Schlumberger 2010 Annual Report - page 61

incurred in acquiring and processing the multiclient seismic data. Such costs are charged to
Cost of revenue
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 involves 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.
Goodwill, Other Intangibles and Long-lived Assets
Schlumberger records the excess of purchase price over the fair value of the tangible and identifiable intangible
assets acquired as goodwill. Goodwill is tested for impairment annually as well as when an event or change in
circumstance indicates an impairment may have occurred. Goodwill is tested for impairment by comparing the fair value
of Schlumberger’s individual reporting units to their carrying amount to determine if there is a potential goodwill
impairment. If the fair value of the reporting unit is less than its carrying value, an impairment loss is recorded to the
extent that the implied fair value of the goodwill of the reporting unit is less than its carrying value.
Long-lived assets, including fixed assets and intangible assets, are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying value may not be recoverable. In reviewing for impairment, the
carrying value of such assets is compared to the estimated undiscounted future cash flows expected from the use of the
assets and their eventual disposition. If such cash flows are not sufficient to support the asset’s recorded value, an
impairment charge is recognized to reduce the carrying value of the long-lived asset to its estimated fair value. The
determination of future cash flows as well as the estimated fair value of long-lived assets involve significant estimates on
the part of management. If there is a material change in economic conditions or other circumstances influencing the
estimate of future cash flows or fair value, Schlumberger could be required to recognize impairment charges in the
Intangible assets consist primarily of customer relationships, technology/technical know-how and tradenames
acquired in business combinations. Customer relationships are generally amortized over periods ranging from 7 to
28 years, acquired technology/technical know-how are generally amortized over periods ranging from 5 to 18 years and
tradenames are generally amortized over periods ranging from 5 years to 30 years.
Taxes on Income
Schlumberger computes taxes on income in accordance with the tax rules and regulations of the many taxing
authorities where the income is earned. The income tax rates imposed by these taxing authorities vary substantially.
Taxable income may differ from pretax income for financial accounting purposes. To the extent that differences are due
to revenue or expense items reported in one period for tax purposes and in another period for financial accounting
purposes, an appropriate provision for deferred income taxes is made. Any effect of changes in income tax rates or tax
laws are included in the provision for income taxes in the period of enactment. When it is more likely than not that a
portion or all of the deferred tax asset will not be realized in the future, Schlumberger provides a corresponding
valuation allowance against deferred tax assets.
Schlumberger’s tax filings are subject to regular audit by the tax authorities in most of the jurisdictions in which it
conducts business. These audits may result in assessments for additional taxes which are resolved with the authorities
or, potentially, through the courts. Schlumberger recognizes the impact of a tax position in its financial statements if
that position is more likely than not of being sustained on audit, based on the technical merits of the position. Tax
liabilities are recorded based on estimates of additional taxes which will be due upon the conclusion of these audits.
Estimates of these tax liabilities are made based upon prior experience and are updated in light of changes in facts and
circumstances. However, due to the uncertain and complex application of tax regulations, it is possible that the ultimate
resolution of audits may result in liabilities which could be materially different from these estimates. In such an event,
Schlumberger will record additional tax expense or tax benefit in the year in which such resolution occurs.
Part II, Item 8
1...,51,52,53,54,55,56,57,58,59,60 62,63,64,65,66,67,68,69,70,71,...108
Powered by FlippingBook