The effective tax rate for 2010 was significantly impacted by the charges and credits described in Note 3 to the
Consolidated Financial Statements
. The effective tax rate for 2009 was also impacted by charges, but to a much lesser
extent. Excluding charges and credits, the effective tax rate in 2010 was approximately 20.6% compared to 19.2% in 2009.
This increase is largely attributable to the geographic mix of earnings as well as the inclusion of four months results from
the merger with Smith. Smith, which as a US company has a US tax rate applicable to its worldwide operations and as
such, will serve to increase Schlumberger’s overall effective tax rate.
The decrease in the Schlumberger effective tax rate in 2009 as compared to 2008 was primarily attributable to the
geographic mix of earnings. Schlumberger generated a lower proportion of its pretax earnings in North America in 2009
as compared to 2008. In addition, outside North America, various GeoMarkets with lower tax rates contributed a greater
percentage to pretax earnings in 2009 as compared to 2008.
Charges and Credits
Schlumberger recorded significant charges and credits in continuing operations during 2010, 2009 and 2008. These
charges and credits, which are summarized below, are more fully described in Note 3 to the
Consolidated Financial
Statements
.
The following is a summary of the 2010 charges and credits:
Pretax Tax
Non-
controlling
Interest
Net Income Statement Classification
(Stated in millions)
Restructuring and Merger-related Charges:
Severance and other
$ 90 $ 13
$– $ 77
Restructuring & other
Impairment relating to WesternGeco’s first
generation Q-Land acquisition system
78
7
–
71
Restructuring & other
Other WesternGeco-related charges
63
–
–
63
Restructuring & other
Professional fees and other
107
1
–
106
Merger & integration
Merger-related employee benefits
58
10
–
48
Merger & integration
Inventory fair value adjustments
153
56
–
97
Cost of revenue
Mexico restructuring
40
4
–
36
Restructuring & other
Repurchase of bonds
60
23
37
Restructuring & other
Total restructuring and merger-related charges
649
114
–
535
Gain on investment in M-I SWACO
(1,270) (32)
–
(1,238)
Gain on Investment in M-I SWACO
Impact of elimination of tax deduction related to
Medicare Part D subsidy
– (40)
–
40
Taxes on income
$ (621) $ 42
$– $ (663)
The following is a summary of the 2009 charges:
Pretax Tax
Non-
controlling
Interest Net Income Statement Classification
(Stated in millions)
Workforce reductions
$102 $17
$– $ 85
Restructuring & other
Postretirement benefits curtailment
136 14
–
122
Restructuring & other
$238 $31
$– $207
The following is a summary of the 2008 charges:
Pretax Tax
Non-
controlling
Interest Net Income Statement Classification
(Stated in millions)
Workforce reductions
$ 74 $ 9
$– $65
Restructuring & other
Provision for doubtful accounts
32 8
6
18
Restructuring & other
Other
10 –
–
10
Interest and other income, net
$116 $17
$6
$93
26
Part II, Item 7
