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. The goodwill relating to each of Schlumberger’s reporting units is tested for impairment
annually as well as when an event, or change in circumstances, indicates an impairment may have occurred.
Under generally accepted accounting principles, Schlumberger has the option to first assess qualitative factors to
determine whether the existence of events or circumstances leads to a determination that it is more likely than not
that the fair value of one of its reporting units is greater than its carrying amount. If, after assessing the totality of
events or circumstances, Schlumberger determines it is more likely than not that the fair value of a reporting unit is
greater than its carrying amount, then there is no need to perform any further testing. However, if Schlumberger
concludes otherwise, then it is required to perform the first step of a two-step impairment test by calculating the fair
value of the reporting unit and comparing the fair value with the carrying amount of the reporting unit. 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.
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 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
future.
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
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