Cobalt Annual Report 2015 - page 101

Cobalt International Energy, Inc.
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Description of Operations
Cobalt International Energy, Inc. (the “Company”) is an independent exploration and production company with operations in the
deepwater U.S. Gulf of Mexico and offshore Angola and Gabon in West Africa.
On August 22, 2015, Cobalt International Energy Angola Ltd., a wholly owned subsidiary of the Company, executed a purchase
and sale agreement with Sociedade Nacional de Combustíveis de Angola—Empresa Pública (“Sonangol”) for the sale by the
Company to Sonangol of the entire issued and outstanding share capital of its indirect wholly owned subsidiaries CIE Angola Block
20 Ltd. and CIE Angola Block 21 Ltd., which respectively hold the Company’s 40% working interest in each of Block 20 and Block
21 offshore Angola (the “Angola Transaction”). The Angola Transaction is subject to Angolan government approvals. Following the
transfer of the share capital of CIE Angola Block 20 Ltd. and CIE Angola Block 21 Ltd., the Company will also relinquish its working
interest in Block 9 offshore Angola to Sonangol. The Company’s working interests in Blocks 9, 20, and 21 offshore Angola have been
classified as “held for sale” on the consolidated balance sheet. The results of operations associated with Blocks 9, 20 and 21 offshore
Angola have been presented as discontinued operations in the accompanying consolidated statement of operations. For more
information, see
Note 11—Angola Transaction
. Historically, the Company’s Angolan subsidiaries constituted a significant portion of
its West Africa segment. The Company’s operations in Gabon, which are deemed immaterial, have been combined with its United
States segment and are reported as one segment.
The terms “Company,” “Cobalt,” “we,” “us,” “our,” “ours,” and similar terms refer to Cobalt International Energy, Inc. unless
the context indicates otherwise.
Basis of Presentation
Our consolidated financial statements include the accounts of Cobalt International Energy, Inc. and its majority-owned
subsidiaries. All significant intercompany transactions and amounts have been eliminated for all years presented. The Company’s
consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles
(“GAAP”) and the appropriate rules and regulations of the Securities and Exchange Commission (“SEC”).
Certain prior year amounts have been reclassified for consistency with the current period presentation due to the Angolan
Transaction (Refer to
Note 11 - Angola Transaction
) resulting in discontinued operations and assets held for sale presentation. These
reclassifications had no effect on the reported results of operations.
Recently Issued Accounting Standards
In April 2015, Financial Accounting Standards Board (FASB) amended Accounting Standard Codification Subtopic No. 835-
Interest—Imputation of Interest
(the “ASC Subtopic 835-30”). The amendments require that debt issuance costs related to a
recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability,
consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the
amendments. The amendments under ASC Subtopic 835-30 are effective for financial statements issued for fiscal years beginning
after December 15, 2015 and interim periods within those fiscal years. However, early adoption is permitted for financial statements
that have not been previously issued. The Company expects to comply with the amendments to ASC Subtopic 835-30 for the financial
statements at its effective date beginning after December 15, 2015. We do not expect the adoption of ASC 835-30 to have a material
impact on the Company’s financial statements.
In July 2015, the FASB issued Accounting Standards Update (ASU) 2015-11, "Accounting for Inventory" (ASU 2015-11),
which requires entities to measure most inventory at lower of cost or net realizable value. ASU 2015-11 defines net realizable value as
"the estimated selling prices in the ordinary course of business, less reasonably predictable cost of completion, disposal and
transportation." ASU 2015-11 is effective prospectively for interim and annual periods beginning after December 15, 2016. The
Company expects to comply with the amendments to ASC 2015-11 at its effective date beginning after December 15, 2016. We do not
expect the adoption of ASC 2015-11 to have a material impact on the Company’s financial statements.
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