Basis of Presentation (Policies)

3 Months Ended

Mar. 31, 2018

The interim-period financial information presented in the financial statements included in this report is unaudited and, in the opinion of management, includes all known accruals and adjustments necessary for a fair presentation of the consolidated financial position of ConocoPhillips and its results of operations and cash flows for such periods. All such adjustments are of a normal and recurring nature unless otherwise disclosed. Certain notes and other information have been condensed or omitted from the interim financial statements included in this report. Therefore, these financial statements should be read in conjunction with the consolidated financial statements and notes included in our 2017 Annual Report on Form 10-K.

New Accounting Pronouncements, Policy

We adopted the provisions of Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No. 2014-09, “Revenue from Contracts with Customers,” and its amendments issued by the provisions of ASU No. 2016-08, “Principal versus Agent Considerations (Reporting Revenue Gross versus Net),” ASU No. 2016-10, “Identifying Performance Obligations and Licensing,” ASU No. 2016-12, “Narrow-Scope Improvements and Practical Expedients,” and ASU No. 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue From Contracts with Customers,” collectively Accounting Standards Codification (ASC) Topic 606, “Revenue from Contracts with Customers,” (ASC Topic 606) beginning January 1, 2018. ASC Topic 606 outlines a single comprehensive model for an entity to use in accounting for revenue arising from all contracts with customers except where revenues are in scope of another accounting standard. The ASU superseded the revenue recognition requirements in ASC Topic 605, “Revenue Recognition,” and most industry-specific guidance. ASC Topic 606 sets forth a five-step model for determining when and how revenue is recognized. Under the model, an entity is required to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting the consideration it expects to receive in exchange for those goods and services. ASC Topic 606 also requires certain additional revenue-related disclosures. The adoption of ASC Topic 606 did not have a material impact on our consolidated financial statements. See Note 20—Sales and Other Operating Revenues for additional information related to this ASC.

We adopted the provisions of FASB ASU No. 2016-01, “Recognition and Measurement of Financial Assets and Liabilities,” (ASU No. 2016-01) beginning January 1, 2018. The ASU, among other things, requires an entity to record the changes in fair value of equity investments, other than investments accounted for using the equity method, within net income. Under this ASU, an entity is no longer able to recognize unrealized holding gains and losses on available-for-sale securities in other comprehensive income and instead must recognize them in the income statement. See Note 7—Investment in Cenovus Energy and Note 16—Accumulated Other Comprehensive Loss for additional information relating to this ASU.

The cumulative effect of the changes made to our consolidated balance sheet at January 1, 2018, for the adoption of ASC Topic 606 and ASU No. 2016-01 were as follows:

	Millions of Dollars
		December 31	ASC Topic 606	ASU No. 2016-01	January 1
		2017	Adjustments	Adjustments	2018
Liabilities
Other accruals	$	1,029	104	-	1,133
Total current liabilities		9,397	104	-	9,501
Deferred income taxes		5,282	(31)	-	5,251
Other liabilities and deferred credits		1,269	147	-	1,416
Total liabilities		42,561	220	-	42,781

Equity
Accumulated other comprehensive loss	$	(5,518)	-	58	(5,460)
Retained earnings		29,391	(220)	(58)	29,113
Total common stockholders' equity		30,607	(220)	-	30,387
Total equity		30,801	(220)	-	30,581
For discussion of adjustments for ASU No. 2016-01 and ASC Topic 606, see Note 7—Investment in Cenovus Energy and Note 20—Sales and
Other Operating Revenues, respectively.

We adopted the provisions of FASB ASU No. 2017-07, “Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” beginning January 1, 2018. We retrospectively applied the presentation of service cost separate from the other components of net periodic costs. The interest cost, expected return on plan assets, amortization of prior service cost/credit, recognized net actuarial loss/gain, settlement expense, curtailment loss/gain, and special termination benefits have been reclassified from the “Production and operating expenses,” “Selling, general and administrative expenses,” and “Exploration expenses” lines to the “Other expense” line on our consolidated income statement. We elected to apply the practical expedient which allows us to reclassify amounts disclosed previously in the employee benefit plans footnote as the basis for applying retrospective presentation for prior comparative periods as it is impracticable to determine the disaggregation of the cost components for amounts capitalized and amortized in those periods. On a prospective basis, the other components of net periodic benefit costs will not be included in amounts capitalized in inventory or properties, plants, and equipment (PP&E).

The effect of the retrospective presentation change related to the net periodic benefit cost of our defined benefit pension and other postretirement employee benefits plans on our consolidated income statement was as follows:

	Millions of Dollars
	Three Months Ended
	March 31, 2017
		Previously	Effect of Change	As
		Reported	Higher/(Lower)	Revised
Production and operating expenses	$	1,298	(7)	1,291
Selling, general and administrative expenses		157	(60)	97
Exploration expenses		551	(1)	550
Other expense		-	68	68

We adopted the provisions of FASB ASU No. 2016-15, “Classification of Certain Cash Receipts and Cash Payments,” beginning January 1, 2018. This ASU clarifies how certain cash receipts and cash payments should be classified and presented in the statement of cash flows. We have made an accounting policy election to classify distributions received from equity method investees using the nature of the distribution approach which classifies distributions received from investees as either cash inflows from operating activities or cash inflows from investing activities in the statement of cash flows based on the nature of the activities of the investee that generated the distribution. The impact of adopting this ASU was not material to prior presented periods.

We adopted the provisions of FASB ASU No. 2016-18, “Restricted Cash,” beginning January 1, 2018. This ASU requires amounts deemed restricted cash to be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows, and presentation should permit a reconciliation when cash, cash equivalents and restricted cash are presented in more than one line item on the balance sheet. We have amounts deposited in statutory bank accounts in certain countries to satisfy asset retirement obligations (ARO). These amounts are deemed restricted cash and are included in the “Other assets” line of our consolidated balance sheet. This standard is required to be applied retrospectively to all periods presented, but the impact in those periods was not material.

Revenue Recognition, Policy

Revenues associated with the sales of crude oil, bitumen, natural gas, LNG, natural gas liquids and other items are recognized at the point in time when the customer obtains control of the asset. In evaluating when a customer has control of the asset, we primarily consider whether the transfer of legal title and physical delivery has occurred, whether the customer has significant risks and rewards of ownership, and whether the customer has accepted delivery and a right to payment exists. These products are typically sold at prevailing market prices. We allocate variable market-based consideration to deliveries (performance obligations) in the current period as that consideration relates specifically to our efforts to transfer control of current period deliveries to the customer and represents the amount we expect to be entitled to in exchange for the related products. Payment is typically due within 30 days or less.