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 4.25% at December 31, 2012 and 5.00% at December 31, 2011.
• The weighted-average discount rate utilized to determine the liability for Schlumberger’s international
pension plans was 4.38% at December 31, 2012 and 4.95% at December 31, 2011.
• The weighted-average discount rate utilized to determine expense for Schlumberger’s United States pension
plans and postretirement medical plans decreased from 5.50% in 2011 to 5.00% in 2012.
• The weighted-average discount rate utilized to determine expense for Schlumberger’s international pension
plans decreased from 5.47% in 2011 to 4.95% in 2012.
A higher discount rate decreases the present value of benefit obligations and decreases expense.
The expected rate of return for our retirement benefit plans represents the average rate of return expected to be
earned on plan assets over the period that benefits included in the benefit obligation are expected to be paid. The
expected rate of return for Schlumberger’s United States pension plans has been determined based upon expectations
regarding future rates of return for the investment portfolio, with consideration given to the distribution of investments
by asset class and historical rates of return for each individual asset class. The weighted average expected rate of
return on plan assets for each of the United States and international pension plans was 7.50% in both 2012 and 2011. A
lower expected rate of return would increase pension expense.
Schlumberger’s medical cost trend rate assumptions are developed based on historical cost data, the near-term
outlook and an assessment of likely long-term trends. The overall medical cost trend rate assumption utilized to
determine the 2012 postretirement medical expense was 8% graded to 5% over the next seven years. The overall
medical trend rate assumption utilized to determine the postretirement medical liability at December 31, 2012 was
7.5% graded to 5% over the next eleven years.
The following illustrates the sensitivity to changes in certain assumptions, holding all other assumptions constant,
for the United States and international pension plans:
(Stated in millions)
Change in Assumption
Effect on 2012
Pretax Pension
Expense
Effect on
Dec. 31, 2012
Liability
25 basis point decrease in discount rate
+ $39
+ $377
25 basis point increase in discount rate
- $38
- $356
25 basis point decrease in expected return on plan assets
+ $17
–
25 basis point increase in expected return on plan assets
- $17
–
29
