ACCOUNTING AND DISCLOSURE CHANGES

12 Months Ended

Dec. 31, 2020

Accounting Standards Update and Change in Accounting Principle [Abstract]

ACCOUNTING AND DISCLOSURE CHANGES

NOTE 2 - ACCOUNTING AND DISCLOSURE CHANGES

RECENTLY ADOPTED ACCOUNTING AND DISCLOSURE CHANGES

In January 2020, Occidental adopted Accounting Standards Update (ASU) 2016-13 Financial Instruments - Credit Losses (Topic 326). The new standard makes significant changes to the accounting for credit losses on financial assets and disclosures regarding credit losses. For trade receivables, loans and held-to-maturity debt securities, entities will be required to estimate lifetime expected credit losses. This will result in the earlier recognition of credit losses than the current incurred-loss model. The acceleration of the recognition of losses is more material for entities whose receivables and other held-to-maturity debt investments are (1) long dated and (2) with less credit worthy counterparties.

The majority of Occidental's receivables are short dated with maturities of less than 60 days with creditworthy counterparties, including refiners, pipelines and resellers. Occidental strives to maintain a strong credit portfolio and there have been no negative indications regarding the collectability of these receivables as of the date of this filing. The adoption of this standard has no material impact. Occidental will continue to assess the risk to its receivables in the future.

In January 2019, Occidental adopted the new lease standard ASC Topic 842 - Leases (ASC 842) using the modified retrospective approach, which did not require restatement of prior year amounts and disclosures. ASC 842 requires Occidental to recognize most leases, including operating leases, on the balance sheet. The new rules require lessees to recognize a right-of-use (ROU) asset and lease liability for all leases with lease terms of more than 12 months. Occidental adopted the standard including adopting the following practical expedients:

■Leases that commenced before the effective date carried forward their historical lease classification;

■Existing or expired land easements as of December 31, 2018, were not reassessed to determine whether or not they contained a lease;

■Leases with a lease term of 12 months or less from lease commencement date are considered short-term leases and not recorded on the Consolidated Balance Sheet; however, the lease expenditures recognized are captured and reported as incurred; and

■For asset classes, except long-term drilling rigs, Occidental elected to account for the lease and non-lease components as a single lease component as the non-lease portions were not significant to separate in determining the lease liability. For long-term drilling rig contracts, Occidental bifurcated the lease and non-lease components using relative fair value as a stand-alone selling price between the asset rental and the services obtained.

For Occidental operations, adoption of ASC 842 resulted in recording of net lease assets and lease liabilities of $772 million as of January 1, 2019. There was no material impact to net income, cash flows, or stockholders’ equity. See Note 8 - Lease Commitments.