Summary of Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2017

Accounting Policies [Abstract]

Use of Estimates

Use of Estimates

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.  On an ongoing basis, Schlumberger evaluates its estimates, including those related to collectibility of accounts receivable; revenue recognized under the percentage-of-completion method; recoverability of fixed assets, goodwill, intangible assets, Schlumberger Production Management investments and investments in affiliates; income taxes; multiclient seismic data; contingencies and actuarial assumptions for employee benefit plans.  Schlumberger bases its estimates on historical experience and other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates under different assumptions or conditions.

Revenue Recognition

Revenue Recognition

Schlumberger recognizes revenue based upon purchase orders, contracts or other persuasive evidence of an arrangement with the customer that include fixed or determinable prices provided that collectibility is reasonably assured.  Revenue is recognized for services when they are rendered.  Revenue is recognized for products upon delivery and when the customer assumes the risks and rewards of ownership.

Revenue is recognized for certain long-term construction-type contracts based on the percentage-of-completion method.  These contracts involve significant design and engineering efforts in order to satisfy custom designs for customer-specific applications.  Under the percentage-of-completion method, revenue is recognized as work progresses on each such contract.  Progress is measured by the ratio of actual costs incurred to date on the project in relation to total estimated project costs.  Any expected losses on a project are recorded in full in the period in which they become probable.  Progress billings are generally issued upon completion of certain phases of work as stipulated in the contract.  Revenue in excess of billings is included within Receivables less allowance for doubtful accounts in the Consolidated Balance Sheet.  Billings and cash collections in excess of revenue recognized on contracts are included within Accounts payable and accrued liabilities in the Consolidated Balance Sheet.

Revenue from seismic contract services performed on a dayrate basis is recognized as the service is performed.  Revenue from other services, including pre-funded multiclient surveys, is recognized as the seismic data is acquired and/or processed on a proportionate basis as work is performed.  This method requires revenue to be recognized based upon quantifiable measures of progress, such as square kilometers acquired.  Multiclient data surveys are licensed or sold to customers on a non-transferable basis.  Revenue from sales of completed multiclient data surveys is recognized upon obtaining a signed licensing agreement and providing customers with access to such data.

Revenue is occasionally generated from contractual arrangements that include multiple deliverables.  Revenue from these arrangements is recognized as each item is delivered based on its relative fair value, provided that the delivered items have stand-alone value to the customer.

Revenue derived from the sale of licenses of Schlumberger software may include installation, maintenance, consulting and training services.  If services are not essential to the functionality of the software, the revenue for each element of the contract is recognized separately based on its respective vendor specific objective evidence of fair value when all of the following conditions are met: a signed contract is obtained, delivery has occurred, the fee is fixed or determinable and collectibility is probable.

Short-term and Investments

Short-term Investments

The Consolidated Balance Sheet reflects the Schlumberger investment portfolio separated between current and long term, based on maturity.  Short-term investments are comprised primarily of money market funds, time deposits, certificates of deposit, commercial paper, bonds and notes, substantially all of which are denominated in US dollars and are stated at cost plus accrued interest, which approximates market.  

For purposes of the Consolidated Statement of Cash Flows, Schlumberger does not consider Short-term investments to be cash equivalents.

Investments in Affiliated Companies

Investments in Affiliated Companies

Investments in companies in which Schlumberger does not have a controlling financial interest, but over which it has significant influence, are accounted for using the equity method.  Schlumberger’s share of the after-tax earnings of equity method investees is included in Interest and other income. Investments in privately held companies in which Schlumberger does not have the ability to exercise significant influence are accounted for using the cost method.  Investments in publicly traded companies in which Schlumberger does not have significant influence are accounted for as available-for-sale marketable securities, reported at fair value with unrealized gains and losses reported as a component of Accumulated other comprehensive loss.  

Equity and cost method investments as well as investments in available-for-sale marketable securities are classified as Investments in Affiliated Companies in the Consolidated Balance Sheet.

Multiclient Seismic Data

Multiclient Seismic Data

Schlumberger’s multiclient library consists of completed and in-process seismic surveys that are licensed on a nonexclusive basis. Schlumberger capitalizes costs directly incurred in acquiring and processing the multiclient seismic data. Such costs are charged to Cost of services based on the percentage of the total costs to the estimated total revenue that Schlumberger expects to receive from the sales of such data. However, under no circumstance will an individual survey carry a net book value greater than a 4-year, straight-line amortized value.

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 involve 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.

Schlumberger Production Management

Schlumberger Production Management

Schlumberger Production Management (“SPM”) projects are focused on developing and managing production on behalf of Schlumberger’s clients under long-term agreements.  Schlumberger will invest its own services and products, and in some cases cash, into the field development activities and operations.  Although in certain arrangements Schlumberger is paid for a portion of the services or products it provides, generally Schlumberger will not be paid at the time of providing its services or upon delivery of its products. Instead, Schlumberger is compensated based upon cash flow generated or on a fee-per-barrel basis.  This includes certain arrangements whereby Schlumberger is only compensated based upon incremental production it helps deliver above a mutually agreed baseline.

Revenue from SPM arrangements, which is recognized as the related production is achieved, represented less than 5% of Schlumberger’s consolidated revenue during each of 2017, 2016 and 2015.

Schlumberger capitalizes its cash investments in a project as well as the direct costs associated with providing services or products for which Schlumberger will be compensated when the related production is achieved.  These capitalized investments are amortized to the Consolidated Statement of Income (Loss) as the related production is achieved based on the units of production method, whereby each unit produced is assigned a pro-rata portion of the unamortized costs based on estimated total production, resulting in a matching of revenue with the applicable costs.  Amortization expense relating to these capitalized investments was $465 million, $449 million and $317 million in 2017, 2016 and 2015, respectively.

During 2017, Schlumberger purchased a majority non-operating interest in the Palliser Block, located in Alberta, Canada.  In connection with the initial accounting for this transaction, Schlumberger recorded a $268 million asset retirement obligation, which was included in both Other Assets and Other Liabilities in the Consolidated Balance Sheet.

The unamortized portion of Schlumberger’s investments in SPM projects was $4.065 billion and $2.458 billion at December 31, 2017 and 2016, respectively.  These amounts are included within Other Assets in Schlumberger’s Consolidated Balance Sheet.

Concentration of Credit Risk

Concentration of Credit Risk

Schlumberger’s assets that are exposed to concentrations of credit risk consist primarily of cash, short-term investments, fixed income investments held to maturity, receivables from clients and derivative financial instruments.  Schlumberger places its cash, short-term investments and fixed income investments held to maturity with financial institutions and corporations and limits the amount of credit exposure with any one of them.  Schlumberger regularly evaluates the creditworthiness of the issuers in which it invests.  By using derivative financial instruments to hedge certain exposures, Schlumberger exposes itself to some credit risk.  Schlumberger minimizes this credit risk by entering into transactions with high-quality counterparties, limiting the exposure to each counterparty and monitoring the financial condition of its counterparties.

Schlumberger operates in more than 85 countries and as such, its accounts receivable are spread over many countries and customers.  Accounts receivable in the United States represented approximately 23% of Schlumberger’s accounts receivable balance at December 31, 2017.  No other country accounted for greater than 10% of Schlumberger’s accounts receivable balance.  

Earnings per Share

Earnings per Share

The following is a reconciliation from basic to diluted earnings (loss) per share of Schlumberger for each of the last three years:

(Stated in millions, except per share amounts)
	Net Income (Loss) Attributable to Schlumberger			Average Shares Outstanding		Earnings (Loss) per Share
2017:
Basic	$	(1,505	)		1,388	$	(1.08	)
Assumed exercise of stock options		-			-
Unvested restricted stock		-			-
Diluted	$	(1,505	)		1,388	$	(1.08	)
2016:
Basic	$	(1,687	)		1,357	$	(1.24	)
Assumed exercise of stock options		-			-
Unvested restricted stock		-			-
Diluted	$	(1,687	)		1,357	$	(1.24	)
2015:
Basic	$	2,072			1,267	$	1.63
Assumed exercise of stock options		-			4
Unvested restricted stock		-			4
Diluted	$	2,072			1,275	$	1.63

The number of outstanding employee stock options to purchase shares of Schlumberger common stock and unvested restricted stock units that were not included in the computation of diluted earnings/loss per share, because to do so would have had an anti-dilutive effect, were as follows:

(Stated in millions)
	2017		2016		2015
Employee stock options		47		47		20
Unvested restricted stock		5		5		-

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers.  This ASU amends the existing accounting standards for revenue recognition and is based on the principlethat revenue should be recognized to depict the transfer of goods or services to a customer at an amount that reflects the considerationa company expects to receive in exchange for those goods or services.  Schlumberger adopted this ASU on January 1,2018.  Schlumberger has concluded that the adoption of this ASU will not have a material impact on its consolidated financial statements.  

In February 2016, the FASB issued ASU No. 2016-02, Leases.  This ASU requires lessees to recognize a right of use asset and lease liability on the balance sheet for all leases, with the exception of short-term leases.  Schlumberger will adopt this ASU on January 1, 2019.  Based on its current lease portfolio, Schlumberger estimates that the adoption of this ASU will result in approximately $1.2 billion of additional assets and liabilities being reflected on its Consolidated Balance Sheet.

Reclassifications

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation.