Annual Report 2011 - PGS

Notes to the consolidated financial statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
represents a separate major line of business it would classify such operations as discontinued. The result from discontinued
operations are reported net of tax and presented separately in the consolidated statements of operations. Assets and liabilities
are presented as separate line items in the consolidated statements of financial position. Comparative consolidated statements
of operations and cash flow information is restated based on the classification (as continuing and discontinued) at the current
reporting date.
Non-current assets are classified as held-for-sale when their carrying amount will be recovered principally through sale rather
than through continuing use. This condition is deemed to exist when the sale is highly probable, the asset is available for
immediate sale in its present condition and management is committed to the sale. Such assets are measured at the lower of
carrying amount and fair value less costs to sell and are presented separately on the face of the consolidated statements of
financial position. Comparative amounts are not restated when an asset is classified as held-for-sale.
Cash and cash equivalents
The carrying amounts of cash and cash equivalents approximate fair value. Cash and cash equivalents include demand
deposits and all highly liquid financial instruments purchased with original maturities of three months or less. Cash and cash
equivalents that are restricted from the Company's use are presented separately in the consolidated statements of financial
position and are classified as current or long-term depending on the nature of the restrictions. Such restrictions primarily relate
to Brazilian tax claim deposit (Note 27), employee tax withholdings, cash collateral for bid or performance bonds, certain health
insurance and restricted deposits under contracts.
Foreign currency translation and transactions
The financial statements of non-US subsidiaries having their respective local currency as their functional currency are translated
using the current exchange rate method. Assets and liabilities are translated at the rate of exchange in effect at the period end;
share par value and paid-in capital are translated at historical exchange rates; and revenues and expenses are translated at the
average rate of exchange in effect during the period. Translation adjustments are recorded as a separate component in the
consolidated statement of comprehensive income.
Foreign exchange gains and losses resulting from the settlement of foreign currency transactions and from the translation of
realized and unrealized monetary assets and liabilities denominated in foreign currencies are recognized in the consolidated
statements of operations, except when recognized in the consolidated statement of comprehensive income as qualifying cash
flow hedges and qualifying net investment hedges.
Operational and finance leases
The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement and
requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and
the arrangement conveys a right to use the asset.
The Company has significant operating lease arrangements in all of its operating segments and also has some finance lease
arrangements relating to marine seismic equipment and UK leases for vessels (See Note 27).
Finance leases, which transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item,
are capitalized at inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum
lease payments. Assets under finance leases are depreciated over the shorter of the estimated useful life of the asset and the
lease term, if there is no reasonable certainty that the Company will obtain ownership by the end of the lease term.
Operating lease payments are expensed in the consolidated statements of operations on a straight-line basis over the lease
term, except where another systematic basis is more representative of the time pattern in which economic benefits from the
leased asset are consumed. Contingent rentals arising under operating leases are expensed in the period in which they are
incurred.
Goodwill
Goodwill is initially recognized as an asset at cost and is subsequently measured at cost less any accumulated impairment
losses.
Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets
are carried at cost less any accumulated amortization and accumulated impairment losses. Internally generated intangible
assets other than those specified below are expensed as incurred.
MultiClient library
The MultiClient library consists of seismic data surveys to be licensed to customers on a nonexclusive basis. Costs directly
incurred in acquiring, processing and otherwise completing seismic surveys are capitalized to the MultiClient library. Also
included are costs incurred while relocating or “steaming” a vessel or crew from one location to another and capitalized
borrowing costs.
The Company records the costs incurred on the MultiClient library in a manner consistent with its capital investment and
operating decision analysis, which generally results in each component of the MultiClient library being recorded and evaluated
separately. Projects that are covered by the same political regime, with similar geological traits and that are marketed
collectively are recorded and evaluated as a group by year of completion.
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