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HALLIBURTON OUTLINES COMPANY’s REVENUE RECOGNITION ACCOUNTING PRACTICE
- Company publishes facts, confirms GAAP compliance -
In light of several recent news articles regarding accounting questions raised by a former employee, the Company provides the following facts:
- When the Company was first made aware of the allegations, the allegations were thoroughly reviewed by the Audit Committee of the Company's Board of Directors which directed an independent investigation. The findings of this independent investigation, along with those from thorough reviews by the Company's external audit firm, all concluded that the allegations were without merit and that the Company's accounting for these matters was in accordance with U.S. generally accepted accounting principles (GAAP).
- The Securities and Exchange Commission reviewed the matter and Halliburton was advised twice by the SEC (in letters dated September 21, 2006, and April 30, 2007) that the inquiry had been terminated and no enforcement action had been recommended to the Commission.
- The former employee filed a retaliation complaint with the U.S. Department of Labor in May 2006. This complaint was investigated and determined by the DoL to be without merit.
- The former employee has since filed an appeal of the above-referenced DoL decision to dismiss the matter and Halliburton expects that the Company will prevail when it comes to trial before an administrative law judge later this year.
With regard to Halliburton’s revenue recognition practices, the Company’s policies are rigorous and comply with U.S. generally accepted accounting principles (GAAP) in conjunction with recognized industry practice.
In general terms, Halliburton recognizes revenue from product sales when title passes to the customer, the customer assumes risks and rewards of ownership, and collectibility is reasonably assured.
In a limited number of situations, the customer may request that Halliburton’s warehouse storage facility be the designated intermediate delivery site. In such cases a number of conditions all must be met in order for revenue to be recognized, including:
- The title and risks of ownership must have contractually passed to the customer;
- The customer has no right of return in regards to the equipment;
- The delivery date for the equipment is consistent with customary industry practice, which may involve the scheduling of offshore rig availability;
- Halliburton has no further obligations to the customer in regards to the equipment;
- The equipment is segregated from other equipment in the warehouse storage facility and will not be used to fill other customer’s orders; and
- The customer must have committed to purchase the equipment under our normal credit terms.
For example, a customer orders completion equipment for use in constructing an offshore well and the equipment takes several months to manufacture. The customer may also order additional, spare equipment to have on-hand to minimize costly rig downtime if the original equipment becomes damaged. The offshore rig itself has limited equipment storage space; however, when the equipment is needed, it is needed quickly. The customer will request Halliburton contractually to store this equipment in the Company’s warehouse storage facilities located onshore, while taking title to the equipment at the time it leaves the Company’s central manufacturing facility. The payment terms with the customer begin when the equipment leaves Halliburton’s central manufacturing facility and are not contingent on any additional services being provided. Any services that Halliburton may subsequently provide to install the equipment are separately contracted.
Media Contact
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Halliburton
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Halliburton
supplier_diversity@halliburton.com
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