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Analysis of Debt
Difficulty: Advanced
Debt Accounting Policy
Capitalized Interest
Interest from external borrowings is capitalized on major projects with an expected construction period of one year or longer. Capitalized interest is added to the cost of the underlying asset and is amortized over the useful lives of the assets in the same manner as the underlying assets.
Source: 10-K (filing date: 2018-02-20).
Total Debt (Carrying Amount)
ConocoPhillips, Statement of Financial Position, Debt
USD $ in millions
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
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| Short-term debt | |
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| Total debt, including capital leases (carrying amount) | |
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Based on: 10-K (filing date: 2018-02-20), 10-K (filing date: 2017-02-21), 10-K (filing date: 2016-02-23), 10-K (filing date: 2015-02-24), 10-K (filing date: 2014-02-25).
| Item | Description | The company |
|---|---|---|
| Total debt, including capital leases (carrying amount) | Sum of the carrying values as of the balance sheet date of all debt plus capital lease obligations. | ConocoPhillips’s total debt increased from 2015 to 2016 but then declined significantly from 2016 to 2017. |
Total Debt (Fair Value)
| Dec 31, 2017 | |
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| Selected Financial Data (USD $ in millions) | |
| Debt, excluding capital leases | |
| Capitalized leases | |
| Total debt, including capital leases (fair value) | |
| Ratio | |
| Debt, fair value to carrying amount | |
Based on: 10-K (filing date: 2018-02-20).
Weighted-average Interest Rate on Debt
Before-tax incremental borrowing rate:
| Interest Rate | Debt Amount1 | Interest Rate × Debt Amount | Weighted-average Interest Rate2 | |
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Based on: 10-K (filing date: 2018-02-20).
1 USD $ in millions
2 Weighted-average interest rate = 100 × ÷ =
Interest Costs Incurred
ConocoPhillips
USD $ in millions
| 12 months ended | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||||||
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| Interest expensed | |
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| Interest capitalized | |
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| Interest incurred | |
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Based on: 10-K (filing date: 2018-02-20), 10-K (filing date: 2017-02-21), 10-K (filing date: 2016-02-23), 10-K (filing date: 2015-02-24), 10-K (filing date: 2014-02-25).
| Item | Description | The company |
|---|---|---|
| Interest expensed | Amount of the cost of borrowed funds accounted for as interest expense for debt. | ConocoPhillips’s interest expensed increased from 2015 to 2016 but then slightly declined from 2016 to 2017. |
| Interest capitalized | Amount of interest costs capitalized disclosed as an adjusting item to interest costs incurred. | ConocoPhillips’s interest capitalized declined from 2015 to 2016 and from 2016 to 2017. |
| Interest incurred | Total interest costs incurred during the period and either capitalized or charged against earnings. | ConocoPhillips’s interest incurred increased from 2015 to 2016 but then slightly declined from 2016 to 2017 not reaching 2015 level. |
Adjusted Interest Coverage Ratio
Based on: 10-K (filing date: 2018-02-20), 10-K (filing date: 2017-02-21), 10-K (filing date: 2016-02-23), 10-K (filing date: 2015-02-24), 10-K (filing date: 2014-02-25).
2017 Calculations
1 Interest coverage ratio (excluding capitalized interest) = EBIT ÷ Interest and debt expense
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2 Adjusted interest coverage ratio (including capitalized interest) = EBIT ÷ Interest incurred
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| Ratio | Description | The company |
|---|---|---|
| Adjusted interest coverage ratio | A solvency ratio calculated as EBIT divided by interest payments (including capitalized interest). | ConocoPhillips’s adjusted interest coverage ratio improved from 2015 to 2016 and from 2016 to 2017. |
