Revenue Recognition Accounting Policy
Transocean recognizes operating revenues as they are earned, based on contractual dayrates or on a fixed-price basis. In connection with drilling contracts, Transocean may receive revenues for preparation and mobilization of equipment and personnel or for capital improvements to rigs. In connection with new drilling contracts, revenues earned and incremental costs incurred directly related to contract preparation and mobilization are deferred and recognized over the primary contract term of the drilling project using the straight-line method. Transocean's policy to amortize the fees related to contract preparation, mobilization and capital upgrades on a straight-line basis over the estimated firm period of drilling is consistent with the general pace of activity, level of services being provided and dayrates being earned over the life of the contract. For contractual daily rate contracts, Transocean accounts for loss contracts as the losses are incurred. Costs of relocating drilling units without contracts to more promising market areas are expensed as incurred. Upon completion of drilling contracts, any demobilization fees received are reported in income, as are any related expenses. Capital upgrade revenues received are deferred and recognized over the primary contract term of the drilling project. The actual cost incurred for the capital upgrade is depreciated over the estimated useful life of the asset. Transocean incurs periodic survey and drydock costs in connection with obtaining regulatory certification to operate rigs and well control systems on an ongoing basis. Costs associated with these certifications are deferred and amortized on a straight-line basis over the period until the next survey.
Source: Transocean Ltd., Annual Report
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