Organization and Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2014 |
Accounting Policies [Abstract] | |
Organization and Principles of Consolidation | Organization and Principles of Consolidation |
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We are an independent energy company engaged in the exploration, development and production of crude oil, natural gas and natural gas liquids (NGLs). Our principal domestic areas of operation include the Mid-Continent, the Rocky Mountains and the onshore Gulf Coast regions of the United States. In addition, we have offshore oil developments in China. |
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Our consolidated financial statements include the accounts of Newfield Exploration Company, a Delaware corporation, and its subsidiaries. We proportionately consolidate our interests in oil and natural gas exploration and production ventures and partnerships in accordance with industry practice. All significant intercompany balances and transactions have been eliminated. Unless otherwise specified or the context otherwise requires, all references in these notes to “Newfield,” “we,” “us,” “our” or the “Company” are to Newfield Exploration Company and its subsidiaries. |
Discontinued Operations, Policy [Policy Text Block] | Discontinued Operations |
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Our businesses in Malaysia and China were classified as held for sale in the second quarter of 2013. As of December 31, 2014, our China business is no longer held for sale, as we concluded the marketing process and were unable to sell at an acceptable price given the significant decrease in oil prices in the fourth quarter of 2014. Therefore, our China business is included in continuing operations for all periods in these financial statements. The results of our Malaysia operations are reflected separately as discontinued operations in the consolidated statement of operations on a line immediately after "Income (loss) from continuing operations." See Note 3, "Discontinued Operations," for additional disclosures, as well as information regarding the sale of our Malaysia business, which closed in February 2014. These financial statements and notes are inclusive of our Malaysia operations unless otherwise noted. |
Dependence on Oil and Gas Prices | Risks and Uncertainties |
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As an independent oil and natural gas producer, our revenue, profitability and future rate of growth are substantially dependent on prevailing prices for oil, natural gas and NGLs. Historically, the energy markets have been very volatile, and there can be no assurance that commodity prices will not be subject to wide fluctuations in the future. A substantial or extended decline in commodity prices could have a material adverse effect on our financial position, results of operations, cash flows, access to capital and on the quantities of oil, natural gas and NGL reserves that we can economically produce. It is possible for any of these effects to occur in the near term, given the recent decline in commodity pricing. |
Use of Estimates | Use of Estimates |
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The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities; disclosure of contingent assets and liabilities at the date of the financial statements; the reported amounts of revenues and expenses during the reporting period; and the quantities and values of proved oil, natural gas and NGL reserves used in calculating depletion and assessing impairment of our oil and gas properties. Actual results could differ significantly from these estimates. Our most significant estimates are associated with the quantities of proved oil, natural gas and NGL reserves, the timing and amount of transfers of our unevaluated properties into our amortizable full cost pool and the fair value of both our derivative positions and our stock-based compensation liability awards. |
Reclassifications | Reclassifications |
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Certain reclassifications have been made to prior years’ reported amounts in order to conform to the current year presentation. These reclassifications did not impact our net income (loss), stockholders’ equity or cash flows. |
Revenue Recognition | Revenue Recognition |
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Substantially all of our oil, natural gas and NGLs are sold at market-based prices to a variety of purchasers under short-term contracts (less than 12 months). We also have long-term contracts in the Uinta Basin at market-based prices, less a variable differential that becomes fixed below certain market price thresholds. We record revenue when we deliver our production to the customer and collectability is reasonably assured. Revenues from the production of oil, natural gas and NGLs on properties in which we have joint ownership are recorded under the sales method. Under the sales method, the Company and other joint owners may sell more or less than their entitled share of production. Should the Company’s excess sales exceed our share of estimated remaining recoverable reserves, a liability is recorded. Differences between sales and our entitled share of production are not significant. |
Foreign Currency | Foreign Currency |
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The functional currency for our foreign operations is the U.S. dollar. Gains and losses incurred on transactions in a currency other than a country’s functional currency are recorded under the caption “Other income (expense) — Other, net” on our consolidated statement of operations. |
Cash and Cash Equivalents | Cash and Cash Equivalents |
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Cash and cash equivalents include highly liquid investments with a maturity of three months or less when acquired and are stated at cost, which approximates fair value. We invest cash in excess of near-term capital and operating requirements in U.S. Treasury Notes, Eurodollar time deposits and money market funds, which are classified as cash and cash equivalents on our consolidated balance sheet. |
Cash and Cash Equivalents, Restricted Cash and Cash Equivalents, Policy [Policy Text Block] | Restricted Cash and Deferred Liabilities |
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Restricted cash and the associated deferred liability on our consolidated balance sheet at December 31, 2013 represent a deposit received in the fourth quarter of 2013 related to the sale of our Malaysia business. Amounts were contractually restricted until the transaction closed in February 2014. See Note 3, "Discontinued Operations," for further discussion about the close of the sale of the Malaysia business. |
Investments | Investments |
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Investments consist of debt and equity securities, a majority of which are classified as “available-for-sale” and stated at fair value. Accordingly, unrealized gains and losses and the related deferred income tax effects are excluded from earnings and reported in other comprehensive income within our consolidated statement of stockholders' equity. Realized gains or losses are computed based on specific identification of the securities sold. We regularly assess our investments for impairment and consider any impairment to be other than temporary if we intend to sell the security, it is more likely than not that we will be required to sell the security or we do not expect to recover our cost of the security. |
Allowance for Doubtful Accounts | Allowance for Doubtful Accounts |
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We routinely assess material trade and other receivables to determine their collectability. Many of our receivables are from joint interest owners of properties we operate. Thus, we may have the ability to withhold future revenue disbursements to recover any non-payment of joint interest billings. Generally, our oil and gas receivables are collected within 45 to 60 days of production. We accrue a reserve on a receivable when, based on the judgment of management, it is probable that a receivable will not be collected and the amount of the reserve may be reasonably estimated. |
Inventories | Inventories |
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Inventories primarily consist of tubular goods and well equipment held for use in our oil and natural gas operations and oil produced but not sold in our international operations. Tubular goods and well equipment inventories are carried at the lower of cost or market. During 2014, we wrote down obsolete inventory across all three of our domestic regions. At December 31, 2012, we wrote down subsea wellhead inventory that was not included in the sale of our Gulf of Mexico assets. The writedowns of $9 million in 2014 and $8 million in 2012 are included in “Operating expenses — Other” on our consolidated statement of operations. |
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Substantially all of the crude oil from our offshore operations in China is produced into floating storage facilities and “lifted” and sold periodically as barge quantities are accumulated. At December 31, 2014 and 2013, the crude oil inventory from our China operations consisted of approximately 240,000 and 23,000 barrels of crude oil valued at cost of approximately $8 million and $1 million, respectively, and is included under the caption "Inventories" on our consolidated balance sheet. Cost for purposes of the carrying value of oil inventory is the sum of related production costs and depletion expense. See Note 3, "Discontinued Operations" for details on our Malaysia crude oil inventory. |
Oil and Gas Properties | Oil and Gas Properties |
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We use the full cost method of accounting for our oil and gas producing activities. Under this method, all costs incurred in the acquisition, exploration and development of oil and gas properties, including salaries, benefits, interest and other internal costs directly attributable to these activities, are capitalized into cost centers that are established on a country-by-country basis. We capitalized approximately $199 million, $198 million and $191 million of interest and direct internal costs in 2014, 2013 and 2012, respectively. |
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Proceeds from the sale of oil and gas properties are applied to reduce the costs in the applicable cost center unless the reduction would significantly alter the relationship between capitalized costs and proved reserves, in which case a gain or loss is recognized. During the first quarter of 2014, we sold our Malaysia business, which constituted the entire full cost pool for Malaysia. See Note 3, "Discontinued Operations," for further discussion. |
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Capitalized costs and estimated future development costs are amortized using a unit-of-production method based on proved reserves associated with the applicable cost center. For each cost center, the net capitalized costs of oil and gas properties are limited to the lower of the unamortized cost or the cost center ceiling. A particular cost center ceiling is equal to the sum of: |
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• | the present value (10% per annum discount rate) of estimated future net revenues from proved reserves using oil, natural gas and NGL reserve estimation requirements, which require use of the unweighted average first-day-of-the-month commodity prices for the prior 12 months (SEC pricing), adjusted for market differentials, applicable to our reserves (including the effects of derivative contracts that are designated for hedge accounting, if any); plus | | | | | | | | | | | |
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• | the costs of properties not included in the costs being amortized, if any; less | | | | | | | | | | | |
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• | related income tax effects. | | | | | | | | | | | |
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If net capitalized costs of oil and gas properties exceed the cost center ceiling, we are subject to a ceiling test writedown to the extent of such excess. If required, a ceiling test writedown reduces earnings and stockholders’ equity in the period of occurrence and, holding other factors constant, results in lower depreciation, depletion and amortization expense in future periods. |
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The risk that we will be required to writedown the carrying value of our oil and gas properties increases when oil, natural gas and NGL prices decrease significantly for a prolonged period of time or if we have substantial downward revisions in our estimated proved reserves. At December 31, 2014, the ceiling value of our reserves was calculated based upon SEC pricing of $4.35 per MMBtu for natural gas and $94.98 per barrel for oil. Using these prices, our ceilings for the U.S. and China exceeded the net capitalized costs of oil and gas properties by approximately $400 million and $150 million, respectively, net of tax, and as such, no ceiling test writedown was required. |
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The continued decline of SEC pricing for oil and natural gas reserves since December 31, 2014 will likely result in a ceiling test writedown in the first quarter of 2015. |
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At December 31, 2013, the ceiling value of our reserves was calculated based upon SEC pricing of $3.67 per MMBtu for natural gas and $96.82 per barrel for oil. Using these prices, the cost center ceilings with respect to our domestic and China full cost pools exceeded the net capitalized costs. As such, no ceiling test writedowns were required at December 31, 2013. |
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At December 31, 2012, the ceiling value of our reserves was calculated based upon SEC pricing of $2.76 per MMBtu for natural gas and $94.84 per barrel for oil. Using these prices, the unamortized net capitalized costs of our domestic oil and gas properties exceeded the ceiling amount by approximately $1.5 billion ($948 million, after tax). No ceiling test writedown was required for the China full cost pool at December 31, 2012. |
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See Note 4, “Oil and Gas Assets,” for a detailed discussion regarding our oil and gas asset acquisitions and sales transactions during 2014, 2013 and 2012. |
Other Property and Equipment | Other Property and Equipment |
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Furniture, fixtures and equipment are recorded at cost and are depreciated using the straight-line method over their estimated useful lives, which range from three to seven years. Gathering systems and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives of 25 years. |
Accounting for Asset Retirement Obligations | Accounting for Asset Retirement Obligations |
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If a reasonable estimate of the fair value of an obligation to perform site reclamation, dismantle facilities or plug and abandon wells can be made, we record a liability (an asset retirement obligation or ARO) on our consolidated balance sheet and capitalize the present value of the asset retirement cost in oil and gas properties in the period in which the ARO is incurred. Settlements include payments made to satisfy the AROs, as well as transfer of the AROs to purchasers of our divested properties. |
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In general, the amount of an ARO and the costs capitalized will equal the estimated future costs to satisfy the abandonment obligation assuming normal operation of the asset, using current prices that are escalated by an assumed inflation factor up to the estimated settlement date, which is then discounted back to the date that the abandonment obligation was incurred using an assumed cost of funds for our Company. After recording these amounts, the ARO is accreted to its future estimated value using the same assumed cost of funds, and the original capitalized costs are depreciated on a unit-of-production basis within the related full cost pool. Both the accretion and the depreciation are included in depreciation, depletion and amortization expense on our consolidated statement of operations. |
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The change in our ARO for continuing operations for each of the three years ended December 31, is set forth below: |
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| | 2014 | | 2013 | | 2012 |
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Balance at January 1 | | $ | 122 | | | $ | 102 | | | $ | 108 | |
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Accretion expense | | 8 | | | 8 | | | 8 | |
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Additions(1) | | 58 | | | 12 | | | 20 | |
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Revisions | | 16 | | | 8 | | | 12 | |
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Settlements(2) | | (18 | ) | | (8 | ) | | (46 | ) |
Balance at December 31 | | 186 | | | 122 | | | 102 | |
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Less: Current portion of ARO at December 31 | | (3 | ) | | (5 | ) | | (5 | ) |
Total long-term ARO at December 31 | | $ | 183 | | | $ | 117 | | | $ | 97 | |
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-1 | For the year ended December 31, 2014, additions include $28 million for our Pearl development in offshore China and $30 million for abandonment obligations in our domestic business. | | | | | | | | | | | |
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-2 | For the year ended December 31, 2014, settlements include $10 million related to the sale of our Granite Wash assets. For the year ended December 31, 2012, settlements include $28 million related to the sale of our Gulf of Mexico assets. See Note 4, “Oil and Gas Assets.” | | | | | | | | | | | |
Contingencies | Contingencies |
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We are subject to legal proceedings, claims, liabilities and environmental matters that arise in the ordinary course of business. We accrue for losses when such losses are considered probable and the amounts can be reasonably estimated. See Note 13, “Commitments and Contingencies,” for a more detailed discussion regarding our contingencies. |
Environmental Matters | Environmental Matters |
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Environmental costs that relate to current operations are expensed as incurred. Remediation costs that relate to an existing condition caused by past operations are accrued when it is probable that those costs will be incurred and can be reasonably estimated based upon evaluations of currently available facts related to each site. |
Income Taxes | Income Taxes |
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We use the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined by applying tax regulations existing at the end of a reporting period to the cumulative temporary differences between the tax bases of assets and liabilities and their reported amounts in our financial statements. A valuation allowance is established to reduce deferred tax assets if it is more likely than not that the related tax benefits will not be realized. |
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As of December 31, 2014, we did not have a liability for uncertain tax positions, and as such, we did not accrue related interest or penalties. The tax years 2011-2014 remain open to examination for federal income tax purposes and by the other major taxing jurisdictions to which we are subject. |
Stock-Based Compensation | Stock-Based Compensation |
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We apply a fair value-based method of accounting for stock-based compensation which requires recognition in the financial statements of the cost of services received in exchange for awards of equity instruments based on the grant date fair value of those awards. For equity awards, compensation expense is based on the fair value on the grant or modification date and is recognized in our financial statements over the vesting period. We utilize the Black-Scholes option-pricing model to measure the fair value of stock options and a Monte Carlo lattice-based model for our performance and market-based restricted stock and restricted stock units. We also have cash-settled restricted stock units as well as a Stockholder Value Appreciation Program that are accounted for under the liability method which requires us to recognize the fair value of each award based on the underlying share price at the end of each period. See Note 11, “Stock-Based Compensation,” for a full discussion of our stock-based compensation. |
Concentration of Credit Risk | Concentration of Credit Risk |
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We operate a substantial portion of our oil and gas properties. As the operator of a property, we make full payment for costs associated with the property and seek reimbursement from the other working interest owners in the property for their share of those costs. Our joint interest owners consist primarily of independent oil and gas producers. If the oil and gas exploration and production industry in general was adversely affected, the ability of our joint interest partners to reimburse us could be adversely affected. |
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The purchasers of our oil, gas and NGL production consist primarily of independent marketers, major oil and gas companies, refiners and gas pipeline companies. We perform credit evaluations of the purchasers of our production and monitor their financial condition on an ongoing basis. Based on our evaluations and monitoring, we obtain cash escrows, letters of credit or parental guarantees from some purchasers. |
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All of our derivative transactions have been carried out in the over-the-counter market and are not typically subject to margin-deposit requirements. The use of derivative transactions involves the risk that the counterparties will be unable to meet the financial terms of such transactions. The counterparties for all of our derivative transactions have an “investment grade” credit rating. We monitor the credit ratings of our hedging counterparties on an ongoing basis. Although we have entered into derivative contracts with multiple counterparties to mitigate our exposure to any individual counterparty, if any of our counterparties were to default on its obligations to us under the derivative contracts or seek bankruptcy protection, it could have a material adverse effect on our ability to fund our planned activities and could result in a larger percentage of our future production being subject to commodity price changes. In addition, in poor economic environments and tight financial markets, the risk of a counterparty default is heightened and fewer counterparties may participate in hedging transactions, which could result in greater concentration of our exposure to any one counterparty or a larger percentage of our future production being subject to commodity price changes. At December 31, 2014, ten of our 16 counterparties accounted for approximately 85% of our contracted volumes, with no single counterparty accounting for more than 15%. Approximately 40% of our volumes subject to derivative instruments are with lenders under our credit facility. Our credit facility, senior notes, senior subordinated notes and substantially all of our derivative instruments contain provisions that provide for cross defaults and acceleration of those debt and derivative instruments in certain situations. |
Major Customers | Major Customers |
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Tesoro Corporation and Sunoco Logistics Partners Operations GP LLC accounted for 12% and 10%, respectively, of our total revenues in 2014. During 2013, Sunoco Logistics Partners Operations GP LLC, Royal Dutch Shell plc and Tesoro Corporation accounted for 13%, 12%, and 11%, respectively, of our total revenues. During 2012, sales of our oil and gas production to Royal Dutch Shell plc, Tesoro Corporation and Big West Oil LLC accounted for 14%, 14% and 10%, respectively, of our total revenues. We believe that the loss of any of our major customers would not have a material adverse effect on us because alternative purchasers are available. |
Derivative Financial Instruments | Derivative Financial Instruments |
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Our derivative instruments are recorded on the consolidated balance sheet at fair value as either an asset or a liability with changes in fair value recognized currently in earnings. While we utilize our derivative instruments to manage the price risk attributable to our expected oil and gas production, we have elected not to designate our derivative instruments as accounting hedges under the accounting guidance. |
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The related cash flow impact of our derivative activities are reflected as cash flows from operating activities unless they are determined to have a significant financing element at inception, in which case they are classified within financing activities. See Note 5, “Derivative Financial Instruments,” for a more detailed discussion of our derivative activities. |
Comprehensive Income (Loss) | Accumulated Other Comprehensive Income |
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At December 31, 2012, accumulated other comprehensive income (“AOCI”) included unrealized losses related to auction rate securities that were deemed to be temporary as the Company had the intent and ability to hold the securities to maturity. As of December 31, 2013, the Company changed its intention and considered plans to sell the securities. As a result, the losses previously accumulated in AOCI related to these securities were transferred and recognized in the consolidated statement of operations for the year ended December 31, 2013. During the first quarter of 2014, all auction rate securities were sold for $39 million. The change in AOCI for the indicated periods is set forth below: |
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Accumulated Other Comprehensive Income |
| | Available-for-Sale Securities | | Post-Retirement Benefits | | Total |
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Balance at January 1, 2012 | | $ | (9 | ) | | $ | (1 | ) | | $ | (10 | ) |
Current period other comprehensive income (loss) | | 3 | | | — | | | 3 | |
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Balance at December 31, 2012 | | (6 | ) | | (1 | ) | | (7 | ) |
Other comprehensive income before reclassifications | | 3 | | | 2 | | | 5 | |
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Amounts reclassified from accumulated other comprehensive income | | 4 | | | — | | | 4 | |
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Net current period other comprehensive income (loss) | | 7 | | | 2 | | | 9 | |
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Balance at December 31, 2013 | | 1 | | | 1 | | | 2 | |
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Current period other comprehensive income (loss) | | — | | | (3 | ) | | (3 | ) |
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Balance at December 31, 2014 | | $ | 1 | | | $ | (2 | ) | | $ | (1 | ) |
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Offsetting Fair Value | Offsetting Assets and Liabilities |
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Our derivative financial instruments are subject to master netting arrangements and are reflected on our consolidated balance sheet accordingly. See Note 5, "Derivative Financial Instruments," for details regarding the gross amounts, as well as the impact of our netting arrangements on our net derivative position. We only offset assets and liabilities in relation to our derivative financial instruments. |
New Accounting Requirements | New Accounting Requirements |
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In August 2014, the FASB issued guidance regarding disclosures of uncertainties about an entity's ability to continue as a going concern. The guidance applies prospectively to all entities, requiring management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity's ability to continue as a going concern and disclose certain information when substantial doubt is raised. The guidance is effective for interim and annual periods beginning on or after December 15, 2016. We do not expect this guidance to impact our Company. |
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In May 2014, the FASB issued guidance regarding the accounting for revenue from contracts with customers. The guidance may be applied retrospectively or using a modified retrospective approach to adjust retained earnings. The guidance is effective for interim and annual periods beginning on or after December 15, 2016. We are currently evaluating the impact of this guidance on our financial statements. |
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In April 2014, the FASB issued guidance regarding the reporting of discontinued operations. The guidance applies prospectively to new disposals and new classifications of disposal groups as held for sale after the effective date. The guidance is effective for interim and annual periods beginning on or after December 15, 2014. We do not expect this guidance to impact our Company. |
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