Chevron Corp. (CVX) | Analysis of Investments

Investment Accounting Policy

Subsidiary and Affiliated Companies

The Consolidated Financial Statements include the accounts of controlled subsidiary companies more than 50 percent-owned and any variable-interest entities in which Chevron is the primary beneficiary. Undivided interests in oil and gas joint ventures and certain other assets are consolidated on a proportionate basis. Investments in and advances to affiliates in which Chevron has a substantial ownership interest of approximately 20 percent to 50 percent, or for which Chevron exercises significant influence but not control over policy decisions, are accounted for by the equity method. As part of that accounting, Chevron recognizes gains and losses that arise from the issuance of stock by an affiliate that results in changes in Chevron's proportionate share of the dollar amount of the affiliate's equity currently in income.

Investments are assessed for possible impairment when events indicate that the fair value of the investment may be below Chevron's carrying value. When such a condition is deemed to be other than temporary, the carrying value of the investment is written down to its fair value, and the amount of the write-down is included in net income. In making the determination as to whether a decline is other than temporary, Chevron considers such factors as the duration and extent of the decline, the investee's financial performance, and Chevron's ability and intention to retain its investment for a period that will be sufficient to allow for any anticipated recovery in the investment's market value. The new cost basis of investments in these equity investees is not changed for subsequent recoveries in fair value.

Differences between Chevron's carrying value of an equity investment and its underlying equity in the net assets of the affiliate are assigned to the extent practicable to specific assets and liabilities based on Chevron's analysis of the various factors giving rise to the difference. When appropriate, Chevron's share of the affiliate's reported earnings is adjusted quarterly to reflect the difference between these allocated values and the affiliate's historical book values.

Short-Term Investments

All short-term investments are classified as available for sale and are in highly liquid debt securities. Those investments that are part of Chevron's cash management portfolio and have original maturities of three months or less are reported as "Cash equivalents." Bank time deposits with maturities greater than 90 days are reported as "Time deposits." The balance of short-term investments is reported as "Marketable securities" and is marked-to-market, with any unrealized gains or losses included in "Other comprehensive income."

Source: Chevron Corp., Annual Report

Adjustment to Net Income (Loss): Mark to Market Available-for-sale Securities

Chevron Corp., adjustment to Net Income Attributable To Chevron Corporation

	12 months ended	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008	Dec 31, 2007
	Net income attributable to Chevron Corporation (as reported)
	Add: Unrealized net holding gain (loss) on securities
	Net income attributable to Chevron Corporation (adjusted)

Adjusted Ratios: Mark to Market Available-for-sale Securities (Summary)

Chevron Corp., adjusted ratios

		Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008	Dec 31, 2007
	Net Profit Margin
	Reported net profit margin	%	%	%	%	%
	Adjusted net profit margin	%	%	%	%	%
	Return on Equity (ROE)
	Reported ROE	%	%	%	%	%
	Adjusted ROE	%	%	%	%	%
	Return on Assets (ROA)
	Reported ROA	%	%	%	%	%
	Adjusted ROA	%	%	%	%	%

Adjusted Net Profit Margin

		Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008	Dec 31, 2007
	As Reported
	Net income attributable to Chevron Corporation (USD $ in millions)
	Sales and other operating revenues (USD $ in millions)
	Net profit margin1	%	%	%	%	%
	Adjusted: Mark to Market Available-for-sale Securities
	Adjusted net income attributable to Chevron Corporation (USD $ in millions)
	Sales and other operating revenues (USD $ in millions)
	Adjusted net profit margin2	%	%	%	%	%

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 attributable to Chevron Corporation (USD $ in millions)
	Chevron Corporation stockholders’ equity (USD $ in millions)
	ROE1	%	%	%	%	%
	Adjusted: Mark to Market Available-for-sale Securities
	Adjusted net income attributable to Chevron Corporation (USD $ in millions)
	Chevron Corporation 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 attributable to Chevron Corporation (USD $ in millions)
	Total assets (USD $ in millions)
	ROA1	%	%	%	%	%
	Adjusted: Mark to Market Available-for-sale Securities
	Adjusted net income attributable to Chevron Corporation (USD $ in millions)
	Total assets (USD $ in millions)
	Adjusted ROA2	%	%	%	%	%

2011 Calculations