Inventories

3 Months Ended

Mar. 31, 2012

Note 3. Inventories

Inventories are stated at the lower of cost or market value. In the United States, we manufacture certain finished products and parts inventories for drill bits, completion products, bulk materials, and other tools that are recorded using the last-in, first-out method, which totaled $205 million as of March 31, 2012 and $160 million as of December 31, 2011. If the average cost method had been used, total inventories would have been $40 million higher than reported as of March 31, 2012 and $36 million higher than reported as of December 31, 2011. The cost of the remaining inventory was recorded on the average cost method. Inventories consisted of the following:

	March 31,		December 31,
Millions of dollars	2012		2011
Finished products and parts	$	2,050	$	1,801
Raw materials and supplies		764		673
Work in process		102		96
Total	$	2,916	$	2,570

Finished products and parts are reported net of obsolescence reserves of $111 million as of March 31, 2012 and $108 million as of December 31, 2011.

- Definition

The entire disclosure for inventory. This may include, but is not limited to, the basis of stating inventory, the method of determining inventory cost, the major classes of inventory, and the nature of the cost elements included in inventory. If inventory is stated above cost, accrued net losses on firm purchase commitments for inventory and losses resulting from valuing inventory at the lower-of-cost-or-market may also be included. For LIFO inventory, may disclose the amount and basis for determining the excess of replacement or current cost over stated LIFO value and the effects of a LIFO quantities liquidation that impacts net income.

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