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Intangible and tangible assets
12 Months Ended
Dec. 31, 2017
Intangible and tangible assets  
Intangible and tangible assets

7) Intangible and tangible assets

7.1) Intangible assets

 

Accounting policies

Exploration costs

The Group applies IFRS 6 “Exploration for and Evaluation of Mineral Resources”. Oil and gas exploration and production properties and assets are accounted for in accordance with the Successful Efforts method.

Mineral interests are tested for impairment on a regular basis, property-by-property, based on the results of the exploratory activity and the management’s evaluation.

In the event of a discovery, the unproved mineral interests are transferred to proved mineral interests at their net book value as soon as proved reserves are booked.

Exploratory wells are tested for impairment on a well-by-well basis and accounted for as follows:

-     Costs of exploratory wells which result in proved reserves are capitalized and then depreciated using the unit-of-production method based on proved developed reserves;

-     Costs of exploratory wells are temporarily capitalized until a determination is made as to whether the well has found proved reserves if both of the following conditions are met:

n     The well has found a sufficient quantity of reserves to justify, if appropriate, its completion as a producing well, assuming that the required capital expenditures are made;

n     The Group is making sufficient progress assessing the reserves and the economic and operating viability of the project. This progress is evaluated on the basis of indicators such as whether additional exploratory works are under way or firmly planned (wells, seismic or significant studies), whether costs are being incurred for development studies and whether the Group is waiting for governmental or other third-party authorization of a proposed project, or availability of capacity on an existing transport or processing facility.

Costs of exploratory wells not meeting these conditions are charged to exploration costs.

Proved mineral interests are depreciated using the unit-of-production method based on proved reserves.

The corresponding expense is recorded as depreciation of tangible assets and mineral interests.

Goodwill and other intangible assets excluding mineral interests

Other intangible assets include goodwill, patents, trademarks, and lease rights.

Intangible assets are carried at cost, after deducting any accumulated amortization and accumulated impairment losses.

Guidance for calculating goodwill is presented in Note 1.1 paragraph B to the Consolidated Financial Statements. Goodwill is not amortized but is tested for impairment at least annually and as soon as there is any indication of impairment.

Intangible assets (excluding mineral interests) that have a finite useful life are amortized on a straight-line basis over three to twenty years depending on the useful life of the assets. The corresponding expense is recorded under other expense.

 

 

 

 

 

 

 

 

As of December 31, 2017

    

    

    

Amortization and

    

    

(M$)

 

Cost

 

impairment

 

Net

Goodwill

 

2,442

 

(1,015)

 

1,427

Proved mineral interests

 

13,081

 

(7,674)

 

5,407

Unproved mineral interests

 

11,686

 

(5,324)

 

6,362

Other intangible assets

 

4,831

 

(3,440)

 

1,391

Total intangible assets

 

32,040

 

(17,453)

 

14,587

 

 

 

 

 

 

 

 

As of December 31, 2016

    

    

    

Amortization and

    

    

(M$)

 

Cost

 

impairment

 

Net

Goodwill

 

2,159

 

(1,002)

 

1,157

Proved mineral interests

 

13,347

 

(6,985)

 

6,362

Unproved mineral interests

 

11,582

 

(5,130)

 

6,452

Other intangible assets

 

4,182

 

(2,791)

 

1,391

Total intangible assets

 

31,270

 

(15,908)

 

15,362

 

 

 

 

 

 

 

 

As of December 31, 2015

    

    

    

Amortization and

    

    

(M$)

 

Cost

 

impairment

 

Net

Goodwill

 

1,597

 

(971)

 

626

Proved mineral interests

 

12,800

 

(6,436)

 

6,364

Unproved mineral interests

 

11,751

 

(5,082)

 

6,669

Other intangible assets

 

4,059

 

(3,169)

 

890

Total intangible assets

 

30,207

 

(15,658)

 

14,549

 

Change in net intangible assets is analyzed in the following table:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Currency

 

 

 

 

 

 

Net amount as of

 

 

 

 

 

Amortization and

 

translation

 

 

 

Net amount as of

(M$)

 

January 1,

 

Increases

 

Disposals

 

impairment

 

adjustment

 

Other

 

December 31,

2017

 

15,362

 

404

 

(23)

 

(1,512)

 

234

 

122

 

14,587

2016

 

14,549

 

1,039

 

(117)

 

(1,252)

 

(187)

 

1,330

 

15,362

2015

 

14,682

 

2,750

 

(343)

 

(2,324)

 

(200)

 

(16)

 

14,549

 

In 2017, the heading “Amortization and impairment" includes the impact of exceptional asset impairments for an amount of $785 million (see note 3 paragraph D to the Consolidated Financial statements).

In 2016, the heading “Amortization and impairment" included the accounting impact of exceptional asset impairments for an amount of $543 million (see note 3 paragraph D to the Consolidated Financial statements).

In 2016, the heading “Other” principally corresponded to the effect of the entries in the consolidation scope (including SAFT Group and Lampiris) for $1,394 million and to the reclassification of assets classified in accordance with IFRS 5 "Non-current assets held for sale and discontinued operations”.

In 2015, the heading “Amortization and impairment" included the accounting impact of exceptional asset impairments for an amount of $1,482 million (see note 3 paragraph D to the Consolidated Financial statements).

A summary of changes in the carrying amount of goodwill by business segment for the year ended December 31, 2017 is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

    

    

    

    

    

    

 

 

 

Net goodwill as of

 

 

 

 

 

 

 

Net goodwill as of

(M$)

 

January 1, 2017

 

Increases

 

Impairments

 

Other

 

December 31, 2017

Exploration & Production

 

 —

 

 —

 

 —

 

 —

 

 —

Gas, Renewables & Power

 

556

 

16

 

 —

 

78

 

650

Refining & Chemicals

 

462

 

 —

 

 —

 

29

 

491

Marketing & Services

 

113

 

146

 

 —

 

(3)

 

256

Corporate

 

26

 

 —

 

 —

 

 4

 

30

Total

 

1,157

 

162

 

 —

 

108

 

1,427

 

7.2) Property, plant and equipment

 

Accounting policies

Exploration & Production Oil and Gas producing assets

Development costs incurred for the drilling of development wells and for the construction of production facilities are capitalized, together with borrowing costs incurred during the period of construction and the present value of estimated future costs of asset retirement obligations. The depletion rate is equal to the ratio of oil and gas production for the period to proved developed reserves (unit-of-production method).

In the event that, due to the price effect on reserves evaluation, the unit-of-production method does not reflect properly the useful life of the asset, an alternative depreciation method is applied based on the reserves evaluated with the price of the previous year.

With respect to phased development projects or projects subject to progressive well production start-up, the fixed assets’ depreciable amount, excluding production or service wells, is adjusted to exclude the portion of development costs attributable to the undeveloped reserves of these projects.

With respect to production sharing contracts, the unit-of-production method is based on the portion of production and reserves assigned to the Group taking into account estimates based on the contractual clauses regarding the reimbursement of exploration, development and production costs (cost oil/gas) as well as the sharing of hydrocarbon rights (profit oil/gas).

Hydrocarbon transportation and processing assets are depreciated using the unit-of-production method based on throughput or by using the straight-line method whichever best reflects the duration of use of the economic life of the asset.

Other property, plant and equipment excluding Exploration & Production

Other property, plant and equipment are carried at cost, after deducting any accumulated depreciation and accumulated impairment losses. This cost includes borrowing costs directly attributable to the acquisition or production of a qualifying asset incurred until assets are placed in service. Borrowing costs are capitalized as follows:

     if the project benefits from a specific funding, the capitalization of borrowing costs is based on the borrowing rate;

     if the project is financed by all the Group’s debt, the capitalization of borrowing costs is based on the weighted average borrowing cost for the period.

Routine maintenance and repairs are charged to expense as incurred. The costs of major turnarounds of refineries and large petrochemical units are capitalized as incurred and depreciated over the period of time between two consecutive major turnarounds.

Other property, plant and equipment are depreciated using the straight-line method over their useful lives, which are as follows:

 

 

Furniture, office equipment, machinery and tools                                  3-12 years

Transportation equipment                                                                   5-20 years

Storage tanks and related equipment                                                  10-15 years

Specialized complex installations and pipelines                                   10-30 years

Buildings                                                                                         10-50 years

 

 

 

 

 

 

 

 

 

As of December 31, 2017

    

 

    

Depreciation and

    

 

(M$)

 

Cost

 

impairment

 

Net

Exploration & Production properties

 

  

 

  

 

  

Proved properties

 

174,336

 

(112,113)

 

62,223

Unproved properties

 

1,980

 

(152)

 

1,828

Work in progress

 

30,286

 

(2,537)

 

27,749

Subtotal

 

206,602

 

(114,802)

 

91,800

Other property, plant and equipment

 

  

 

 

 

  

Land

 

1,809

 

(652)

 

1,157

Machinery, plant and equipment (including transportation equipment)

 

33,554

 

(25,774)

 

7,780

Buildings

 

9,203

 

(5,859)

 

3,344

Work in progress

 

2,310

 

(1)

 

2,309

Other

 

9,463

 

(6,456)

 

3,007

Subtotal

 

56,339

 

(38,742)

 

17,597

Total property, plant and equipment

 

262,941

 

(153,544)

 

109,397

 

 

 

 

 

 

 

 

As of December 31, 2016

    

 

    

Depreciation and

    

 

(M$)

 

Cost

 

impairment

 

Net

Exploration & Production properties

 

  

 

  

 

  

Proved properties

 

163,860

 

(100,959)

 

62,901

Unproved properties

 

1,996

 

 —

 

1,996

Work in progress

 

33,860

 

(2,075)

 

31,785

Subtotal

 

199,716

 

(103,034)

 

96,682

Other property, plant and equipment

 

  

 

  

 

  

Land

 

1,578

 

(567)

 

1,011

Machinery, plant and equipment (including transportation equipment)

 

28,620

 

(22,940)

 

5,680

Buildings

 

7,977

 

(4,979)

 

2,998

Work in progress

 

2,780

 

(10)

 

2,770

Other

 

8,296

 

(5,466)

 

2,830

Subtotal

 

49,251

 

(33,962)

 

15,289

Total property, plant and equipment

 

248,967

 

(136,996)

 

111,971

 

 

 

 

 

 

 

 

As of December 31, 2015

    

 

    

Depreciation and

    

 

(M$)

 

Cost

 

impairment

 

Net

Exploration & Production properties

 

  

 

  

 

  

Proved properties

 

153,530

 

(94,843)

 

58,687

Unproved properties

 

2,423

 

 —

 

2,423

Work in progress

 

36,246

 

(2,284)

 

33,962

Subtotal

 

192,199

 

(97,127)

 

95,072

Other property, plant and equipment

 

  

 

  

 

  

Land

 

1,551

 

(581)

 

970

Machinery, plant and equipment (including transportation equipment)

 

28,723

 

(22,975)

 

5,748

Buildings

 

7,655

 

(5,018)

 

2,637

Work in progress

 

2,705

 

(128)

 

2,577

Other

 

8,182

 

(5,668)

 

2,514

Subtotal

 

48,816

 

(34,370)

 

14,446

Total property, plant and equipment

 

241,015

 

(131,497)

 

109,518

 

Change in net property, plant and equipment is analyzed in the following table:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

 

    

 

    

 

    

Currency

    

 

    

 

 

 

Net amount as of

 

 

 

 

 

Depreciation and

 

translation

 

 

 

Net amount as of

(M$)

 

January 1,

 

Increases

 

Disposals

 

impairment

 

adjustment

 

Other

 

December 31,

2017

 

111,971

 

13,363

 

(1,117)

 

(15,099)

 

2,302

 

(2,023)

 

109,397

2016

 

109,518

 

17,067

 

(1,869)

 

(13,171)

 

(1,057)

 

1,483

 

111,971

2015

 

106,876

 

22,382

 

(1,842)

 

(17,010)

 

(3,449)

 

2,561

 

109,518

 

In 2017, the heading “Disposals” mainly includes the impact of sales in the Exploration & Production segment (sale of interests in Gina Krog in Norway, and in Gabon).

In 2017, the heading “Depreciation and impairment” includes the impact of impairments of assets recognized for an amount of $3,901 million (see Note 3 paragraph D to the Consolidated Financial Statements).

In 2017, the heading “Other” principally corresponds to the impact of $855 million of finance lease contracts, the decrease of the asset for site restitution for an amount of $(773) million and the reclassification of assets classified in accordance with IFRS 5 "Non-current assets held for sale and discontinued operations” for $(2,604) million, related to the Martin Linge field in Norway.

In 2016, the heading “Disposals” mainly included the impact of sales in the Exploration & Production segment (sale of interests in the FUKA and SIRGE gas pipelines, and the St. Fergus gas terminal in the United Kingdom, and sale of a 20% stake in Kharyaga, Russia.).

In 2016, the heading “Depreciation and impairment” included the impact of impairments of assets recognized for an amount of $1,780 million (see Note 3 paragraph D to the Consolidated Financial Statements).

In 2016, the heading “Other” principally corresponded to the effect of the entries in the consolidation scope (including SAFT Group and Lampiris) for $751 million, to the reclassification of assets in accordance with IFRS 5 "Non-current assets held for sale and discontinued operations” for $(365) million and the reversal of the reclassification under IFRS 5 as at December 31, 2015 for $627 million corresponding to disposals.

In 2015, the heading “Disposals” mainly included the impact of sales in the Exploration & Production segment (sale of  4 blocks in Nigeria, West of Shetland fields in United Kingdom and a part of Fort Hills in Canada).

In 2015, the heading “Depreciation and impairment” included the impact of impairments of assets recognized for an amount of $5,544 million (see Note 3 paragraph D to the Consolidated Financial Statements).

In 2015, the heading “Other” principally corresponded to the increase of the asset for site restitution for an amount of $956 million and the reclassification of assets classified in accordance with IFRS 5 "Non-current assets held for sale and discontinued operations” for $1,128 million, primarily related to the Usan field in Nigeria.

Property, plant and equipment presented above include the following amounts for facilities and equipment under finance leases:

 

 

 

 

 

 

 

 

As of December 31, 2017

    

 

    

Depreciation and

    

 

(M$)

 

Cost

 

impairment

 

Net

Machinery, plant and equipment

 

1,140

 

(468)

 

672

Buildings

 

124

 

(57)

 

67

Other

 

378

 

(58)

 

320

Total

 

1,642

 

(583)

 

1,059

 

 

 

 

 

 

 

 

As of December 31, 2016

    

 

    

Depreciation and

    

 

(M$)

 

Cost

 

impairment

 

Net

Machinery, plant and equipment

 

426

 

(391)

 

35

Buildings

 

109

 

(38)

 

71

Other

 

179

 

(41)

 

138

Total

 

714

 

(470)

 

244

 

 

 

 

 

 

 

 

As of December 31, 2015

    

 

    

Depreciation and

    

 

(M$)

 

Cost

 

impairment

 

Net

Machinery, plant and equipment

 

426

 

(384)

 

42

Buildings

 

95

 

(38)

 

57

Other

 

175

 

(31)

 

144

Total

 

696

 

(453)

 

243