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 at least annually, and more frequently 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.

Market conditions continued to negatively impact our business in the first quarter of 2016. The rig count declined to historic lows during the quarter, in the face of continued depressed commodity prices, which created further widespread pricing pressure and activity reductions for our products and services on a global basis. As a result of these conditions and their corresponding impact on our business outlook, during the three months ended March 31, 2016, 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. Over the last four years, we have been systematically converting our pressure pumping fleet in North America over to the Frac of the Future design. As such, we impaired or wrote off a large portion of our older equipment during the first quarter of 2016. Additionally, current market conditions required us to take other actions to reduce some of our infrastructure and further reduce our global workforce in an effort to mitigate the impact of the industry downturn and better align our workforce with anticipated activity levels in the near-term. This resulted in a headcount reduction of over 6,000 during the first quarter of 2016, which resulted in severance costs relating to termination benefits during quarter. We also determined the cost of some of our inventory exceeded its market value, resulting in associated write-downs of its carrying value.

As a result of the events described above, we recorded a total of $2.8 billion in impairments and other charges during the first quarter of 2016, compared to $1.2 billion during the first quarter of 2015, which consisted of fixed asset impairments and write-offs, severance costs, impairments of intangible assets, inventory write-downs, country and facility closures, and other items.

The following table presents various charges we recorded during the three months ended March 31, 2016 and 2015 as a result of the downturn in the energy industry and other matters, all of which were recorded within "Impairments and other charges" on our condensed consolidated statements of operations:



	Three Months Ended
Millions of dollars	March 31, 2016		March 31, 2015
Industry downturn:
Fixed asset impairments	$	2,445	$	303
Severance costs	135		134
Intangible asset impairments	87		165
Inventory write-downs	66		309
Other	31		150
Other matters:
Country closures	2		75
Other	—		72
Total impairments and other charges	$	2,766	$	1,208

Additionally, we performed a goodwill impairment assessment as of March 31, 2016. 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, 2016. This analysis consists of a discounted cash flow based on management’s short-term and long-term forecast of operating performance for each reporting unit. Should current market conditions worsen or continue to persist for an extended period of time, an impairment of the carrying value of our goodwill could occur, particularly in our Completion and Production operating segment.