DVN » Topics » Chevron Common Stock

These excerpts taken from the DVN 10-K filed Feb 27, 2009.
Chevron Common Stock
 
Until October 31, 2008, Devon owned approximately 14.2 million shares of Chevron common stock. As described in Note 6, Devon exchanged these shares on October 31, 2008 for cash and certain oil and gas property interests owned by Chevron. These shares were held in connection with debt previously owed by Devon that contained an exchange option.
 
The shares of Chevron common stock and the exchange option embedded in the debt have always been recorded on Devon’s balance sheet at fair value. However, pursuant to accounting rules prior to January 1, 2007, only the change in fair value of the embedded option had historically been included in Devon’s results of operations. Conversely, the change in fair value of the Chevron common stock had not been included in Devon’s results of operations, but instead had been recorded directly to stockholders’ equity as part of “accumulated other comprehensive income.”
 
Effective January 1, 2007, Devon adopted Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of FASB Statement No. 115. Statement No. 159 allows a company the option to value its financial assets and liabilities, on an instrument by instrument basis, at fair value, and include the change in fair value of such assets and liabilities in its results of operations. Devon chose to apply the provisions of Statement No. 159 to its shares of Chevron common stock. Accordingly, beginning with the first quarter of 2007, the change in fair value of the Chevron common stock owned by Devon, along with the change in fair value of the related exchange option, are both included in Devon’s results of operations.
 
For the year ended December 31, 2008, the change in fair value of other financial instruments caption on Devon’s statement of operations includes an unrealized loss of $363 million related to the Chevron common stock and an unrealized gain of $109 million related to the embedded option. For the year ended December 31, 2007, the change in fair value of other financial instruments caption on Devon’s statement of operations includes an unrealized gain of $281 million related to the Chevron common stock and an unrealized loss of $248 million related to the embedded option. For the year ended December 31, 2006, prior to adopting Statement No. 159, an unrealized loss of $181 million related to the change in fair value of the embedded option were included in the change in fair value of other financial instruments caption on Devon’s statement of operations.
 
As of December 31, 2006, $364 million of after-tax unrealized gains related to Devon’s investment in the Chevron common stock was included in accumulated other comprehensive income. This is the amount of unrealized gains that, prior to Devon’s adoption of Statement No. 159, had not been recorded in Devon’s historical results of operations. Upon the adoption of Statement No. 159 as of January 1, 2007, this $364 million net unrealized gain was reclassified on Devon’s balance sheet from accumulated other comprehensive income to retained earnings.
 
In conjunction with the adoption of Statement No. 159, Devon also adopted on January 1, 2007 Statement of Financial Accounting Standards No. 157, Fair Value Measurements. Statement No. 157 provides a common definition of fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements, but does not require any new fair value measurements. The adoption of Statement No. 157 had no impact on Devon’s financial statements, but the adoption did result in additional required disclosures as set forth in Note 11.


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Table of Contents

 
DEVON ENERGY CORPORATION AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
Chevron Common Stock
 
Until October 31, 2008, Devon owned approximately 14.2 million shares of Chevron common stock. As described in Note 6, Devon exchanged these shares on October 31, 2008 for cash and certain oil and gas property interests owned by Chevron. These shares were held in connection with debt previously owed by Devon that contained an exchange option.
 
The shares of Chevron common stock and the exchange option embedded in the debt have always been recorded on Devon’s balance sheet at fair value. However, pursuant to accounting rules prior to January 1, 2007, only the change in fair value of the embedded option had historically been included in Devon’s results of operations. Conversely, the change in fair value of the Chevron common stock had not been included in Devon’s results of operations, but instead had been recorded directly to stockholders’ equity as part of “accumulated other comprehensive income.”
 
Effective January 1, 2007, Devon adopted Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of FASB Statement No. 115. Statement No. 159 allows a company the option to value its financial assets and liabilities, on an instrument by instrument basis, at fair value, and include the change in fair value of such assets and liabilities in its results of operations. Devon chose to apply the provisions of Statement No. 159 to its shares of Chevron common stock. Accordingly, beginning with the first quarter of 2007, the change in fair value of the Chevron common stock owned by Devon, along with the change in fair value of the related exchange option, are both included in Devon’s results of operations.
 
For the year ended December 31, 2008, the change in fair value of other financial instruments caption on Devon’s statement of operations includes an unrealized loss of $363 million related to the Chevron common stock and an unrealized gain of $109 million related to the embedded option. For the year ended December 31, 2007, the change in fair value of other financial instruments caption on Devon’s statement of operations includes an unrealized gain of $281 million related to the Chevron common stock and an unrealized loss of $248 million related to the embedded option. For the year ended December 31, 2006, prior to adopting Statement No. 159, an unrealized loss of $181 million related to the change in fair value of the embedded option were included in the change in fair value of other financial instruments caption on Devon’s statement of operations.
 
As of December 31, 2006, $364 million of after-tax unrealized gains related to Devon’s investment in the Chevron common stock was included in accumulated other comprehensive income. This is the amount of unrealized gains that, prior to Devon’s adoption of Statement No. 159, had not been recorded in Devon’s historical results of operations. Upon the adoption of Statement No. 159 as of January 1, 2007, this $364 million net unrealized gain was reclassified on Devon’s balance sheet from accumulated other comprehensive income to retained earnings.
 
In conjunction with the adoption of Statement No. 159, Devon also adopted on January 1, 2007 Statement of Financial Accounting Standards No. 157, Fair Value Measurements. Statement No. 157 provides a common definition of fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements, but does not require any new fair value measurements. The adoption of Statement No. 157 had no impact on Devon’s financial statements, but the adoption did result in additional required disclosures as set forth in Note 11.


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Table of Contents

 
DEVON ENERGY CORPORATION AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
Chevron
Common Stock



 





Until October 31, 2008, Devon owned approximately
14.2 million shares of Chevron common stock. As described
in Note 6, Devon exchanged these shares on October 31,
2008 for cash and certain oil and gas property interests owned
by Chevron. These shares were held in connection with debt
previously owed by Devon that contained an exchange option.


 





The shares of Chevron common stock and the exchange option
embedded in the debt have always been recorded on Devon’s
balance sheet at fair value. However, pursuant to accounting
rules prior to January 1, 2007, only the change in fair
value of the embedded option had historically been included in
Devon’s results of operations. Conversely, the change in
fair value of the Chevron common stock had not been included in
Devon’s results of operations, but instead had been
recorded directly to stockholders’ equity as part of
“accumulated other comprehensive income.”


 





Effective January 1, 2007, Devon adopted Statement of
Financial Accounting Standards No. 159, The Fair Value
Option for Financial Assets and Financial
Liabilities — Including an Amendment of FASB Statement
No. 115
. Statement No. 159 allows a company the
option to value its financial assets and liabilities, on an
instrument by instrument basis, at fair value, and include the
change in fair value of such assets and liabilities in its
results of operations. Devon chose to apply the provisions of
Statement No. 159 to its shares of Chevron common stock.
Accordingly, beginning with the first quarter of 2007, the
change in fair value of the Chevron common stock owned by Devon,
along with the change in fair value of the related exchange
option, are both included in Devon’s results of operations.


 





For the year ended December 31, 2008, the change in fair
value of other financial instruments caption on Devon’s
statement of operations includes an unrealized loss of
$363 million related to the Chevron common stock and an
unrealized gain of $109 million related to the embedded
option. For the year ended December 31, 2007, the change in
fair value of other financial instruments caption on
Devon’s statement of operations includes an unrealized gain
of $281 million related to the Chevron common stock and an
unrealized loss of $248 million related to the embedded
option. For the year ended December 31, 2006, prior to
adopting Statement No. 159, an unrealized loss of
$181 million related to the change in fair value of the
embedded option were included in the change in fair value of
other financial instruments caption on Devon’s statement of
operations.


 





As of December 31, 2006, $364 million of after-tax
unrealized gains related to Devon’s investment in the
Chevron common stock was included in accumulated other
comprehensive income. This is the amount of unrealized gains
that, prior to Devon’s adoption of Statement No. 159,
had not been recorded in Devon’s historical results of
operations. Upon the adoption of Statement No. 159 as of
January 1, 2007, this $364 million net unrealized gain
was reclassified on Devon’s balance sheet from accumulated
other comprehensive income to retained earnings.


 





In conjunction with the adoption of Statement No. 159,
Devon also adopted on January 1, 2007 Statement of
Financial Accounting Standards No. 157, Fair Value
Measurements
. Statement No. 157 provides a common
definition of fair value, establishes a framework for measuring
fair value and expands disclosures about fair value
measurements, but does not require any new fair value
measurements. The adoption of Statement No. 157 had no
impact on Devon’s financial statements, but the adoption
did result in additional required disclosures as set forth in
Note 11.





85





Table of Contents





 




DEVON
ENERGY CORPORATION AND SUBSIDIARIES




 




NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS —
(Continued)


 






Chevron
Common Stock



 





Until October 31, 2008, Devon owned approximately
14.2 million shares of Chevron common stock. As described
in Note 6, Devon exchanged these shares on October 31,
2008 for cash and certain oil and gas property interests owned
by Chevron. These shares were held in connection with debt
previously owed by Devon that contained an exchange option.


 





The shares of Chevron common stock and the exchange option
embedded in the debt have always been recorded on Devon’s
balance sheet at fair value. However, pursuant to accounting
rules prior to January 1, 2007, only the change in fair
value of the embedded option had historically been included in
Devon’s results of operations. Conversely, the change in
fair value of the Chevron common stock had not been included in
Devon’s results of operations, but instead had been
recorded directly to stockholders’ equity as part of
“accumulated other comprehensive income.”


 





Effective January 1, 2007, Devon adopted Statement of
Financial Accounting Standards No. 159, The Fair Value
Option for Financial Assets and Financial
Liabilities — Including an Amendment of FASB Statement
No. 115
. Statement No. 159 allows a company the
option to value its financial assets and liabilities, on an
instrument by instrument basis, at fair value, and include the
change in fair value of such assets and liabilities in its
results of operations. Devon chose to apply the provisions of
Statement No. 159 to its shares of Chevron common stock.
Accordingly, beginning with the first quarter of 2007, the
change in fair value of the Chevron common stock owned by Devon,
along with the change in fair value of the related exchange
option, are both included in Devon’s results of operations.


 





For the year ended December 31, 2008, the change in fair
value of other financial instruments caption on Devon’s
statement of operations includes an unrealized loss of
$363 million related to the Chevron common stock and an
unrealized gain of $109 million related to the embedded
option. For the year ended December 31, 2007, the change in
fair value of other financial instruments caption on
Devon’s statement of operations includes an unrealized gain
of $281 million related to the Chevron common stock and an
unrealized loss of $248 million related to the embedded
option. For the year ended December 31, 2006, prior to
adopting Statement No. 159, an unrealized loss of
$181 million related to the change in fair value of the
embedded option were included in the change in fair value of
other financial instruments caption on Devon’s statement of
operations.


 





As of December 31, 2006, $364 million of after-tax
unrealized gains related to Devon’s investment in the
Chevron common stock was included in accumulated other
comprehensive income. This is the amount of unrealized gains
that, prior to Devon’s adoption of Statement No. 159,
had not been recorded in Devon’s historical results of
operations. Upon the adoption of Statement No. 159 as of
January 1, 2007, this $364 million net unrealized gain
was reclassified on Devon’s balance sheet from accumulated
other comprehensive income to retained earnings.


 





In conjunction with the adoption of Statement No. 159,
Devon also adopted on January 1, 2007 Statement of
Financial Accounting Standards No. 157, Fair Value
Measurements
. Statement No. 157 provides a common
definition of fair value, establishes a framework for measuring
fair value and expands disclosures about fair value
measurements, but does not require any new fair value
measurements. The adoption of Statement No. 157 had no
impact on Devon’s financial statements, but the adoption
did result in additional required disclosures as set forth in
Note 11.





85





Table of Contents





 




DEVON
ENERGY CORPORATION AND SUBSIDIARIES




 




NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS —
(Continued)


 






EXCERPTS ON THIS PAGE:

10-K (4 sections)
Feb 27, 2009
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