  |  | - |  |  |  |  |
Unvested restricted stock |  |  | - |  |  |  | - |  |  |  |  |
Diluted |  | $ | (1,687 | ) |  |  | 1,357 |  |  | $ | (1.24 | )
The number of outstanding employee stock options to purchase shares of Schlumberger common stock and unvested restricted stock units that were not included in the computation of diluted earnings/loss per share, because to do so would have had an anti-dilutive effect, were as follows:
(Stated in millions) |
| 2018 |  |  | 2017 |  |  | 2016 |
Employee stock options |  | 40 |  |  |  | 47 |  |  |  | 47 |
Unvested restricted stock |  | - |  |  |  | 5 |  |  |  | 5 |

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