2.0.0.10 false Note 2 - Summary of Significant Accounting Policies 00901 - Disclosure - Note 2 - Summary of Significant Accounting Policies true false false false 1 usd $ false false Dollars Standard http://www.xbrl.org/2003/iso4217 USD iso4217 0 Shares Standard http://www.xbrl.org/2003/instance shares xbrli 0 2 Notes to Financial Statements [Abstract] 0 pbra_NotesToFinancialStatementsAbstract pbra false na duration string No definition available. false false false false false true false false false false false false 1 false false false false 0 0 false false false No definition available. false 3 Note 2 - Summary of Significant Accounting Policies 1 us-gaap_SignificantAccountingPoliciesTextBlock us-gaap true na duration string No definition available. false false false false false false false false false false false false 1 false false false false 0 0 <div style="PADDING-LEFT: 0%; PADDING-RIGHT: 0%"> 2.   Summary of Significant Accounting Policies In preparing these consolidated financial statements, the Company has followed accounting policies that are in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). The preparation of these financial statements requires the use of estimates and assumptions that affect the assets, liabilities, revenues and expenses reported in the financial statements, as well as amounts included in the notes thereto. Estimates adopted by management include: oil and gas reserves, pension and health care liabilities, depreciation, depletion and amortization, abandonment costs, fair value of financial instruments, contingencies and income taxes. While the Company uses its best estimates and judgments, actual results could differ from those estimates as future confirming events occur. Certain prior years amounts have been reclassified to conform to current year presentation standards. These reclassifications are not significant to the consolidated financial statements and had no impact on the Companys net income. Events subsequent to December 31, 2009 were evaluated until the time of the Form 6-K filing with the Securities and Exchange Commission. Refer to Note 2 (n) for discussion of Codification Topic 855, Subsequent Events. </div> <div style="PADDING-LEFT: 0%; PADDING-RIGHT: 0%"> a)   Basis of financial statements preparation The accompanying consolidated financial statements of Petróleo Brasileiro S.A. -Petrobras (the Company) have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and the rules and regulations of the Securities and Exchange Commission (SEC). U.S. GAAP differs in certain respects from Brazilian accounting practice as applied by Petrobras in its statutory financial statements prepared in accordance with Brazilian Corporate Law and regulations promulgated by the Brazilian Securities and Exchange Commission (CVM). The U.S. dollar amounts for the years presented have been translated from the Brazilian Real amounts in accordance Accounting Standard Codification ASC Topic 830 Foreign Currency Matters as applicable to entities operating in non-hyperinflationary economies. Transactions occurring in foreign currencies are first remeasured to the Brazilian Real and then translated to the U.S. dollar, with remeasurement gains and losses being recognized in the statements of income. While Petrobras has selected the U.S. Dollar as its reporting currency, the functional currency of Petrobras and all Brazilian subsidiaries is the Brazilian Real. The functional currency of Petrobras International Finance Company PifCo and some subsidiaries and certain of the special purpose companies that operate in the international economic environment is the U.S. dollar, and the functional currency of Petrobras Argentina is the Argentine Peso. The Company has translated all assets and liabilities into U.S. dollars at the current exchange rate (R$1.741 and R$2.337 to US$1.00 at December 31, 2009 and 2008, respectively), and all accounts in the statements of income and cash flows (including amounts relative to local currency indexation and exchange variances on assets and liabilities denominated in foreign currency) at the average rates prevailing during the year. The net translation gain in the amount of US$22,589 in 2009 (net translation loss in 2008 - US$20,001 and net translation gain in 2007 - US$10,357) resulting from this remeasurement process was excluded from income and presented as a cumulative translation adjustment (CTA) within Accumulated other comprehensive income in the consolidated statements of changes in shareholders equity. b)   Basis of consolidation The consolidated financial statements include the accounts of the Company and all majority-owned subsidiaries in which (a) the Company directly or indirectly has either a majority of the equity of the subsidiary or otherwise has management control, or (b) the Company has determined itself to be the primary beneficiary of a variable interest entity in accordance with Codification Topic 810-10-25 (Variable Interest Entities). </div> <div style="PADDING-LEFT: 0%; PADDING-RIGHT: 0%"> The following majority-owned subsidiaries and variable interest entities are consolidated: <div align="left"> <table style="WIDTH: 100%; FONT-FAMILY: '''''''''''''Times New Roman'''''''''''''; FONT-SIZE: 7pt" border="0" cellspacing="0"> <tr> <td></td> <td width="1%"></td> <td width="25%"></td> </tr> <tr valign="bottom"> <td style="BORDER-BOTTOM: #000000 1px solid; TEXT-INDENT: 26px" align="center">Subsidiary companies </td> <td> </td> <td style="BORDER-BOTTOM: #000000 1px solid" align="center">Activity </td> </tr> <tr valign="bottom"> <td style="BACKGROUND-COLOR: #cceeff" align="left">Petrobras Química S.A. - Petroquisa and subsidiaries </td> <td style="BACKGROUND-COLOR: #cceeff"> </td> <td style="BACKGROUND-COLOR: #cceeff" align="left">Petrochemical </td> </tr> <tr valign="bottom"> <td align="left">Petrobras Distribuidora S.A. - BR and subsidiaries </td> <td> </td> <td align="left">Distribution </td> </tr> <tr valign="bottom"> <td style="BACKGROUND-COLOR: #cceeff" align="left">Braspetro Oil Services Company - Brasoil and subsidiaries </td> <td style="BACKGROUND-COLOR: #cceeff"> </td> <td style="BACKGROUND-COLOR: #cceeff" align="left">International operations </td> </tr> <tr valign="bottom"> <td align="left">Braspetro Oil Company - BOC and subsidiaries </td> <td> </td> <td align="left">International operations </td> </tr> <tr valign="bottom"> <td style="BACKGROUND-COLOR: #cceeff" align="left">Petrobras International Braspetro B.V. - PIBBV and subsidiaries </td> <td style="BACKGROUND-COLOR: #cceeff"> </td> <td style="BACKGROUND-COLOR: #cceeff" align="left">International operations </td> </tr> <tr valign="bottom"> <td align="left">Petrobras Gás S.A. - Gaspetro and subsidiaries </td> <td> </td> <td align="left">Gas transportation </td> </tr> <tr valign="bottom"> <td style="BACKGROUND-COLOR: #cceeff" align="left">Petrobras International Finance Company - PifCo and subsidiaries </td> <td style="BACKGROUND-COLOR: #cceeff"> </td> <td style="BACKGROUND-COLOR: #cceeff" align="left">Financing </td> </tr> <tr valign="bottom"> <td align="left">Petrobras Transporte S.A. - Transpetro and subsidiary </td> <td> </td> <td align="left">Transportation </td> </tr> <tr valign="bottom"> <td style="BACKGROUND-COLOR: #cceeff" align="left">Downstream Participações Ltda. and subsidiary </td> <td style="BACKGROUND-COLOR: #cceeff"> </td> <td style="BACKGROUND-COLOR: #cceeff" align="left">Refining and distribution </td> </tr> <tr valign="bottom"> <td align="left">Petrobras Netherlands BV - PNBV and subsidiaries </td> <td> </td> <td align="left">Exploration and Production </td> </tr> <tr valign="bottom"> <td style="BACKGROUND-COLOR: #cceeff" align="left">Petrobras Comercializadora de Energia Ltda. - PBEN </td> <td style="BACKGROUND-COLOR: #cceeff"> </td> <td style="BACKGROUND-COLOR: #cceeff" align="left">Energy </td> </tr> <tr valign="bottom"> <td align="left">Petrobras Negócios Eletrônicos S.A. - E-Petro and subsidiary </td> <td> </td> <td align="left">Corporate </td> </tr> <tr valign="bottom"> <td style="BACKGROUND-COLOR: #cceeff" align="left">5283 Participações Ltda. </td> <td style="BACKGROUND-COLOR: #cceeff"> </td> <td style="BACKGROUND-COLOR: #cceeff" align="left">Corporate </td> </tr> <tr valign="bottom"> <td align="left">Fundo de Investimento Imobiliário RB Logística - FII </td> <td> </td> <td align="left">Corporate </td> </tr> <tr valign="bottom"> <td style="BACKGROUND-COLOR: #cceeff" align="left">FAFEN Energia S.A. and subsidiary </td> <td style="BACKGROUND-COLOR: #cceeff"> </td> <td style="BACKGROUND-COLOR: #cceeff" align="left">Energy </td> </tr> <tr valign="bottom"> <td align="left">Baixada Santista Energia Ltda. </td> <td> </td> <td align="left">Energy </td> </tr> <tr valign="bottom"> <td style="BACKGROUND-COLOR: #cceeff" align="left">Sociedade Fluminense de Energia Ltda. - SFE </td> <td style="BACKGROUND-COLOR: #cceeff"> </td> <td style="BACKGROUND-COLOR: #cceeff" align="left">Energy </td> </tr> <tr valign="bottom"> <td align="left">Termoaçu S.A. </td> <td> </td> <td align="left">Energy </td> </tr> <tr valign="bottom"> <td style="BACKGROUND-COLOR: #cceeff" align="left">Termobahia S.A. </td> <td style="BACKGROUND-COLOR: #cceeff"> </td> <td style="BACKGROUND-COLOR: #cceeff" align="left">Energy </td> </tr> <tr valign="bottom"> <td align="left">Termoceará Ltda. </td> <td> </td> <td align="left">Energy </td> </tr> <tr valign="bottom"> <td style="BACKGROUND-COLOR: #cceeff" align="left">Termorio S.A. </td> <td style="BACKGROUND-COLOR: #cceeff"> </td> <td style="BACKGROUND-COLOR: #cceeff" align="left">Energy </td> </tr> <tr valign="bottom"> <td align="left">Termomacaé Ltda. </td> <td> </td> <td align="left">Energy </td> </tr> <tr valign="bottom"> <td style="BACKGROUND-COLOR: #cceeff" align="left">Termomacaé Comercializadora de Energia Ltda. </td> <td style="BACKGROUND-COLOR: #cceeff"> </td> <td style="BACKGROUND-COLOR: #cceeff" align="left">Energy </td> </tr> <tr valign="bottom"> <td align="left">Ibiritermo S.A. </td> <td> </td> <td align="left">Energy </td> </tr> <tr valign="bottom"> <td style="BACKGROUND-COLOR: #cceeff" align="left">Usina Termelétrica de Juiz de Fora S.A. </td> <td style="BACKGROUND-COLOR: #cceeff"> </td> <td style="BACKGROUND-COLOR: #cceeff" align="left">Energy </td> </tr> <tr valign="bottom"> <td align="left">Petrobras Biocombustível S.A. </td> <td> </td> <td align="left">Energy </td> </tr> <tr valign="bottom"> <td style="BACKGROUND-COLOR: #cceeff" align="left">Marlim Participações S.A. and subsidiary </td> <td style="BACKGROUND-COLOR: #cceeff"> </td> <td style="BACKGROUND-COLOR: #cceeff" align="left">Exploration and Production </td> </tr> <tr valign="bottom"> <td align="left">NovaMarlim Participações S.A. and subsidiary </td> <td> </td> <td align="left">Exploration and Production </td> </tr> <tr valign="bottom"> <td style="BACKGROUND-COLOR: #cceeff" align="left">Companhia Locadora de Equipamentos Petrolíferos S.A. CLEP </td> <td style="BACKGROUND-COLOR: #cceeff"> </td> <td style="BACKGROUND-COLOR: #cceeff" align="left">Exploration and Production </td> </tr> <tr valign="bottom"> <td align="left">Comperj Participações S.A. </td> <td> </td> <td align="left">Petrochemical </td> </tr> <tr valign="bottom"> <td style="BACKGROUND-COLOR: #cceeff" align="left">Comperj Petroquímicos Básicos S.A. </td> <td style="BACKGROUND-COLOR: #cceeff"> </td> <td style="BACKGROUND-COLOR: #cceeff" align="left">Petrochemical </td> </tr> <tr valign="bottom"> <td align="left">Comperj PET S.A. </td> <td> </td> <td align="left">Petrochemical </td> </tr> <tr valign="bottom"> <td style="BACKGROUND-COLOR: #cceeff" align="left">Comperj Estirênicos S.A. </td> <td style="BACKGROUND-COLOR: #cceeff"> </td> <td style="BACKGROUND-COLOR: #cceeff" align="left">Petrochemical </td> </tr> <tr valign="bottom"> <td align="left">Comperj MEG S.A. </td> <td> </td> <td align="left">Petrochemical </td> </tr> <tr valign="bottom"> <td style="BACKGROUND-COLOR: #cceeff" align="left">Comperj Poliolefinas S.A. </td> <td style="BACKGROUND-COLOR: #cceeff"> </td> <td style="BACKGROUND-COLOR: #cceeff" align="left">Petrochemical </td> </tr> <tr valign="bottom"> <td align="left">Refinaria Abreu e Lima S.A. </td> <td> </td> <td align="left">Refining </td> </tr> <tr valign="bottom"> <td style="BACKGROUND-COLOR: #cceeff" align="left">Cordoba Financial Services Gmbh CFS and subsidiary </td> <td style="BACKGROUND-COLOR: #cceeff"> </td> <td style="BACKGROUND-COLOR: #cceeff" align="left">Corporate </td> </tr> </table> </div>   </div> <div style="PADDING-LEFT: 0%; PADDING-RIGHT: 0%"> <div align="left"> <table style="WIDTH: 100%; FONT-FAMILY: ''''''''''''Times New Roman''''''''''''; FONT-SIZE: 7pt" border="0" cellspacing="0"> <tr> <td></td> <td width="1%"></td> <td width="25%"></td> </tr> <tr valign="bottom"> <td style="BORDER-BOTTOM: #000000 1px solid" align="center">Special purpose entities consolidated according to ASC TOPIC 810-10-25 </td> <td> </td> <td style="BORDER-BOTTOM: #000000 1px solid" align="center">Activity </td> </tr> <tr valign="bottom"> <td style="BACKGROUND-COLOR: #cceeff" align="left">Albacora Japão Petróleo Ltda. </td> <td style="BACKGROUND-COLOR: #cceeff"> </td> <td style="BACKGROUND-COLOR: #cceeff" align="left">Exploration and Production </td> </tr> <tr valign="bottom"> <td align="left">Barracuda & Caratinga Leasing Company B.V. </td> <td> </td> <td align="left">Exploration and Production </td> </tr> <tr valign="bottom"> <td style="BACKGROUND-COLOR: #cceeff" align="left">Cayman Cabiunas Investments Co. </td> <td style="BACKGROUND-COLOR: #cceeff"> </td> <td style="BACKGROUND-COLOR: #cceeff" align="left">Exploration and Production </td> </tr> <tr valign="bottom"> <td style="TEXT-INDENT: 1px" align="left">Companhia de Desenvolvimento e Modernização de Plantas Industriais - CDMPI </td> <td> </td> <td align="left">Refining </td> </tr> <tr valign="bottom"> <td style="BACKGROUND-COLOR: #cceeff" align="left">PDET Offshore S.A. </td> <td style="BACKGROUND-COLOR: #cceeff"> </td> <td style="BACKGROUND-COLOR: #cceeff" align="left">Exploration and Production </td> </tr> <tr valign="bottom"> <td align="left">Companhia de Recuperação Secundária S.A. </td> <td> </td> <td align="left">Exploration and Production </td> </tr> <tr valign="bottom"> <td style="BACKGROUND-COLOR: #cceeff" align="left">Nova Transportadora do Nordeste S.A. NTN </td> <td style="BACKGROUND-COLOR: #cceeff"> </td> <td style="BACKGROUND-COLOR: #cceeff" align="left">Transportation </td> </tr> <tr valign="bottom"> <td align="left">Nova Transportadora do Sudeste S.A. - NTS </td> <td> </td> <td align="left">Transportation </td> </tr> <tr valign="bottom"> <td style="BACKGROUND-COLOR: #cceeff" align="left">Gasene Participações Ltda. </td> <td style="BACKGROUND-COLOR: #cceeff"> </td> <td style="BACKGROUND-COLOR: #cceeff" align="left">Transportation </td> </tr> <tr valign="bottom"> <td align="left">Manaus Geração Termelétrica Participações Ltda. </td> <td> </td> <td align="left">Energy </td> </tr> <tr valign="bottom"> <td style="BACKGROUND-COLOR: #cceeff" align="left">Codajás Coari Participações Ltda. </td> <td style="BACKGROUND-COLOR: #cceeff"> </td> <td style="BACKGROUND-COLOR: #cceeff" align="left">Transportation </td> </tr> <tr valign="bottom"> <td align="left">Charter Development LLC- CDC </td> <td> </td> <td align="left">Exploration and Production </td> </tr> <tr valign="bottom"> <td style="BACKGROUND-COLOR: #cceeff" align="left">Companhia Mexilhão do Brasil </td> <td style="BACKGROUND-COLOR: #cceeff"> </td> <td style="BACKGROUND-COLOR: #cceeff" align="left">Exploration and Production </td> </tr> <tr valign="bottom"> <td style="TEXT-INDENT: 1px" align="left">Fundo de Investimento em Direitos Creditórios não-padronizados do Sistema Petrobras (1) </td> <td> </td> <td align="left">Corporate </td> </tr> <tr> <td colspan="3"> </td> </tr> <tr valign="bottom"> <td colspan="3" align="left">(1) At December 31, 2009, the Company had amounts invested in the Petrobras Groups Non-Standardized Credit Rights Investment Fund (Fundo de Investimento em Direitos Creditórios não-padronizados do Sistema Petrobras - FIDC-NP). This investment fund is predominantly intended for acquiring credit rights, performed and/or non-performed, in the Petrobras System companies, and aims to optimize the Companys cash management. </td> </tr> </table> </div>   </div> c)   Cash and cash equivalents Cash and cash equivalents consist of highly liquid investments that are readily convertible into cash and have an original maturity of three months or less at date of acquisition. d)   Marketable securities Marketable securities have been classified by the Company as available-for-sale, held-to-maturity or trading based upon intended managements strategies with respect to such securities. The Company classifies and accounts for marketable securities under ASC Topic 320 - Investments. Trading securities are marked-to-market through current period earnings. Available-for-sale securities are marked-to-market through other comprehensive income. Held-to-maturity securities are recorded at amortized cost. The interest and monetary restatement of the securities are recorded in the statement of income. There were no material transfers between categories. e)   Inventories Inventories are stated as follows: Raw material comprises mainly the stocks of petroleum, which are stated at the average value of the importing and production costs, adjusted, when applicable, to their realization value; Oil products and fuel alcohol are stated, respectively, at average refining and purchase cost, adjusted when applicable to their realizable value; Materials and supplies are stated at average purchase cost, not exceeding replacement value and imports in transit are stated at identified cost. f)    Investments in non-consolidated companies The Company uses the equity method of accounting for all long-term investments for which it owns between 20% and 50% of the investees outstanding voting stock or has the ability to exercise significant influence over operating and financial policies of the investee without controlling it. The equity method requires periodic adjustments to the investment account to recognize the Companys proportionate share in the investees results, reduced by receipt of investees dividends. <div style="PADDING-LEFT: 0%; PADDING-RIGHT: 0%"> g)   Property, plant and equipment Costs incurred in oil and gas producing activities The costs incurred in connection with the exploration, development and production of oil and gas are recorded in accordance with the successful efforts method. This method requires that costs the Company incurs in connection with the drilling of developmental wells and facilities in proved reserve production areas and successful exploratory wells be capitalized. In addition, costs the Company incurs in connection with geological and geophysical activities are charged to the statements of income in the year incurred, and the costs relating to exploratory dry wells on unproved reserve properties are charged to the statements of income when determined as dry or uneconomical. Capitalized costs The capitalized costs are depreciated based on the unit-of-production method using proved developed reserves. These reserves are estimated by the Companys geologists and petroleum engineers in accordance with SEC standards and are reviewed annually, or more frequently when there are indications of significant changes. Property acquisition costs Costs of acquiring developed or undeveloped leaseholds including lease bonus, brokerage, and other fees are capitalized. The costs of undeveloped properties that become productive are transferred to a producing property account. Exploratory costs Exploratory wells that find oil and gas in an area requiring a major capital expenditure before production begins are evaluated annually to assure that commercial quantities of reserves have been found or that additional exploration work is underway or planned. Exploratory costs related to areas where commercial quantities have been found are capitalized, and exploratory costs where additional work is underway or planned continue to be capitalized pending final evaluation. Exploratory well costs not meeting either of these tests are charged to expense. All other exploratory costs (including geological and geophysical costs) are expensed as incurred. Exploratory dry holes are expensed. </div> <div style="PADDING-LEFT: 0%; PADDING-RIGHT: 0%"> Development costs Costs of development wells including wells, platforms, well equipment and attendant production facilities are capitalized. Production costs Costs incurred with producing wells are recorded as inventories and are expensed when the products are sold. Abandonment costs The Company makes its annual reviews and revision of its estimated costs associated with well abandonment and the demobilization of oil and gas production areas, considering new information about date of expected abandonment and revised cost estimates to abandon. The changes in estimated asset retirement obligation are principally related to the commercial declaration of new fields, certain changes in cost estimates, and revisions to abandonment information provided for non-operated joint ventures, considering the useful economic life of the fields and the expected cash flows, to present value, at a rate of interest free of risks, adjusted by the Petrobras risk. Depreciation, depletion and amortization Depreciation, depletion and amortization of leasehold costs of producing properties are recorded using the unit-of-production method applied on a field by field basis as a ratio of proved developed reserves. Production platform under capital lease which is not tied to the respective wells, are depreciated on a straight-line basis over the estimated useful lives of the platforms. Depreciation, depletion and amortization of all other capitalized costs (both tangible and intangible) of proved oil and gas producing properties is recorded using the unit-of-production method applied on a field by field basis as a ratio of proved developed reserves produced. The straight-line method is used for assets with a useful life shorter than the life of the field. </div> <div style="PADDING-LEFT: 0%; PADDING-RIGHT: 0%"> Other plant and equipment are depreciated on a straight line basis over their estimated useful lives. Impairment In accordance with Codification Topic 360-10, management reviews long-lived assets, primarily property, plant and equipment to be used in the business and capitalized costs relating to oil and gas producing activities, whenever events or changes in circumstances indicate that the carrying value of an asset or group of assets may not be recoverable on the bases of undiscounted future cash flows. The reviews are carried out at the lowest level of assets to which the Company is able to attribute identifiable future cash flows. The net book value of the underlying assets is adjusted to their fair value using a discounted future cash flows model, if the sum of the expected undiscounted future cash flows is less than the book value. The main assumptions of cash flows are: prices based on last strategic plan presented, production curves associated to existent projects comprising the Companys portfolio, operating market costs and investments needed for projects conclusion. Maintenance and repairs Maintenance and repairs, that do not embody significant improvements, are expensed as incurred, as well as planned major maintenances. Expenditures which appreciably extend the life, increase the capacity, or improve the efficiency of existing property are capitalized. Capitalized interest Interest is capitalized in accordance with Codification Topic 835-20 -Capitalization of Interest Cost. Interest is capitalized on specific projects when a construction process involves considerable time and involves major capital expenditures. Capitalized interest is allocated to property, plant and equipment and amortized over the estimated useful lives or unit-of-production method of the related assets. Interest is capitalized at the Companys weighted average cost of borrowings. </div> h)  Revenues, costs and expenses Revenue from sales of crude oil and oil products, petrochemical products, natural gas and other related products is recognized when title passes to the customer, because at that time the amount can be reasonably measured, collectibility is reasonably assured, persuasive evidence of an arrangement exists, the sellers price to the buyer is fixed or determinable and the significant risks and rewards of ownership have been transferred. Title is transferred to the customer when delivery occurs pursuant to the terms of the sales contracts. Revenues from the production of natural gas properties in which Petrobras has an interest with other producers are recognized based on the actual volumes sold during the period. Subsequent adjustments to revenues based on production sharing agreements or volumetric delivery differences are not significant. Costs and expenses are accounted for on an accrual basis. i)    Income taxes The Company accounts for income taxes in accordance with Codification Topic 740 -Accounting for Income, which requires an asset and liability approach to recording current and deferred taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company records the tax benefit of all net operating losses as a deferred tax asset and recognizes a valuation allowance for any part of this benefit which management believes will not be recovered against future taxable income using a more likely than not criterion. In accordance with Codification Topic 740-10, the Company recognizes the effect of an income tax position only if that position is more likely that not of being sustained upon examination, based on technical merits of the position. A recognized income tax position is measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgement occurs. The Company records interests and penalties related to unrecognized tax benefits in Other expenses.   <div style="PADDING-LEFT: 0%; PADDING-RIGHT: 0%"> j)    Employees postretirement benefits The Company sponsors a contributory defined-benefit pension plan covering substantially all of its employees, which is accounted and disclosured for by the Company in accordance with Codification Topic 715 Compensation-Retirement Benefits. In addition, the Company provides certain health care benefits for retired employees and their dependents. The cost of such benefits is recognized in accordance with Codification Topic 715 Compensation-Retirement Benefits. The Company also contributes to the Brazilian pension and government sponsored pensions of international subsidiaries, social security and redundancy plans at rates based on payroll, and such contributions are expensed as incurred. Further indemnities may be payable upon involuntary severance of employees but, based on current operating plans, management does not believe that any amounts payable under this plan will be significant. k)   Earnings per share Earnings per share are computed using the two-class method, which is an earnings allocation formula that determines earnings per share for both preferred shares, which are participating securities and common shares as if all of the net income for each year had been distributed in accordance with a predetermined formula described in Note 17(e). l)    Accounting for derivatives and hedging activities The Company applies Codification Topic 815 Derivatives and Hedging, together with its amendments and interpretations, referred to collectively herein as ASC 815. These rules require that all derivative instruments be recorded in the balance sheet of the Company as either an asset or a liability and measured at fair value. ASC 815 requires that changes in the derivatives fair value be recognized in the income statement unless specific hedge accounting criteria are met; and the Company designates. For derivatives designated as accounting hedges, fair value adjustments are recorded either in the income statements or Accumulated other comprehensive income, a component of shareholders equity, depending upon the type of accounting hedge and the degree of hedge effectiveness. </div> <div style="PADDING-LEFT: 0%; PADDING-RIGHT: 0%"> The Company uses derivative financial instruments, not designated as hedge accounting, to mitigate the risk of unfavorable price movements for crude oil purchases. These instruments are marked-to-market with the associated gains or losses recognized as Financial income or Financial expenses. The Company may also use non-hedging derivatives to mitigate the risk of unfavorable exchange-rate movements on its foreign currency-denominated funding. Gains and losses from changes in the fair value of these contracts are recognized as Financial income or Financial expenses. The Company may also use hedging derivatives to protect exchange of interest rates in different currencies. These hedging derivatives used as well as the risk being hedged are accounted for a cash flow model. Under this model, the gains and losses associated with the derivative instruments are deferred and recorded in Accumulated other comprehensive income until such time as the hedged transaction impacts earnings, with the exception of any hedge ineffectiveness; which is recorded directly in the statements of income. m)   Recently issued accounting pronouncements      Transfers and Servicing (ASC 860), Accounting for Transfers of Financial Assets (ASU 2009-16) The FASB issued ASU 2009-16 in December 2009. This standard removes the concept of a Qualifying Special Purpose Entity (QSPE) and the exception for QSPE consolidation and clarifies the requirements for financial asset transfers eligible for sale accounting. ASU 2009-17 is effective for the Company in January 1, 2010, and is not expected to have a material impact on the Companys results of operations, financial position or liquidity.      Consolidation (ASC 810), Improvements to Financial Reporting by Enterprises Involved With Variable Interest Entities (ASU 2009-17) The FASB issued ASU 2009-17 in December 2009. This standard became effective for the Company January 1, 2010. ASU 2009-17 requires the enterprise to qualitatively assess if it is the primary beneficiary of a variable-interest entity (VIE), and, if so, the VIE must be consolidated. Additionally, this Statement requires continuous assessments of whether an enterprise is the primary beneficiary of a VIE. ASU 2009-17 is effective for the Company in January, 2010, and is not expected to have a material impact on the Companys results of operations, financial position or liquidity. </div> <div style="PADDING-LEFT: 0%; PADDING-RIGHT: 0%"> n)   Recently adopted accounting pronouncements      Codification The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2009-01 in June 2009. This Update, also issued as FASB Statement of Financial Accounting Standards (SFAS) No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, is effective for financial statements issued after September 15, 2009. Update 2009-01 requires that the FASBs Accounting Standards Codification (ASC) become the sole source of authoritative U.S. generally accepted accounting principles recognized by the FASB for nongovernmental entities. The Codification is meant to simplify user access to all authoritative GAAP by reorganizing GAAP pronouncements into roughly 90 accounting topics within a consistent structure. All previous level (a)-(d) US GAAP standards issued by a standard setter are superseded. Level (a)-(d) US GAAP refers to the previous accounting hierarchy. All other accounting literature not included in the Codification is nonauthoritative. Following this Statement, the Board will not issue new standards in the form of Statements, FASB Staff Positions, or Emerging Issues Task Force Abstracts. Instead, it will issue Accounting Standards Updates. The Board will not consider Accounting Standards Updates as authoritative in their own right. Accounting Standards Updates will serve only to update the Codification. Petrobras adopted this Update effective July 1, 2009.      FASB Statement No. 141 (revised 2007), Business Combinations (SFAS 141-R) In December 2007, the FASB issued SFAS 141-R, which was subsequently amended by FASB Staff Position (FSP) FAS 141 (R)-1 in April 2009. SFAS 141-R apllies prospectively to all business combinations ocurring on or after January, 2009. This Statement was codified into FASB ASC Topic 805, Business combinations. This statement requires the acquiring entity in a business combination to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date to be measured at their respective fair values. Topic 805 changes the accounting treatment for the following items: acquisition-related costs and restructuring costs to be generally expensed when incurred; in-process research and development to be recorded at fair value as an indefinite-lived intangible asset at the acquisition date; changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition to be generally recognized in income tax expense. Topic 805 also includes a substantial number of new disclosures requirements. There was no impact to the Companys consolidated financial statements from the implementation of this Topic. </div> <div style="PADDING-LEFT: 0%; PADDING-RIGHT: 0%">      FASB Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51 (SFAS 160) In December 2007, the FASB issued SFAS 160, which establishes new accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. This Statement was codified into Topic 810, Consolidation. Topic 810 was implemented on January 1, 2009. As a result of the implementation, the Company reclassified on December 31, 2009, noncontrolling interest (minority interest) of US$1,362 as equity in the consolidated financial statements, and net income of US$1,319 attributable to the noncontrolling interest was included in consolidated net income on the face of the income statement.      FASB Statement No. 157, Fair Value Measurements (SFAS 157) Effective January 1, 2009, the Company implemented SFAS No 157, Fair Value Measurements for nonfinancial assets and nonfinancial liabilities measured at fair value, except those that are recognized or disclosed on a recurring basis (at least annually). This Statement was codified into Topic ASC 820 Fair Value Measurement and Disclosures. There was no impact to the Companys consolidated financial statements from the implementation of this Topic for nonfinancial assets and liabilities, other than additional disclosures that have been incorporated into Note 21 of these financial statements.      FASB Staff Position (FSP) No. 132(R)-1, Employers Disclosures about Postretirement Benefit Plan Assets ((FSP) No. 132(R)-1) In December 2008, the FASB issued (FSP) No. 132(R)-1, which amends SFAS 132(R) and was codified into FASB ASC Topic 715 CompensationRetirement Benefits. This orientation provides guidance on an employers disclosures about plan assets of a defined benefit pension or other postretirement plan. This FSP requires disclosures about: (a) Investment Policies and Strategies; (b) Categories of Plan Assets; (c) Fair Value Measurements of Plan Assets; and (d) Significant Concentrations of Risk. Effective December 31, 2009, the Company adopted this FSP. There was no impact to the Companys consolidated financial statements from the implementation of this Topic, other than additional disclosures that have been incorporated into Note 16 (b). </div> <div style="PADDING-LEFT: 0%; PADDING-RIGHT: 0%">      FASB Statement No. 165, Subsequent Events (SFAS 165) Effective April 1, 2009, the Company adopted SFAS 165, Subsequent Events. This Statement was codified into FASB ASC Topic 855, Subsequent Events. Topic 855 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. Topic 855 did not change significantly the current practice previously provided in auditing literature, except for introducing the concept of financial statements being available to be issued. It requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date, that is, whether that date represents the date the financial statements were issued or were available to be issued. This Statement is not expected to result in any significant changes in the subsequent events reported by the Company. Refer to Note 2 for the Topic 855 related disclosure for the year ended December 31, 2009.      Oil and gas reserves estimation and disclosure The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2010-03 in January 2010. The objective of the amendment included in this Update is to align the oil and gas reserve estimation and disclosure requirements of the Extractive Activities - Oil and Gas (Topic 932) with the requirements in the Securities and Exchange Commission final rule, Modernization of the Oil and Gas Reporting Requirements. The main provisions of the ASU No. 2010-03 include the following: Expanding the definition of oil and gas production activities to include nontraditional reserves, such as bitumen.    Amending the definition of proved oil and gas reserves to indicate that entities must use average of the first-day-of-the-month for the 12-month period, rather than year end price when estimating whether reserve quantities are economical to produce.    Requiring that disclosures about equity method investments be in the same level of detail as is required for consolidated investments.    Modifying the definition of geographic area for disclosure of reserve estimates and production. </div> <div style="PADDING-LEFT: 0%; PADDING-RIGHT: 0%">    Permitting the use of new reliable technologies to establish reasonable certainty of proved reserves. As required be the ASU No. 2010-03, the Company effectively adopted it in December 31, 2009. Adoption of these requirements did not significantly impact the Companys reported reserves or our consolidated financial statements. </div> 2.   Summary of Significant Accounting Policies In preparing these consolidated financial statements, the Company has followed accounting false false false This element may be used to describe all significant accounting policies of the reporting entity. Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Principles Board Opinion (APB) -Number 22 -Paragraph 8 false false 1 2 false UnKnown UnKnown UnKnown false true