Impairments and Other Charges

We carry a variety of long-lived assets on our balance sheet including property, plant and equipment, goodwill, and other intangibles. We conduct impairment tests on long-lived assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. We review the recoverability of the carrying value of our assets based upon estimated future cash flows while taking into consideration assumptions and estimates including the future use of the asset, remaining useful life of the asset, and service potential of the asset. Additionally, inventories are valued at the lower of cost or market.

During the first quarter of 2015, as a result of the recent downturn in the energy market and its corresponding impact on our business outlook, we determined the carrying amount of a number of our long-lived assets exceeded their respective fair values due to projected declines in asset utilization, and that the cost of some of our inventory exceeded its market value; therefore, we recorded corresponding impairments and other charges. Additionally, we initiated a company-wide reduction in workforce during the quarter intended to reduce costs and better align our workforce with anticipated activity levels in the near-term, which resulted in us recording severance costs relating to termination benefits. We also recorded a write-off of our operations in both Libya and Yemen due to our decision to exit our operations in these countries.

Primarily as a result of the events described above, we recorded a total of approximately $1.2 billion in charges during the first quarter of 2015, which consisted of asset impairments and write-offs, inventory write-downs, impairments of intangible assets, severance costs, country and facility closures, and other items. We also recorded a $199 million foreign currency exchange loss in Venezuela during the quarter as discussed in further detail below.

The following table presents various charges we recorded during the first quarter of 2015 as a result of the economic downturn and other matters:



Millions of dollars	March 31, 2015		Income Statement Classification
Economic downturn:
Inventory write-downs	$	309	Impairments and other charges
Fixed asset impairments	303		Impairments and other charges
Intangible asset impairments	165		Impairments and other charges
Severance costs	134		Impairments and other charges
Other	150		Impairments and other charges
Other matters:
Country closures	75		Impairments and other charges
Other	72		Impairments and other charges
Total impairments and other charges	$	1,208
Venezuela currency devaluation loss	199		Other, net
Total charges	$	1,407

Additionally, we determined that these recent events constituted a triggering event that would require us to update our goodwill impairment assessment through March 31, 2015. As a result of our analysis, we determined that the fair value of each reporting unit exceeded its net book value and therefore, no goodwill impairment was necessary as of March 31, 2015. A prolonged reduction in oil and natural gas prices may require us to record further asset impairments and other charges, including a potential impairment of the carrying value of our goodwill.

In February 2015, the Venezuelan government created a new foreign exchange rate mechanism, called the Marginal Currency System, or SIMADI. The new mechanism, which is the third system in a three-tier exchange control mechanism, is a floating market rate for the conversion of Bolívares to United States dollars based on supply and demand. We intend to utilize the SIMADI mechanism for liquidity purposes in our Venezuelan operations. We have historically remeasured our net monetary assets denominated in Bolívares using the official exchange rate of 6.3 Bolívares per United States dollar. During the first quarter of 2015, we began utilizing SIMADI to remeasure our net monetary assets denominated in Bolívares with a market rate of 192 Bolívares per United States dollar, which resulted in us recording a foreign currency loss of $199 million during the first quarter of 2015.