ExxonMobil, a multinational integrated oil and gas company, reported the following information in its 2019 annual report:

Due to slackening global demand for crude oil, as well production disputes between two large oil-producing countries (Saudi Arabia and Russia), crude oil prices plummeted in world markets in 2020. A barrel of crude oil sold for $61.68 on December 30, 2019, but dropped to $23.70 on March 19, 2020.

INSTRUCTIONS:
a. What steps should ExxonMobil take regarding the balance sheet value of its crude oil inventory? Estimate the percentage drop in the company's shareholders' equity.
b. What will happen if prices rebound to earlier levels? If prices rebound and Exxon Mobil used IFRS instead of U.S. GAAP, would anything be different?

Transcribed Image Text:

Assets (in millions) 12/31/2019 12/31/2018 Inventories: Crude oil, products, and merchandise $ 14,010 $ 14,803 Total assets 362,597 346,196 Shareholders' equity 198,938 198,528