Page 92

APACHE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Fair Value Measurements Certain assets and liabilities are reported at fair value on a recurring basis in Apache’s consolidated balance sheet. Accounting Standards Codification (ASC) 820-10-35 provides a hierarchy that prioritizes and defines the types of inputs used to measure fair value. The fair value hierarchy gives the highest priority to Level 1 inputs, which consist of unadjusted quoted prices for identical instruments in active markets. Level 2 inputs consist of quoted prices for similar instruments. Level 3 valuations are derived from inputs that are significant and unobservable; hence, these valuations have the lowest priority. The valuation techniques that may be used to measure fair value include a market approach, an income approach, and a cost approach. A market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. An income approach uses valuation techniques to convert future amounts to a single present amount based on current market expectations, including present value techniques, option-pricing models, and the excess earnings method. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement cost). Recurring fair value measurements are presented in further detail in Note 6—Debt and Note 9—Retirement and Deferred Compensation Plans. Apache also uses fair value measurements on a nonrecurring basis as indicated by certain qualitative assessments of its assets. For the year ended December 31, 2015, the Company recorded asset impairments totaling $1.9 billion in connection with fair value assessments in the current low commodity price environment. Impairments totaling $1.7 billion were recorded for certain gathering, transmission, and processing (GTP) facilities, which were written down to their fair values. These GTP impairments are discussed in further detail below in “Gathering, Transmission, and Processing Facilities.” Also in 2015, the Company recorded $148 million for the impairment of an equity method investment sold in the fourth quarter and $55 million for inventory write-downs. For a discussion of the equity method investment impairment, see Note 2—Acquisitions and Divestitures. For the year ended December 31, 2014, the Company recorded asset impairments totaling $1.9 billion in connection with fair value assessments, including $1.3 billion for the impairment of goodwill, $604 million for the impairment of assets held for sale, and other asset impairments. The Company also recorded $439 million in impairments related to the sale of Australia’s assets, which are classified as discontinued operations in 2014. For discussion of these impairments, see “Property and Equipment” and “Goodwill” below and Note 2—Acquisitions and Divestitures. Cash Equivalents The Company considers all highly liquid short-term investments with a maturity of three months or less at the time of purchase to be cash equivalents. These investments are carried at cost, which approximates fair value. As of December 31, 2015 and 2014, Apache had $1.5 billion and $0.8 billion, respectively, of cash and cash equivalents. Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable are stated at the historical carrying amount net of write-offs and an allowance for doubtful accounts. The carrying amount of Apache’s accounts receivable approximates fair value because of the short-term nature of the instruments. The Company routinely assesses the collectability of all material trade and other receivables. Many of Apache’s receivables are from joint interest owners on properties Apache operates. The Company may have the ability to withhold future revenue disbursements to recover any non-payment of F-10

Apache 2015 Summary Annual Report  

Adapting to a changing environment

Read more
Read more
Similar to
Popular now
Just for you