Schlumberger has the option to bypass the qualitative assessment for any reporting unit in any period and proceed
directly to performing the first step of the two-step goodwill impairment test.
For purposes of performing the impairment test for goodwill, Schlumberger’s four reporting units are the three
Groups comprising Oilfield Services: Reservoir Characterization, Drilling and Reservoir Production, as well as the
Distribution business segment. Schlumberger elected to perform the qualitative assessment described above for
purposes of its annual goodwill impairment test. Based on this assessment, Schlumberger concluded that it was more
likely than not that the fair value of each of its reporting units was greater than its carrying amount. Accordingly, no
further testing was required.
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 involves 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
future. Schlumberger evaluates the remaining useful life of its intangible assets on a periodic basis to determine
whether events and circumstances warrant a revision to the remaining estimated amortization period.
Income Taxes
Schlumberger conducts business in more than 100 tax jurisdictions, a number of which have tax laws that are not
fully defined and are evolving. Schlumberger’s tax filings are subject to regular audits by the tax authorities. These
audits may result in assessments for additional taxes which are resolved with the authorities or, potentially, through
the courts. 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 period in which such
resolution occurs.
Pension and Postretirement Benefits
Schlumberger’s pension and postretirement benefit obligations are described in detail in Note 18 to the
Consolidated Financial Statements
. The obligations and related costs are calculated using actuarial concepts, which
include critical assumptions related to the discount rate, expected rate of return on plan assets and medical cost trend
rates. These assumptions are important elements of expense and/or liability measurement and are updated on an
annual basis, or upon the occurrence of significant events.
The discount rate Schlumberger uses reflects the prevailing market rate of a portfolio of high-quality debt
instruments with maturities matching the expected timing of the payment of the benefit obligations. The following
summarizes the discount rates utilized by Schlumberger for its various pension and postretirement benefit plans:
• The discount rate utilized to determine the liability for Schlumberger’s United States pension plans and
postretirement medical plans was 5.00% at December 31, 2011 and 5.50% at December 31, 2010.
• The weighted-average discount rate utilized to determine the liability for Schlumberger’s international
pension plans was 4.95% at December 31, 2011 and 5.47% at December 31, 2010.
• The weighted-average discount rate utilized to determine expense for Schlumberger’s United States pension
plans and postretirement medical plans decreased from 6.00% in 2010 to 5.50% in 2011.
• The weighted-average discount rate utilized to determine expense for Schlumberger’s international pension
plans decreased from 5.89% in 2010 to 5.47% in 2011.
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