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Correction of Errors in Previously Reported Consolidated Financial Statements
12 Months Ended
Dec. 31, 2016
Correction of Errors in Previously Reported Consolidated Financial Statements  
Correction of Errors in Previously Reported Consolidated Financial Statements

Note 4—Correction of Errors in Previously Reported Consolidated Financial Statements

In calculating our income taxes for the year ended December 31, 2016, we identified errors in our previously issued financial statements for the interim and annual periods prior to December 31, 2016 related to the measurement of deferred taxes in relation to:  (a) the remeasurement of certain nonmonetary assets in Norway, (b) the analysis of our U.S. defined benefit pension plans and effect on other comprehensive income and (c) the assessment of realizability of our deferred tax assets and the need for valuation allowances.  We assessed the materiality of these errors in accordance with the U.S. Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) No. 99, Materiality and SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (“SAB 108”), using both the rollover method and the iron curtain method, as defined in SAB 108, and concluded the errors, including other adjustments discussed below, were immaterial to prior years but, if corrected in the current year, would have been material to the current year.  Under SAB 108, such prior‑year misstatements which, if corrected in the current year would be material to the current year, must be corrected by adjusting the prior‑year financial statements.  Correcting prior‑year financial statements for such immaterial misstatements does not require previously filed reports to be amended.

In addition to the adjustments related to the deferred taxes as noted above, we recorded other adjustments related to the years ended December 31, 2015 and 2014 and the quarterly periods in the nine months ended September 30, 2016 to correct for immaterial errors related to revenues, operating and maintenance costs, depreciation expense, losses on impairment and disposal of assets, interest income and income taxes.  These other adjustments were not previously recorded in the appropriate periods, as we concluded that they were immaterial to our previously issued consolidated financial statements.

For the year ended December 31, 2015, correction of these errors increased our income from continuing operations by $71 million and net income attributable to controlling interest by $74 million.  For the year ended December 31, 2014, correction of these errors decreased our loss from continuing operations by $66 million and net loss attributable to controlling interest by $74 million.  The cumulative effect of those adjustments reduced previously reported retained earnings by $11 million.  We also corrected our financial statements for each of the interim periods in the years ended December 31, 2016 and 2015 (see Note 22—Quarterly Results).

The effects of the corrections of the errors on our consolidated statements of operations, comprehensive income (loss) and balance sheets are presented in the tables below.  The corrections of the errors had no effect on the previously reported amounts of operating, investing, and financing cash flows on our consolidated statements of cash flows.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Years ended December 31, 2015

 

Years ended December 31, 2014

 

 

 

Previously

 

 

 

 

As

 

Previously

 

 

 

 

As

 

 

 

reported

    

Adjustments

    

adjusted

    

reported

    

Adjustments

    

adjusted

 

Operating revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contract drilling revenues

 

$

6,802

 

$

 —

 

$

6,802

 

$

8,952

 

$

11

 

$

8,963

 

Other revenues

 

 

584

 

 

 —

 

 

584

 

 

222

 

 

 —

 

 

222

 

 

 

 

7,386

 

 

 —

 

 

7,386

 

 

9,174

 

 

11

 

 

9,185

 

Costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating and maintenance

 

 

2,955

 

 

 —

 

 

2,955

 

 

5,110

 

 

(10)

 

 

5,100

 

Depreciation

 

 

963

 

 

 —

 

 

963

 

 

1,139

 

 

(10)

 

 

1,129

 

General and administrative

 

 

193

 

 

(1)

 

 

192

 

 

234

 

 

 —

 

 

234

 

 

 

 

4,111

 

 

(1)

 

 

4,110

 

 

6,483

 

 

(20)

 

 

6,463

 

Loss on impairment

 

 

(1,867)

 

 

(8)

 

 

(1,875)

 

 

(4,043)

 

 

 —

 

 

(4,043)

 

Loss on disposal of assets, net

 

 

(28)

 

 

(8)

 

 

(36)

 

 

(26)

 

 

 —

 

 

(26)

 

Operating income (loss)

 

 

1,380

 

 

(15)

 

 

1,365

 

 

(1,378)

 

 

31

 

 

(1,347)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense), net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

22

 

 

 —

 

 

22

 

 

39

 

 

(19)

 

 

20

 

Interest expense, net of amounts capitalized

 

 

(432)

 

 

 —

 

 

(432)

 

 

(483)

 

 

 —

 

 

(483)

 

Gain (loss) on retirement of debt

 

 

23

 

 

 —

 

 

23

 

 

(13)

 

 

 —

 

 

(13)

 

Other, net

 

 

37

 

 

 —

 

 

37

 

 

35

 

 

 —

 

 

35

 

 

 

 

(350)

 

 

 —

 

 

(350)

 

 

(422)

 

 

(19)

 

 

(441)

 

Income (loss) from continuing operations before income tax expense

 

 

1,030

 

 

(15)

 

 

1,015

 

 

(1,800)

 

 

12

 

 

(1,788)

 

Income tax expense (benefit)

 

 

206

 

 

(86)

 

 

120

 

 

146

 

 

(54)

 

 

92

 

Income (loss) from continuing operations

 

 

824

 

 

71

 

 

895

 

 

(1,946)

 

 

66

 

 

(1,880)

 

Income (loss) from discontinued operations, net of tax

 

 

2

 

 

 —

 

 

2

 

 

(20)

 

 

 —

 

 

(20)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

826

 

 

71

 

 

897

 

 

(1,966)

 

 

66

 

 

(1,900)

 

Net income (loss) attributable to noncontrolling interest

 

 

35

 

 

(3)

 

 

32

 

 

(53)

 

 

(8)

 

 

(61)

 

Net income (loss) attributable to controlling interest

 

$

791

 

$

74

 

$

865

 

$

(1,913)

 

$

74

 

$

(1,839)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per share-basic

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) from continuing operations

 

$

2.16

 

$

0.20

 

$

2.36

 

$

(5.23)

 

$

0.21

 

$

(5.02)

 

Earnings (loss) from discontinued operations

 

 

 —

 

 

 —

 

 

 —

 

 

(0.06)

 

 

 —

 

 

(0.06)

 

Earnings (loss) per share

 

$

2.16

 

$

0.20

 

$

2.36

 

$

(5.29)

 

$

0.21

 

$

(5.08)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per share-diluted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) from continuing operations

 

$

2.16

 

$

0.20

 

$

2.36

 

$

(5.23)

 

$

0.21

 

$

(5.02)

 

Earnings (loss) from discontinued operations

 

 

 —

 

 

 —

 

 

 —

 

 

(0.06)

 

 

 —

 

 

(0.06)

 

Earnings (loss) per share

 

$

2.16

 

$

0.20

 

$

2.36

 

$

(5.29)

 

$

0.21

 

$

(5.08)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31, 2015

 

Year ended December 31, 2014

 

 

 

Previously

 

 

 

 

As

 

Previously

 

 

 

 

As

 

 

 

reported

    

Adjustments

 

adjusted

 

reported

    

Adjustments

 

adjusted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

826

 

$

71

 

$

897

 

$

(1,966)

 

$

66

 

$

(1,900)

 

Net income (loss) attributable to noncontrolling interest

 

 

35

 

 

(3)

 

 

32

 

 

(53)

 

 

(8)

 

 

(61)

 

Net income (loss) attributable to controlling interest

 

 

791

 

 

74

 

 

865

 

 

(1,913)

 

 

74

 

 

(1,839)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Components of net periodic benefit costs before reclassifications

 

 

63

 

 

 —

 

 

63

 

 

(170)

 

 

 —

 

 

(170)

 

Components of net periodic benefit costs reclassified to net income

 

 

23

 

 

 —

 

 

23

 

 

17

 

 

 —

 

 

17

 

Gain on derivative instruments reclassified to net income

 

 

 —

 

 

 —

 

 

 —

 

 

(2)

 

 

 —

 

 

(2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss) before income taxes

 

 

86

 

 

 —

 

 

86

 

 

(155)

 

 

 —

 

 

(155)

 

Income taxes related to other comprehensive income

 

 

(16)

 

 

(1)

 

 

(17)

 

 

13

 

 

22

 

 

35

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss)

 

 

70

 

 

(1)

 

 

69

 

 

(142)

 

 

22

 

 

(120)

 

Other comprehensive income (loss) attributable to noncontrolling interest

 

 

 —

 

 

 —

 

 

 —

 

 

 

 

 —

 

 

 —

 

Other comprehensive income (loss) attributable to controlling interest

 

 

70

 

 

(1)

 

 

69

 

 

(142)

 

 

22

 

 

(120)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income (loss)

 

 

896

 

 

70

 

 

966

 

 

(2,108)

 

 

88

 

 

(2,020)

 

Total comprehensive income (loss) attributable to noncontrolling interest

 

 

35

 

 

(3)

 

 

32

 

 

(53)

 

 

(8)

 

 

(61)

 

Total comprehensive income (loss) attributable to controlling interest

 

$

861

 

$

73

 

$

934

 

$

(2,055)

 

$

96

 

$

(1,959)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2015

 

 

 

 

 

Previously

 

 

 

 

As

 

 

    

 

 

reported

    

Adjustments

 

adjusted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

$

2,339

 

$

 —

 

$

2,339

 

Accounts receivable, net

 

 

 

 

 

 

 

 —

 

 

 

 

Trade

 

 

 

 

1,343

 

 

 —

 

 

1,343

 

Other

 

 

 

 

36

 

 

21

 

 

57

 

Materials and supplies, net

 

 

 

 

635

 

 

(8)

 

 

627

 

Restricted cash

 

 

 

 

340

 

 

 —

 

 

340

 

Other current assets

 

 

 

 

92

 

 

 —

 

 

92

 

Total current assets

 

 

 

 

4,785

 

 

13

 

 

4,798

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property and equipment

 

 

 

 

26,274

 

 

(9)

 

 

26,265

 

Less accumulated depreciation

 

 

 

 

(5,456)

 

 

 —

 

 

(5,456)

 

Property and equipment, net

 

 

 

 

20,818

 

 

(9)

 

 

20,809

 

Deferred income taxes, net

 

 

 

 

316

 

 

95

 

 

411

 

Other assets

 

 

 

 

410

 

 

3

 

 

413

 

Total assets

 

 

 

$

26,329

 

$

102

 

$

26,431

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and equity

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

 

 

$

448

 

$

7

 

$

455

 

Accrued income taxes

 

 

 

 

82

 

 

(27)

 

 

55

 

Debt due within one year

 

 

 

 

1,093

 

 

 —

 

 

1,093

 

Other current liabilities

 

 

 

 

1,046

 

 

16

 

 

1,062

 

Total current liabilities

 

 

 

 

2,669

 

 

(4)

 

 

2,665

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt

 

 

 

 

7,397

 

 

 —

 

 

7,397

 

Deferred income taxes, net

 

 

 

 

339

 

 

(110)

 

 

229

 

Other long-term liabilities

 

 

 

 

1,108

 

 

27

 

 

1,135

 

Total long-term liabilities

 

 

 

 

8,844

 

 

(83)

 

 

8,761

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

Redeemable noncontrolling interest

 

 

 

 

8

 

 

(3)

 

 

5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

 

 

5,193

 

 

 —

 

 

5,193

 

Additional paid-in capital

 

 

 

 

5,739

 

 

(3)

 

 

5,736

 

Treasury shares, at cost

 

 

 

 

(240)

 

 

 —

 

 

(240)

 

Retained earnings

 

 

 

 

4,140

 

 

138

 

 

4,278

 

Accumulated other comprehensive loss

 

 

 

 

(334)

 

 

57

 

 

(277)

 

Total controlling interest shareholders’ equity

 

 

 

 

14,498

 

 

192

 

 

14,690

 

Noncontrolling interest

 

 

 

 

310

 

 

 —

 

 

310

 

Total equity

 

 

 

 

14,808

 

 

192

 

 

15,000

 

Total liabilities and equity

 

 

 

$

26,329

 

$

102

 

$

26,431