Annual Report 2010 - SBM Offshore

Use of estimates
In the preparation of the financial statements, it is necessary
for the management of the Company to make
estimates and certain assumptions that can affect
the valuation of the assets and liabilities and the outcome
of the income statement. The actual outcome
may differ from these estimates and assumptions.
Estimates and judgements are continually evaluated
and are based on historical experience and other factors,
including expectations of future events that are
believed to be reasonable.
In particular, significant areas of estimation, uncertainty
and critical judgements in applying accounting policies
that have the most significant effect on amounts recognised
in the financial statements are:
• the anticipated useful life and residual value of the
leased facilities;
• the lease classification;
• the revenue recognition on construction contracts
based on the stage of completion method;
• the impairment of tangible and intangible fixed
assets;
• the impact of variation orders and recoveries from
clients where negotiations or discussions are at a
sufficiently advanced stage;
• the future costs to complete for construction projects
and required contingencies;
• the demobilisation provisions;
• the Company's exposure to litigation with third
parties.
1. Segment information
Business information
Sales between segments are carried out at arm’s
length. The revenue to third parties reported to the
Chief Operating Decision Maker is measured in a
manner consistent with that in the income statement.
The amounts provided to the Chief Operating Decision
Maker with respect to non-current assets and noncurrent
liabilities are measured in a manner consistent
with that of the financial statements. These assets and
liabilities are allocated based on the operations of the
segment.
Financial Review / Financial Statements 2010
SBM Offshore – Annual Report 2010 127