ConocoPhillips (COP) | Analysis of Inventory

Inventory Accounting Policy

ConocoPhillips has several valuation methods for various types of inventories and consistently uses the following methods for each type of inventory. Crude oil and petroleum products inventories are valued at the lower of cost or market in the aggregate, primarily on the last-in, first-out (LIFO) basis. Any necessary lower-of-cost-or-market write-downs at year end are recorded as permanent adjustments to the LIFO cost basis. LIFO is used to better match current inventory costs with current revenues and to meet tax-conformity requirements. Costs include both direct and indirect expenditures incurred in bringing an item or product to its existing condition and location, but not unusual/nonrecurring costs or research and development costs. Materials, supplies and other miscellaneous inventories, such as tubular goods and well equipment, are valued using various methods, including the weighted-average-cost method, and the first-in, first-out (FIFO) method, consistent with industry practice.

Source: ConocoPhillips, Annual Report

Inventory Disclosure

ConocoPhillips, Statement of Financial Position, Inventory

		Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008	Dec 31, 2007
	Crude oil and petroleum products
	Materials, supplies and other
	Inventories

Source: Based on data from ConocoPhillips Annual Reports

Adjustment to Inventory: from LIFO to FIFO

Adjusting LIFO Inventory to FIFO (Current) Cost

		Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008	Dec 31, 2007
	Adjustment to Inventories
	Inventories at LIFO (as reported)
	Add: LIFO reserve, ending balance
	Inventories at FIFO (adjusted)
	Adjustment to Current Assets
	Current assets (as reported)
	Add: LIFO reserve, ending balance
	Current assets (adjusted)
	Adjustment to Total Assets
	Total assets (as reported)
	Add: LIFO reserve, ending balance
	Total assets (adjusted)
	Adjustment to Common Stockholders’ Equity
	Common stockholders’ equity (as reported)
	Add: LIFO reserve, ending balance
	Common stockholders’ equity (adjusted)
	Adjustment to Net Income (loss) Attributable To ConocoPhillips
	Net income (loss) attributable to ConocoPhillips (as reported)
	Add: Increase (decrease) in LIFO reserve, ending balance
	Net income (loss) attributable to ConocoPhillips (adjusted)

ConocoPhillips's inventory value on Dec 31, 2011 would be $13,031  (in millions) if the FIFO inventory method was used instead of LIFO. ConocoPhillips's inventories, valued on a LIFO basis, on Dec 31, 2011 were $4,631 . ConocoPhillips's inventories would have been $8,400  higher than reported on Dec 31, 2011 if the FIFO method had been used instead.

Adjusted Ratios: LIFO vs. FIFO (Summary)

ConocoPhillips, adjusted ratios

		Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008	Dec 31, 2007
	Current Ratio
	Reported current ratio (LIFO)
	Adjusted current ratio (FIFO)
	Net Profit Margin
	Reported net profit margin (LIFO)	%	%	%	%	%
	Adjusted net profit margin (FIFO)	%	%	%	%	%
	Total Asset Turnover
	Reported total asset turnover (LIFO)
	Adjusted total asset turnover (FIFO)
	Financial Leverage
	Reported financial leverage (LIFO)
	Adjusted financial leverage (FIFO)
	Return on Equity (ROE)
	Reported ROE (LIFO)	%	%	%	%	%
	Adjusted ROE (FIFO)	%	%	%	%	%
	Return on Assets (ROA)
	Reported ROA (LIFO)	%	%	%	%	%
	Adjusted ROA (FIFO)	%	%	%	%	%

Adjusted Current Ratio

		Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008	Dec 31, 2007
	As Reported
	Current assets (USD $ in millions)
	Current liabilities (USD $ in millions)
	Current ratio1
	Adjusted: from LIFO to FIFO
	Adjusted current assets (USD $ in millions)
	Current liabilities (USD $ in millions)
	Adjusted current ratio2

2011 Calculations

Adjusted Net Profit Margin

		Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008	Dec 31, 2007
	As Reported
	Net income (loss) attributable to ConocoPhillips (USD $ in millions)
	Sales and other operating revenues (USD $ in millions)
	Net profit margin1	%	%	%	%	%
	Adjusted: from LIFO to FIFO
	Adjusted net income (loss) attributable to ConocoPhillips (USD $ in millions)
	Sales and other operating revenues (USD $ in millions)
	Adjusted net profit margin2	%	%	%	%	%

2011 Calculations

Adjusted Total Asset Turnover

		Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008	Dec 31, 2007
	As Reported
	Sales and other operating revenues (USD $ in millions)
	Total assets (USD $ in millions)
	Total asset turnover1
	Adjusted: from LIFO to FIFO
	Sales and other operating revenues (USD $ in millions)
	Adjusted total assets (USD $ in millions)
	Adjusted total asset turnover2

2011 Calculations

Adjusted Financial Leverage

		Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008	Dec 31, 2007
	As Reported
	Total assets (USD $ in millions)
	Common stockholders’ equity (USD $ in millions)
	Financial leverage1
	Adjusted: from LIFO to FIFO
	Adjusted total assets (USD $ in millions)
	Adjusted common stockholders’ equity (USD $ in millions)
	Adjusted financial leverage2

2011 Calculations

Adjusted Return On Equity (ROE)

		Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008	Dec 31, 2007
	As Reported
	Net income (loss) attributable to ConocoPhillips (USD $ in millions)
	Common stockholders’ equity (USD $ in millions)
	ROE1	%	%	%	%	%
	Adjusted: from LIFO to FIFO
	Adjusted net income (loss) attributable to ConocoPhillips (USD $ in millions)
	Adjusted common stockholders’ equity (USD $ in millions)
	Adjusted ROE2	%	%	%	%	%

2011 Calculations

Adjusted Return On Assets (ROA)

		Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008	Dec 31, 2007
	As Reported
	Net income (loss) attributable to ConocoPhillips (USD $ in millions)
	Total assets (USD $ in millions)
	ROA1	%	%	%	%	%
	Adjusted: from LIFO to FIFO
	Adjusted net income (loss) attributable to ConocoPhillips (USD $ in millions)
	Adjusted total assets (USD $ in millions)
	Adjusted ROA2	%	%	%	%	%

2011 Calculations