XML 107 R10.htm IDEA: XBRL DOCUMENT
v2.4.0.8

Summary of Significant Accounting Policies | 12 Months Ended
--- | ---
Dec. 31, 2013
Accounting Policies [Abstract] |
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Fair Value of Financial Instruments The carrying amounts of financial instruments including cash and cash equivalents, receivables, and payables approximated fair value because of the relatively short maturity of these instruments. Cash equivalents include only those investments having a maturity date of three months or less at the time of purchase. Derivative Financial Instruments Accounting Standards Codification (“ASC”) Topic 815, “Derivatives and Hedging” (“ASC Topic 815”) requires companies to recognize all derivative instruments as either assets or liabilities in the Consolidated Balance Sheet at fair value. The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and further, on the type of hedging relationship. For those derivative instruments that are designated and qualify as hedging instruments, a company must designate the hedging instrument, based upon the exposure being hedged, as a fair value hedge, cash flow hedge, or a hedge of a net investment in a foreign operation. The Company records all derivative financial instruments at their fair value in its Consolidated Balance Sheet. Except for certain non-designated hedges discussed below, all derivative financial instruments that the Company holds are designated as cash flow hedges and are highly effective in offsetting movements in the underlying risks. Such arrangements typically have terms between two and 24 months, but may have longer terms depending on the underlying cash flows being hedged, typically related to the projects in our backlog. Inventories Inventories consist of raw materials, work-in-process and oilfield and industrial finished products, manufactured equipment and spare parts. Inventories are stated at the lower of cost or market using the first-in, first-out or average cost methods. Allowances for excess and obsolete inventories are determined based on our historical usage of inventory on-hand as well as our future expectations related to our installed base and the development of new products. The allowance, which totaled $396 million and $338 million at December 31, 2013 and 2012, respectively, is the amount necessary to reduce the cost of the inventory to its net realizable value. Property, Plant and Equipment Property, plant and equipment are recorded at cost. Expenditures for major improvements that extend the lives of property and equipment are capitalized while minor replacements, maintenance and repairs are charged to operations as incurred. Disposals are removed at cost less accumulated depreciation with any resulting gain or loss reflected in operations. Depreciation is provided using the straight-line method over the estimated useful lives of individual items. Depreciation expense was $381 million, $315 million and $275 million for the years ended December 31, 2013, 2012 and 2011, respectively. The estimated useful lives of the major classes of property, plant and equipment are included in Note 6 to the consolidated financial statements. Long-lived Assets We record impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets are impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of those assets. The carrying value of assets used in operations that are not recoverable is reduced to fair value if lower than carrying value. In determining the fair market value of the assets, we consider market trends and recent transactions involving sales of similar assets, or when not available, discounted cash flow analysis. There have been no impairments of long-lived assets for the years ended December 31, 2013, 2012 and 2011. Intangible Assets The Company has approximately $9.0 billion of goodwill and $5.1 billion of identified intangible assets at December 31, 2013. Generally accepted accounting principles require the Company to test goodwill and other indefinite-lived intangible assets for impairment at least annually or more frequently whenever events or circumstances occur indicating that such assets might be impaired. Goodwill is identified by segment as follows (in millions):
|  | Rig Systems |  |  | Rig Aftermarket |  |  | Wellbore Technologies |  |  | Completion & Production Solutions |  |  | Discontinued Operations |  |  | Total |
Balance at December 31, 2011 |  | $ | 943 |  |  | $ | 556 |  |  | $ | 3,683 |  |  | $ | 917 |  |  | $ | 52 |  |  | $ | 6,151 |
Goodwill acquired during period |  |  | 145 |  |  |  | 89 |  |  |  | 80 |  |  |  | 395 |  |  |  | 291 |  |  |  | 1,000 |
Currency translation adjustments and other |  |  | 9 |  |  |  | 4 |  |  |  | 6 |  |  |  | 2 |  |  |  | — |  |  |  | 21 |
Balance at December 31, 2012 |  | $ | 1,097 |  |  | $ | 649 |  |  | $ | 3,769 |  |  | $ | 1,314 |  |  | $ | 343 |  |  | $ | 7,172 |
Goodwill acquired during the period |  |  | 179 |  |  |  | 256 |  |  |  | 665 |  |  |  | 803 |  |  |  | — |  |  |  | 1,903 |
Currency translation adjustments and other |  |  | 3 |  |  |  | 1 |  |  |  | (9 | ) |  |  | (11 | ) |  |  | (10 | ) |  |  | (26 | )
Balance at December 31, 2013 |  | $ | 1,279 |  |  | $ | 906 |  |  | $ | 4,425 |  |  | $ | 2,106 |  |  | $ | 333 |  |  | $ | 9,049 |
Identified intangible assets with determinable lives consist primarily of customer relationships, trademarks, trade names, patents, and technical drawings acquired in acquisitions, and are being amortized on a straight-line basis over the estimated useful lives of 2-30 years. Amortization expense of identified intangibles is expected to be approximately $360 million in each of the next five years. Included in intangible assets are approximately $643 million of indefinite-lived trade names. The net book values of identified intangible assets are identified by segment as follows (in millions):
|  | Rig Systems |  |  | Rig Aftermarket |  |  | Wellbore Technologies |  |  | Completion & Production Solutions |  |  | Discontinued Operations |  |  | Total |
Balance at December 31, 2011 |  | $ | 56 |  |  | $ | 92 |  |  | $ | 3,134 |  |  | $ | 771 |  |  | $ | 20 |  |  | $ | 4,073 |
Additions to intangible assets |  |  | 18 |  |  |  | — |  |  |  | 8 |  |  |  | 897 |  |  |  | 58 |  |  |  | 981 |
Amortization |  |  | (14 | ) |  |  | (3 | ) |  |  | (203 | ) |  |  | (81 | ) |  |  | (4 | ) |  |  | (305 | )
Currency translation adjustments and other |  |  | 2 |  |  |  | — |  |  |  | 3 |  |  |  | (11 | ) |  |  | — |  |  |  | (6 | )
Balance at December 31, 2012 |  | $ | 62 |  |  | $ | 89 |  |  | $ | 2,942 |  |  | $ | 1,576 |  |  | $ | 74 |  |  | $ | 4,743 |
Additions to intangible assets |  |  | 190 |  |  |  | 59 |  |  |  | 286 |  |  |  | 161 |  |  |  | — |  |  |  | 696 |
Amortization |  |  | (21 | ) |  |  | (6 | ) |  |  | (217 | ) |  |  | (113 | ) |  |  | (6 | ) |  |  | (363 | )
Currency translation adjustments and other |  |  | 1 |  |  |  | — |  |  |  | (12 | ) |  |  | (10 | ) |  |  | — |  |  |  | (21 | )
Balance at December 31, 2013 |  | $ | 232 |  |  | $ | 142 |  |  | $ | 2,999 |  |  | $ | 1,614 |  |  | $ | 68 |  |  | $ | 5,055 |
Identified intangible assets by major classification consist of the following (in millions):
|  | Gross |  |  | Accumulated Amortization |  |  | Net Book Value |
December 31, 2012: |  |  |  |  |  |  |  |  |  |  |  |
Customer relationships |  | $ | 3,522 |  |  | $ | (907 | ) |  | $ | 2,615 |
Trademarks |  |  | 877 |  |  |  | (152 | ) |  |  | 725 |
Indefinite-lived trade names |  |  | 643 |  |  |  | — |  |  |  | 643 |
Other |  |  | 1,087 |  |  |  | (327 | ) |  |  | 760 |
Total identified intangibles |  | $ | 6,129 |  |  | $ | (1,386 | ) |  | $ | 4,743 |
December 31, 2013: |  |  |  |  |  |  |  |  |  |  |  |
Customer relationships |  | $ | 4,093 |  |  | $ | (1,147 | ) |  | $ | 2,946 |
Trademarks |  |  | 893 |  |  |  | (195 | ) |  |  | 698 |
Indefinite-lived trade names |  |  | 643 |  |  |  | — |  |  |  | 643 |
Other |  |  | 1,175 |  |  |  | (407 | ) |  |  | 768 |
Total identified intangibles |  | $ | 6,804 |  |  | $ | (1,749 | ) |  | $ | 5,055 |
The Company performed its annual impairment analysis for its goodwill and indefinite-lived intangible assets during the fourth quarter of 2013, 2012 and 2011 each resulting in no impairment. The valuation techniques used in the annual test were consistent with those used during previous testing. The inputs used in the annual test were updated for current market conditions and forecasts. Foreign Currency The functional currency for most of our foreign operations is the local currency. The cumulative effects of translating the balance sheet accounts from the functional currency into the U.S. dollar at current exchange rates are included in accumulated other comprehensive income (loss). Revenues and expenses are translated at average exchange rates in effect during the period. Certain other foreign operations, including our operations in Norway, use the U.S. dollar as the functional currency. Accordingly, financial statements of these foreign subsidiaries are remeasured to U.S. dollars for consolidation purposes using current rates of exchange for monetary assets and liabilities and historical rates of exchange for nonmonetary assets and related elements of expense. Revenue and expense elements are remeasured at rates that approximate the rates in effect on the transaction dates. For all operations, gains or losses from remeasuring foreign currency transactions into the functional currency are included in income. Net foreign currency transaction losses were $24 million, $18 million and $10 million for the years ending December 31, 2013, 2012 and 2011, respectively, and are included in other income (expense) in the accompanying statement of operations. Historically, the Venezuelan government has devalued the country’s currency. During the first quarter of 2013, the Venezuelan government again officially devalued the Venezuelan bolivar against the U.S. dollar. As a result, the Company incurred approximately $12 million in devaluation charges in the first quarter of 2013. The Company’s net investment in Venezuela was $39 million at December 31, 2013. Revenue Recognition The Company’s products and services are sold based upon purchase orders or contracts with the customer that include fixed or determinable prices and that do not generally include right of return or other similar provisions or other significant post delivery obligations. Except for certain construction contracts and drill pipe sales described below, the Company records revenue at the time its manufacturing process is complete, the customer has been provided with all proper inspection and other required documentation, title and risk of loss has passed to the customer, collectability is reasonably assured and the product has been delivered. Customer advances or deposits are deferred and recognized as revenue when the Company has completed all of its performance obligations related to the sale. The Company also recognizes revenue as services are performed. The amounts billed for shipping and handling cost are included in revenue and related costs are included in cost of sales. Revenue Recognition under Long-term Construction Contracts The Company uses the percentage-of-completion method to account for certain long-term construction contracts in the Rig Systems and Completion & Production Solutions segments. These long-term construction contracts include the following characteristics:
| • |  | the contracts include custom designs for customer specific applications;
| • |  | the structural design is unique and requires significant engineering efforts; and
| • |  | construction projects often have progress payments.
This method requires the Company to make estimates regarding the total costs of the project, progress against the project schedule and the estimated completion date, all of which impact the amount of revenue and gross margin the Company recognizes in each reporting period. The Company prepares detailed cost estimates at the beginning of each project. Significant projects and their related costs and profit margins are updated and reviewed at least quarterly by senior management. Factors that may affect future project costs and margins include shipyard access, weather, production efficiencies, availability and costs of labor, materials and subcomponents and other factors. These factors can impact the accuracy of the Company’s estimates and materially impact the Company’s current and future reported earnings. The asset, “Costs in excess of billings,” represents revenues recognized in excess of amounts billed. The liability, “Billings in excess of costs,” represents billings in excess of revenues recognized. Drill Pipe Sales For drill pipe sales, if requested in writing by the customer, delivery may be satisfied through delivery to the Company’s customer storage location or to a third-party storage facility. For sales transactions where title and risk of loss have transferred to the customer but the supporting documentation does not meet the criteria for revenue recognition prior to the products being in the physical possession of the customer, the recognition of the revenues and related inventory costs from these transactions are deferred until the customer takes physical possession. Service and Product Warranties The Company provides service and warranty policies on certain of its products. The Company accrues liabilities under service and warranty policies based upon specific claims and a review of historical warranty and service claim experience in accordance with ASC Topic 450 “Contingencies” (“ASC Topic 450”). Adjustments are made to accruals as claim data and historical experience change. In addition, the Company incurs discretionary costs to service its products in connection with product performance issues and accrues for them when they are encountered. The Company monitors the actual cost of performing these discretionary services and adjusts the accrual based on the most current information available. The changes in the carrying amount of service and product warranties are as follows (in millions):
Balance at December 31, 2011 |  | $ | 211 |
Net provisions for warranties issued during the year |  |  | 51 |
Amounts incurred |  |  | (76 | )
Currency translation adjustments and other |  |  | 8 |
Balance at December 31, 2012 |  | $ | 194 |
Net provisions for warranties issued during the year |  |  | 101 |
Amounts incurred |  |  | (73 | )
Currency translation adjustments and other |  |  | 6 |
Balance at December 31, 2013 |  | $ | 228 |
Income Taxes The liability method is used to account for income taxes. Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates that will be in effect when the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to amounts which are more likely than not to be realized. Concentration of Credit Risk We grant credit to our customers, which operate primarily in the oil and gas industry. Concentrations of credit risk are limited because we have a large number of geographically diverse customers, thus spreading trade credit risk. We control credit risk through credit evaluations, credit limits and monitoring procedures. We perform periodic credit evaluations of our customers’ financial condition and generally do not require collateral, but may require letters of credit for certain international sales. Credit losses are provided for in the financial statements. Allowances for doubtful accounts are determined based on a continuous process of assessing the Company’s portfolio on an individual customer basis taking into account current market conditions and trends. This process consists of a thorough review of historical collection experience, current aging status of the customer accounts, and financial condition of the Company’s customers. Based on a review of these factors, the Company will establish or adjust allowances for specific customers. Accounts receivable are net of allowances for doubtful accounts of approximately $132 million and $120 million at December 31, 2013 and 2012. Stock-Based Compensation Compensation expense for the Company’s stock-based compensation plans is measured using the fair value method required by ASC Topic 718 “Compensation – Stock Compensation” (“ASC Topic 718”). Under this guidance the fair value of stock option grants and restricted stock is amortized to expense using the straight-line method over the shorter of the vesting period or the remaining employee service period. The Company provides compensation benefits to employees and non-employee directors under share-based payment arrangements, including various employee stock option plans. Total compensation cost that has been charged against income for all share-based compensation arrangements was $86 million, $74 million and $68 million for 2013, 2012 and 2011, respectively. The total income tax benefit recognized in the income statement for all share-based compensation arrangements was $26 million, $22 million and $15 million for 2013, 2012 and 2011, respectively. Environmental Liabilities When environmental assessments or remediations are probable and the costs can be reasonably estimated, remediation liabilities are recorded on an undiscounted basis and are adjusted as further information develops or circumstances change. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect reported and contingent amounts of assets and liabilities as of the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Such estimates include but are not limited to, estimated losses on accounts receivable, estimated costs and related margins of projects accounted for under percentage-of-completion, estimated realizable value on excess and obsolete inventory, contingencies, estimated liabilities for litigation exposures and liquidated damages, estimated warranty costs, estimates related to pension accounting, estimates related to the fair value of reporting units for purposes of assessing goodwill and other indefinite-lived intangible assets for impairment and estimates related to deferred tax assets and liabilities, including valuation allowances on deferred tax assets. Actual results could differ from those estimates. Contingencies The Company accrues for costs relating to litigation claims and other contingent matters, including liquidated damage liabilities, when such liabilities become probable and reasonably estimable. In circumstances where the most likely outcome of a contingency can be reasonably estimated, we accrue a liability for that amount. Where the most likely outcome cannot be estimated, a range of potential losses is established and if no one amount in that range is more likely than others, the low end of the range is accrued. Such estimates may be based on advice from third parties or on management’s judgment, as appropriate. Revisions to contingent liabilities are reflected in income in the period in which different facts or information become known or circumstances change that affect the Company’s previous judgments with respect to the likelihood or amount of loss. Amounts paid upon the ultimate resolution of contingent liabilities may be materially different from previous estimates and could require adjustments to the estimated reserves to be recognized in the period such new information becomes known. Net Income Attributable to Company Per Share The following table sets forth the computation of weighted average basic and diluted shares outstanding (in millions, except per share data):
|  | Years Ended December 31, |
|  | 2013 |  |  | 2012 |  |  | 2011 |
Numerator: |  |  |  |  |  |  |  |  |  |  |  |
Income from continuing operations |  | $ | 2,180 |  |  | $ | 2,383 |  |  | $ | 1,909 |
Income from discontinued operations |  | $ | 147 |  |  | $ | 108 |  |  | $ | 85 |
Net income attributable to Company |  | $ | 2,327 |  |  | $ | 2,491 |  |  | $ | 1,994 |
Denominator: |  |  |  |  |  |  |  |  |  |  |  |
Basic—weighted average common shares outstanding |  |  | 426 |  |  |  | 425 |  |  |  | 422 |
Dilutive effect of employee stock options and other unvested stock awards |  |  | 2 |  |  |  | 2 |  |  |  | 2 |
Diluted outstanding shares |  |  | 428 |  |  |  | 427 |  |  |  | 424 |
Per share data: |  |  |  |  |  |  |  |  |  |  |  |
Basic: |  |  |  |  |  |  |  |  |  |  |  |
Income from continuing operations |  | $ | 5.11 |  |  | $ | 5.61 |  |  | $ | 4.52 |
Income from discontinued operations |  | $ | 0.35 |  |  | $ | 0.25 |  |  | $ | 0.21 |
Net income attributable to Company |  | $ | 5.46 |  |  | $ | 5.86 |  |  | $ | 4.73 |
Diluted: |  |  |  |  |  |  |  |  |  |  |  |
Income from continuing operations |  | $ | 5.09 |  |  | $ | 5.58 |  |  | $ | 4.50 |
Income from discontinued operations |  | $ | 0.35 |  |  | $ | 0.25 |  |  | $ | 0.20 |
Net income attributable to Company |  | $ | 5.44 |  |  | $ | 5.83 |  |  | $ | 4.70 |
Cash dividends per share |  | $ | 0.91 |  |  | $ | 0.49 |  |  | $ | 0.45 |
ASC Topic 260, “Earnings Per Share” (“ASC Topic 260”) requires companies with unvested participating securities to utilize a two-class method for the computation of net income attributable to Company per share. The two-class method requires a portion of net income attributable to Company to be allocated to participating securities, which are unvested awards of share-based payments with non-forfeitable rights to receive dividends or dividend equivalents, if declared. Net income attributable to Company allocated to these participating securities was immaterial for the years ended December 31, 2013, 2012 and 2011 and therefore not excluded from net income attributable to Company per share calculation. The Company had stock options outstanding that were anti-dilutive totaling 7 million, 5 million, and 3 million at December 31, 2013, 2012 and 2011, respectively. Recently Issued Accounting Standards In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update No. 2013-02, “Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income” (ASU No. 2013-02), which is an update for Accounting Standards Codification Topic No. 220 “Comprehensive Income”. The update improves the reporting of reclassifications out of accumulated other comprehensive income. The guidance was effective for the Company’s interim and annual reporting periods beginning January 1, 2013, and applied prospectively. There was no significant impact to the Company’s Consolidated Financial Statements from the adopted provisions of ASU No. 2013-02. In March 2013, the FASB issued Accounting Standards Update No. 2013-05, “Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity (a consensus of the FASB Emerging Issues Task Force).” (ASU No. 2013-05), which amends Accounting Standards Codification Topic No. 830, “Foreign Currency Matters,” and Accounting Standards Codification Topic No. 810, “Consolidation,” to address diversity in practice related to the release of cumulative translation adjustments (“CTA”) into earnings upon the occurrence of certain derecognition events. ASU No. 2013-05 precludes the release of CTA for derecognition events that occur within a foreign entity, unless such events represent a complete or substantially complete liquidation of the foreign entity; however, derecognition events related to investments in a foreign entity result in the release of all CTA related to the derecognized foreign entity, even when a noncontrolling financial interest is retained. ASU No. 2013-05 also amends Accounting Standards Codification Topic No. 805, “Business Combinations,” for transactions that result in a company obtaining control of a business in a step acquisition by increasing an investment in a foreign entity from one accounted for under the equity method to one accounted for as a consolidated investment. ASU No. 2013-05 is effective for fiscal years beginning after December 15, 2013, and applied prospectively. Early adoption is permitted as of the beginning of the entity’s fiscal year. The Company is currently assessing the impact ASU No. 2013-05 will have on its financial statements, but does not expect a significant impact from adoption of the pronouncement.

X
- Details
Name: | us-gaap_AccountingPoliciesAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for all significant accounting policies of the reporting entity. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6367646&loc=d3e18780-107790 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6367646&loc=d3e18726-107790 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=6367646&loc=d3e18861-107790 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6367646&loc=d3e18743-107790 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=6367646&loc=d3e18854-107790 + Details
Name: | us-gaap_SignificantAccountingPoliciesTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration