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Correction of Errors in Previously Reported Consolidated Financial Statements | 12 Months Ended
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Dec. 31, 2016
Correction of Errors in Previously Reported Consolidated Financial Statements |
Correction of Errors in Previously Reported Consolidated Financial Statements | Note 4—Correction of Errors in Previously Reported Consolidated Financial Statements In calculating our income taxes for the year ended December 31, 2016, we identified errors in our previously issued financial statements for the interim and annual periods prior to December 31, 2016 related to the measurement of deferred taxes in relation to: (a) the remeasurement of certain nonmonetary assets in Norway, (b) the analysis of our U.S. defined benefit pension plans and effect on other comprehensive income and (c) the assessment of realizability of our deferred tax assets and the need for valuation allowances. We assessed the materiality of these errors in accordance with the U.S. Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) No. 99, Materiality and SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (“SAB 108”), using both the rollover method and the iron curtain method, as defined in SAB 108, and concluded the errors, including other adjustments discussed below, were immaterial to prior years but, if corrected in the current year, would have been material to the current year. Under SAB 108, such prior‑year misstatements which, if corrected in the current year would be material to the current year, must be corrected by adjusting the prior‑year financial statements. Correcting prior‑year financial statements for such immaterial misstatements does not require previously filed reports to be amended. In addition to the adjustments related to the deferred taxes as noted above, we recorded other adjustments related to the years ended December 31, 2015 and 2014 and the quarterly periods in the nine months ended September 30, 2016 to correct for immaterial errors related to revenues, operating and maintenance costs, depreciation expense, losses on impairment and disposal of assets, interest income and income taxes. These other adjustments were not previously recorded in the appropriate periods, as we concluded that they were immaterial to our previously issued consolidated financial statements. For the year ended December 31, 2015, correction of these errors increased our income from continuing operations by $71 million and net income attributable to controlling interest by $74 million. For the year ended December 31, 2014, correction of these errors decreased our loss from continuing operations by $66 million and net loss attributable to controlling interest by $74 million. The cumulative effect of those adjustments reduced previously reported retained earnings by $11 million. We also corrected our financial statements for each of the interim periods in the years ended December 31, 2016 and 2015 (see Note 22—Quarterly Results). The effects of the corrections of the errors on our consolidated statements of operations, comprehensive income (loss) and balance sheets are presented in the tables below. The corrections of the errors had no effect on the previously reported amounts of operating, investing, and financing cash flows on our consolidated statements of cash flows.
|  | Years ended December 31, 2015 |  | Years ended December 31, 2014 |
|  | Previously |  |  |  |  | As |  | Previously |  |  |  |  | As |
|  | reported |  | Adjustments |  | adjusted |  | reported |  | Adjustments |  | adjusted |
Operating revenues |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Contract drilling revenues |  | $ | 6,802 |  | $ | — |  | $ | 6,802 |  | $ | 8,952 |  | $ | 11 |  | $ | 8,963 |
Other revenues |  |  | 584 |  |  | — |  |  | 584 |  |  | 222 |  |  | — |  |  | 222 |
|  |  | 7,386 |  |  | — |  |  | 7,386 |  |  | 9,174 |  |  | 11 |  |  | 9,185 |
Costs and expenses |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Operating and maintenance |  |  | 2,955 |  |  | — |  |  | 2,955 |  |  | 5,110 |  |  | (10) |  |  | 5,100 |
Depreciation |  |  | 963 |  |  | — |  |  | 963 |  |  | 1,139 |  |  | (10) |  |  | 1,129 |
General and administrative |  |  | 193 |  |  | (1) |  |  | 192 |  |  | 234 |  |  | — |  |  | 234 |
|  |  | 4,111 |  |  | (1) |  |  | 4,110 |  |  | 6,483 |  |  | (20) |  |  | 6,463 |
Loss on impairment |  |  | (1,867) |  |  | (8) |  |  | (1,875) |  |  | (4,043) |  |  | — |  |  | (4,043) |
Loss on disposal of assets, net |  |  | (28) |  |  | (8) |  |  | (36) |  |  | (26) |  |  | — |  |  | (26) |
Operating income (loss) |  |  | 1,380 |  |  | (15) |  |  | 1,365 |  |  | (1,378) |  |  | 31 |  |  | (1,347) |
Other income (expense), net |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest income |  |  | 22 |  |  | — |  |  | 22 |  |  | 39 |  |  | (19) |  |  | 20 |
Interest expense, net of amounts capitalized |  |  | (432) |  |  | — |  |  | (432) |  |  | (483) |  |  | — |  |  | (483) |
Gain (loss) on retirement of debt |  |  | 23 |  |  | — |  |  | 23 |  |  | (13) |  |  | — |  |  | (13) |
Other, net |  |  | 37 |  |  | — |  |  | 37 |  |  | 35 |  |  | — |  |  | 35 |
|  |  | (350) |  |  | — |  |  | (350) |  |  | (422) |  |  | (19) |  |  | (441) |
Income (loss) from continuing operations before income tax expense |  |  | 1,030 |  |  | (15) |  |  | 1,015 |  |  | (1,800) |  |  | 12 |  |  | (1,788) |
Income tax expense (benefit) |  |  | 206 |  |  | (86) |  |  | 120 |  |  | 146 |  |  | (54) |  |  | 92 |
Income (loss) from continuing operations |  |  | 824 |  |  | 71 |  |  | 895 |  |  | (1,946) |  |  | 66 |  |  | (1,880) |
Income (loss) from discontinued operations, net of tax |  |  | 2 |  |  | — |  |  | 2 |  |  | (20) |  |  | — |  |  | (20) |
Net income (loss) |  |  | 826 |  |  | 71 |  |  | 897 |  |  | (1,966) |  |  | 66 |  |  | (1,900) |
Net income (loss) attributable to noncontrolling interest |  |  | 35 |  |  | (3) |  |  | 32 |  |  | (53) |  |  | (8) |  |  | (61) |
Net income (loss) attributable to controlling interest |  | $ | 791 |  | $ | 74 |  | $ | 865 |  | $ | (1,913) |  | $ | 74 |  | $ | (1,839) |
Earnings (loss) per share-basic |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Earnings (loss) from continuing operations |  | $ | 2.16 |  | $ | 0.20 |  | $ | 2.36 |  | $ | (5.23) |  | $ | 0.21 |  | $ | (5.02) |
Earnings (loss) from discontinued operations |  |  | — |  |  | — |  |  | — |  |  | (0.06) |  |  | — |  |  | (0.06) |
Earnings (loss) per share |  | $ | 2.16 |  | $ | 0.20 |  | $ | 2.36 |  | $ | (5.29) |  | $ | 0.21 |  | $ | (5.08) |
Earnings (loss) per share-diluted |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Earnings (loss) from continuing operations |  | $ | 2.16 |  | $ | 0.20 |  | $ | 2.36 |  | $ | (5.23) |  | $ | 0.21 |  | $ | (5.02) |
Earnings (loss) from discontinued operations |  |  | — |  |  | — |  |  | — |  |  | (0.06) |  |  | — |  |  | (0.06) |
Earnings (loss) per share |  | $ | 2.16 |  | $ | 0.20 |  | $ | 2.36 |  | $ | (5.29) |  | $ | 0.21 |  | $ | (5.08) |
|  | Year ended December 31, 2015 |  | Year ended December 31, 2014 |
|  | Previously |  |  |  |  | As |  | Previously |  |  |  |  | As |
|  | reported |  | Adjustments |  | adjusted |  | reported |  | Adjustments |  | adjusted |
Net income (loss) |  | $ | 826 |  | $ | 71 |  | $ | 897 |  | $ | (1,966) |  | $ | 66 |  | $ | (1,900) |
Net income (loss) attributable to noncontrolling interest |  |  | 35 |  |  | (3) |  |  | 32 |  |  | (53) |  |  | (8) |  |  | (61) |
Net income (loss) attributable to controlling interest |  |  | 791 |  |  | 74 |  |  | 865 |  |  | (1,913) |  |  | 74 |  |  | (1,839) |
Components of net periodic benefit costs before reclassifications |  |  | 63 |  |  | — |  |  | 63 |  |  | (170) |  |  | — |  |  | (170) |
Components of net periodic benefit costs reclassified to net income |  |  | 23 |  |  | — |  |  | 23 |  |  | 17 |  |  | — |  |  | 17 |
Gain on derivative instruments reclassified to net income |  |  | — |  |  | — |  |  | — |  |  | (2) |  |  | — |  |  | (2) |
Other comprehensive income (loss) before income taxes |  |  | 86 |  |  | — |  |  | 86 |  |  | (155) |  |  | — |  |  | (155) |
Income taxes related to other comprehensive income |  |  | (16) |  |  | (1) |  |  | (17) |  |  | 13 |  |  | 22 |  |  | 35 |
Other comprehensive income (loss) |  |  | 70 |  |  | (1) |  |  | 69 |  |  | (142) |  |  | 22 |  |  | (120) |
Other comprehensive income (loss) attributable to noncontrolling interest |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Other comprehensive income (loss) attributable to controlling interest |  |  | 70 |  |  | (1) |  |  | 69 |  |  | (142) |  |  | 22 |  |  | (120) |
Total comprehensive income (loss) |  |  | 896 |  |  | 70 |  |  | 966 |  |  | (2,108) |  |  | 88 |  |  | (2,020) |
Total comprehensive income (loss) attributable to noncontrolling interest |  |  | 35 |  |  | (3) |  |  | 32 |  |  | (53) |  |  | (8) |  |  | (61) |
Total comprehensive income (loss) attributable to controlling interest |  | $ | 861 |  | $ | 73 |  | $ | 934 |  | $ | (2,055) |  | $ | 96 |  | $ | (1,959) |
|  |  |  | December 31, 2015 |
|  |  |  | Previously |  |  |  |  | As |
|  |  |  | reported |  | Adjustments |  | adjusted |
Assets |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  |  |  | $ | 2,339 |  | $ | — |  | $ | 2,339 |
Accounts receivable, net |  |  |  |  |  |  |  | — |  |  |  |
Trade |  |  |  |  | 1,343 |  |  | — |  |  | 1,343 |
Other |  |  |  |  | 36 |  |  | 21 |  |  | 57 |
Materials and supplies, net |  |  |  |  | 635 |  |  | (8) |  |  | 627 |
Restricted cash |  |  |  |  | 340 |  |  | — |  |  | 340 |
Other current assets |  |  |  |  | 92 |  |  | — |  |  | 92 |
Total current assets |  |  |  |  | 4,785 |  |  | 13 |  |  | 4,798 |
Property and equipment |  |  |  |  | 26,274 |  |  | (9) |  |  | 26,265 |
Less accumulated depreciation |  |  |  |  | (5,456) |  |  | — |  |  | (5,456) |
Property and equipment, net |  |  |  |  | 20,818 |  |  | (9) |  |  | 20,809 |
Deferred income taxes, net |  |  |  |  | 316 |  |  | 95 |  |  | 411 |
Other assets |  |  |  |  | 410 |  |  | 3 |  |  | 413 |
Total assets |  |  |  | $ | 26,329 |  | $ | 102 |  | $ | 26,431 |
Liabilities and equity |  |  |  |  |  |  |  |  |  |  |  |
Accounts payable |  |  |  | $ | 448 |  | $ | 7 |  | $ | 455 |
Accrued income taxes |  |  |  |  | 82 |  |  | (27) |  |  | 55 |
Debt due within one year |  |  |  |  | 1,093 |  |  | — |  |  | 1,093 |
Other current liabilities |  |  |  |  | 1,046 |  |  | 16 |  |  | 1,062 |
Total current liabilities |  |  |  |  | 2,669 |  |  | (4) |  |  | 2,665 |
Long-term debt |  |  |  |  | 7,397 |  |  | — |  |  | 7,397 |
Deferred income taxes, net |  |  |  |  | 339 |  |  | (110) |  |  | 229 |
Other long-term liabilities |  |  |  |  | 1,108 |  |  | 27 |  |  | 1,135 |
Total long-term liabilities |  |  |  |  | 8,844 |  |  | (83) |  |  | 8,761 |
Commitments and contingencies |  |  |  |  |  |  |  |  |  |  |  |
Redeemable noncontrolling interest |  |  |  |  | 8 |  |  | (3) |  |  | 5 |
Shares |  |  |  |  | 5,193 |  |  | — |  |  | 5,193 |
Additional paid-in capital |  |  |  |  | 5,739 |  |  | (3) |  |  | 5,736 |
Treasury shares, at cost |  |  |  |  | (240) |  |  | — |  |  | (240) |
Retained earnings |  |  |  |  | 4,140 |  |  | 138 |  |  | 4,278 |
Accumulated other comprehensive loss |  |  |  |  | (334) |  |  | 57 |  |  | (277) |
Total controlling interest shareholders’ equity |  |  |  |  | 14,498 |  |  | 192 |  |  | 14,690 |
Noncontrolling interest |  |  |  |  | 310 |  |  | — |  |  | 310 |
Total equity |  |  |  |  | 14,808 |  |  | 192 |  |  | 15,000 |
Total liabilities and equity |  |  |  | $ | 26,329 |  | $ | 102 |  | $ | 26,431 |

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