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Equity Method Investments and Variable Interest Entities

6 Months Ended

Jun. 30, 2021

Equity Method Investments and Joint Ventures [Abstract]

Equity Method Investments and Variable Interest Entities

Equity Method Investments and Variable Interest Entities

We conduct some of our operations through joint ventures, which operate through partnerships, corporations and undivided interests and other business forms and are principally accounted for using the equity method of accounting. Additionally, the majority of our joint ventures are VIEs.

The following table presents a rollforward of our equity in and advances to unconsolidated affiliates:

			Six Months Ended June 30,						Year Ended December 31,
			2021						2020
Dollars in millions
Beginning balance at January 1,			$	881					$	846
Equity in earnings (losses) of unconsolidated affiliates			(174)						30
Distributions of earnings of unconsolidated affiliates			(26)						(38)
Advances to (payments from) unconsolidated affiliates, net			(10)						(15)
Investments (a)			7						26
Impairment of equity method investments (b)			—						(19)
Foreign currency translation adjustments			(23)						50
Other			7						1
Ending balance			$	662					$	881

(a)Investments include $7 million and $24 million in funding contributions to JKC for the six months ended June 30, 2021, and the year ended December 31, 2020, respectively.

(b)During the year ended December 31, 2020, we recognized an impairment of $13 million associated with our investment in a joint venture project located in the Middle East, and a $6 million impairment related to other equity method investments.

Unconsolidated Variable Interest Entities

For the VIEs in which we participate, our maximum exposure to loss consists of our equity investment in the VIE, any amounts owed to us for services we may have provided to the VIE, and any amounts that we may be contractually or constructively obligated to fund in the future reduced by any unearned revenues on the project. Our maximum exposure to loss may also include our obligation to fund our proportionate share of any future losses incurred. During the quarter, we recognized a non-cash charge in the amount of $193 million associated with the Ichthys LNG project. Where our performance and financial obligations are joint and several to the client with our joint venture partners, we may be further exposed to losses above our ownership interest in the joint venture.

The following summarizes the total assets and total liabilities as reflected in our condensed consolidated balance sheets related to our unconsolidated VIEs in which we have a significant variable interest but are not the primary beneficiary.

			June 30, 2021
Dollars in millions			Total Assets						Total Liabilities
Affinity joint venture (U.K. MFTS project)			$	10					$	9
Aspire Defence Limited			$	68					$	5
JKC joint venture (Ichthys LNG project)			$	375					$	6
U.K. Roads project joint ventures			$	54					$	—
Middle East Petroleum Corporation (EBIC ammonia project)			$	38					$	1

			December 31, 2020
Dollars in millions			Total Assets						Total Liabilities
Affinity joint venture (U.K. MFTS project)			$	11					$	9
Aspire Defence Limited			$	68					$	5
JKC joint venture (Ichthys LNG project)			$	606					$	44
U.K. Roads project joint ventures			$	59					$	—
Middle East Petroleum Corporation (EBIC ammonia project)			$	31					$	1

Related Party Transactions

We often provide engineering, construction management, and other subcontractor services to our unconsolidated joint ventures and our revenues include amounts related to these services. For the six months ended June 30, 2021 and 2020, our revenues included $194 million and $276 million, respectively, related to the services we provided primarily to the Aspire Defence Limited joint venture within our GS business segment and two other joint ventures within our STS business segment.

Amounts included in our condensed consolidated balance sheets related to services we provided to our unconsolidated joint ventures as of June 30, 2021, and December 31, 2020 are as follows:

			June 30,						December 31,
Dollars in millions			2021						2020
Accounts receivable, net of allowance for credit losses			$	53					$	83
Contract assets (a)			$	1					$	2
Contract liabilities (a)			$	11					$	53

(a)Reflects contract assets and contract liabilities related to joint ventures within our GS and STS business segments.

Consolidated Variable Interest Entities

We consolidate VIEs if we determine we are the primary beneficiary of the project entity because we control the activities that most significantly impact the economic performance of the entity. The following is a summary of the significant VIEs where we are the primary beneficiary:

Dollars in millions			June 30, 2021
			Total Assets						Total Liabilities
Fasttrax Limited (Fasttrax project)			$	30					$	3
Aspire Defence subcontracting entities (Aspire Defence project)			$	447					$	214

Dollars in millions			December 31, 2020
			Total Assets						Total Liabilities
Fasttrax Limited (Fasttrax project)			$	45					$	18
Aspire Defence subcontracting entities (Aspire Defence project)			$	448					$	205

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- Definition

Disclosure of variable interest entities (VIE), including, but not limited to the nature, purpose, size, and activities of the VIE, the carrying amount and classification of consolidated assets that are collateral for the VIE's obligations, lack of recourse if creditors (or beneficial interest holders) of a consolidated VIE have no recourse to the general credit of the primary beneficiary. An enterprise that holds a significant variable interest in a VIE but is not the primary beneficiary may disclose the nature of its involvement with the VIE and when that involvement began, the nature, purpose, size, and activities of the VIE and the enterprise's maximum exposure to loss as a result of its involvement with the VIE. Equity Method Investment represents disclosure of information related to equity method investments in common stock. The information which should be considered for disclosure includes: (a) the name of each investee or group of investments for which combined disclosure is appropriate, (2) the percentage ownership of common stock, (3) the difference, if any, between the carrying amount of an investment and the value of the underlying equity in the net assets and the accounting treatment of difference, if any, and (4) the aggregate value of each identified investment based on its quoted market price, if available.

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