Halliburton Co. (HAL)

Inventory Accounting Policy

Inventories are stated at the lower of cost or market. Cost represents invoice or production cost for new items and original cost less allowance for condition for used material returned to stock. Production cost includes material, labor, and manufacturing overhead. Some domestic manufacturing and field service finished products and parts inventories for drill bits, completion products, and bulk materials are recorded using the last-in, first-out method. The remaining inventory is recorded on the average cost method. Halliburton regularly reviews inventory quantities on hand and record provisions for excess or obsolete inventory based primarily on historical usage, estimated product demand, and technological developments.

Source: Halliburton Co., Annual Report

Inventory Disclosure

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Halliburton Co., Statement of Financial Position, Inventory

USD $ in millions

		Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008	Dec 31, 2007
	Finished products and parts
	Raw materials and supplies
	Work in process
	Inventories

Source: Based on data from Halliburton Co. Annual Reports

Item	Description	The company
Finished products and parts	Carrying amount as of the balance sheet date of merchandise or goods held by the company that are readily available for sale.	Halliburton Co.'s finished products and parts increased from 2009 to 2010 and from 2010 to 2011.
Raw materials and supplies	Aggregated amount of unprocessed materials to be used in manufacturing or production process and supplies that will be consumed.	Halliburton Co.'s raw materials and supplies increased from 2009 to 2010 and from 2010 to 2011.
Work in process	Carrying amount as of the balance sheet date of merchandise or goods which are partially completed, are generally comprised of raw materials, labor and factory overhead costs, and which require further materials, labor and overhead to be converted into finished goods, and which generally require the use of estimates to determine percentage complete and pricing.	Halliburton Co.'s work in process increased from 2009 to 2010 and from 2010 to 2011.
Inventories	Carrying amount (lower of cost or market) as of the balance sheet date of inventories less all valuation and other allowances. Excludes noncurrent inventory balances (expected to remain on hand past one year or one operating cycle, if longer).	Halliburton Co.'s inventories increased from 2009 to 2010 and from 2010 to 2011.

Adjustment to Inventory: from LIFO to FIFO

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Adjusting LIFO Inventory to FIFO (Current) Cost

USD $ in millions

		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 Company Shareholders’ Equity
	Company shareholders’ equity (as reported)
	Add: LIFO reserve, ending balance
	Company shareholders’ equity (adjusted)
	Adjustment to Net Income Attributable To Company
	Net income attributable to company (as reported)
	Add: Increase (decrease) in LIFO reserve, ending balance
	Net income attributable to company (adjusted)

Halliburton Co.'s inventory value on Dec 31, 2011 would be $2,606 (in millions) if the FIFO inventory method was used instead of LIFO. Halliburton Co.'s inventories, valued on a LIFO basis, on Dec 31, 2011 were $2,570 . Halliburton Co.'s inventories would have been $36 higher than reported on Dec 31, 2011 if the FIFO method had been used instead.

Adjusted Ratios: LIFO vs. FIFO (Summary)

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Halliburton Co., 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)	%	%	%	%	%

Ratio	Description	The company
Adjusted current ratio	A liquidity ratio calculated as adjusted current assets divided by current liabilities.	Halliburton Co.'s adjusted current ratio improved from 2009 to 2010 but then deteriorated significantly from 2010 to 2011.
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by revenue.	Halliburton Co.'s adjusted net profit margin improved from 2009 to 2010 and from 2010 to 2011.
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	Halliburton Co.'s adjusted total asset turnover improved from 2009 to 2010 and from 2010 to 2011.
Adjusted financial leverage	A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.	Halliburton Co.'s adjusted financial leverage declined from 2009 to 2010 but then slightly increased from 2010 to 2011.
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by adjusted shareholders' equity.	Halliburton Co.'s adjusted ROE improved from 2009 to 2010 and from 2010 to 2011.
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by adjusted total assets.	Halliburton Co.'s adjusted ROA improved from 2009 to 2010 and from 2010 to 2011.

Adjusted Current Ratio

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		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

¹ Current ratio = Current assets ÷ Current liabilities
= ÷ =

² Adjusted current ratio = Adjusted current assets ÷ Current liabilities
= ÷ =

Ratio	Description	The company
Adjusted current ratio	A liquidity ratio calculated as adjusted current assets divided by current liabilities.	Halliburton Co.'s adjusted current ratio improved from 2009 to 2010 but then deteriorated significantly from 2010 to 2011.

Adjusted Net Profit Margin

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	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008	Dec 31, 2007
As Reported
Net income attributable to company (USD $ in millions)
Revenue (USD $ in millions)

Net profit margin¹	%	%	%	%	%
Adjusted: from LIFO to FIFO
Adjusted net income attributable to company (USD $ in millions)
Revenue (USD $ in millions)

Adjusted net profit margin²	%	%	%	%	%

2011 Calculations

¹ Net profit margin = 100 × Net income attributable to company ÷ Revenue
= 100 × ÷ = %

² Adjusted net profit margin = 100 × Adjusted net income attributable to company ÷ Revenue
= 100 × ÷ = %

Ratio	Description	The company
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by revenue.	Halliburton Co.'s adjusted net profit margin improved from 2009 to 2010 and from 2010 to 2011.

Adjusted Total Asset Turnover

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		Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008	Dec 31, 2007
	As Reported
	Revenue (USD $ in millions)
	Total assets (USD $ in millions)

	Total asset turnover¹
	Adjusted: from LIFO to FIFO
	Revenue (USD $ in millions)
	Adjusted total assets (USD $ in millions)

	Adjusted total asset turnover²

2011 Calculations

¹ Total asset turnover = Revenue ÷ Total assets
= ÷ =

² Adjusted total asset turnover = Revenue ÷ Adjusted total assets
= ÷ =

Ratio	Description	The company
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	Halliburton Co.'s adjusted total asset turnover improved from 2009 to 2010 and from 2010 to 2011.

Adjusted Financial Leverage

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		Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008	Dec 31, 2007
	As Reported
	Total assets (USD $ in millions)
	Company shareholders’ equity (USD $ in millions)

	Financial leverage¹
	Adjusted: from LIFO to FIFO
	Adjusted total assets (USD $ in millions)
	Adjusted company shareholders’ equity (USD $ in millions)

	Adjusted financial leverage²

2011 Calculations

¹ Financial leverage = Total assets ÷ Company shareholders’ equity
= ÷ =

² Adjusted financial leverage = Adjusted total assets ÷ Adjusted company shareholders’ equity
= ÷ =

Ratio	Description	The company
Adjusted financial leverage	A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.	Halliburton Co.'s adjusted financial leverage declined from 2009 to 2010 but then slightly increased from 2010 to 2011.

Adjusted Return On Equity (ROE)

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	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008	Dec 31, 2007
As Reported
Net income attributable to company (USD $ in millions)
Company shareholders’ equity (USD $ in millions)

ROE¹	%	%	%	%	%
Adjusted: from LIFO to FIFO
Adjusted net income attributable to company (USD $ in millions)
Adjusted company shareholders’ equity (USD $ in millions)

Adjusted ROE²	%	%	%	%	%

2011 Calculations

¹ ROE = 100 × Net income attributable to company ÷ Company shareholders’ equity
= 100 × ÷ = %

² Adjusted ROE = 100 × Adjusted net income attributable to company ÷ Adjusted company shareholders’ equity
= 100 × ÷ = %

Ratio	Description	The company
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by adjusted shareholders' equity.	Halliburton Co.'s adjusted ROE improved from 2009 to 2010 and from 2010 to 2011.

Adjusted Return On Assets (ROA)

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	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008	Dec 31, 2007
As Reported
Net income attributable to company (USD $ in millions)
Total assets (USD $ in millions)

ROA¹	%	%	%	%	%
Adjusted: from LIFO to FIFO
Adjusted net income attributable to company (USD $ in millions)
Adjusted total assets (USD $ in millions)

Adjusted ROA²	%	%	%	%	%

2011 Calculations

¹ ROA = 100 × Net income attributable to company ÷ Total assets
= 100 × ÷ = %

² Adjusted ROA = 100 × Adjusted net income attributable to company ÷ Adjusted total assets
= 100 × ÷ = %

Ratio	Description	The company
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by adjusted total assets.	Halliburton Co.'s adjusted ROA improved from 2009 to 2010 and from 2010 to 2011.

Halliburton Co. (HAL) | Analysis of Inventory

Inventory Accounting Policy

Inventory Disclosure

Adjustment to Inventory: from LIFO to FIFO

Adjusted Ratios: LIFO vs. FIFO (Summary)

Adjusted Current Ratio

Adjusted Net Profit Margin

Adjusted Total Asset Turnover

Adjusted Financial Leverage

Adjusted Return On Equity (ROE)

Adjusted Return On Assets (ROA)

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