The following table summarizes the fair values of net receiv- ables relating to the Corporation’s trading activities and the credit rating of counterparties at December 31: Hedging: Hedging contracts correlate to the selling prices of crude oil or natural gas and the Corporation has designated these contracts as hedges. Therefore, the Cor- poration records gains or losses on these instruments in income in the period in which the production is sold. At December 31, 2003, the Corporation has $229 million of deferred hedging losses, after income taxes, included in other comprehensive income. Impairment of Long-Lived Assets and Goodwill: As explained below there are significant differences in the way long-lived assets and goodwill are evaluated and measured for impairment testing. The Corporation reviews long-lived assets, including oil and gas fields, for impairment when- ever events or changes in circumstances indicate that the carrying amounts may not be recovered. Long-lived assets are tested at the lowest level for which cash flows are identi- fiable and are largely independent of the cash flows of other assets and liabilities. If the carrying amounts of the long- lived assets are not expected to be recovered by undis- counted future net cash flow estimates, the assets are impaired and an impairment loss is recorded. The amount of impairment is based on the estimated fair value of the assets determined by discounting anticipated future net cash flows. Accounting policies and estimates affect the recognition of assets and liabilities on the Corporation’s balance sheet and revenues and expenses on the income statement. The accounting methods used can affect net income, stock- holders’ equity and various financial statement ratios. How- ever, the Corporation’s accounting policies generally do not change cash flows or liquidity. Accounting for Exploration and Development Costs: The Corporation uses the successful efforts method of accounting for oil and gas producing activities. Costs to acquire or lease unproved and proved oil and gas properties are capitalized. Costs incurred in connection with the drilling and equipping of successful exploratory wells are also capi- talized. If proved reserves are not found, these costs are charged to expense. Other exploration costs, including seismic, are charged to expense as incurred. Development costs, which include the costs of drilling and equipping development wells, are capitalized. Depreciation, depletion and amortization of capitalized costs of proved oil and gas properties are computed on the unit-of-production method based on estimates of proved reserves on a field basis. In the case of oil and gas fields, the present value of future net cash flows is based on management’s best estimate of future prices, which is determined with reference to recent historical prices and published forward prices, applied to projected production volumes of individual fields and dis- counted at a rate commensurate with the risks involved. The projected production volumes represent reserves, including probable reserves, expected to be produced based on a stipulated amount of capital expenditures. The production volumes, prices and timing of production are consistent with internal projections and other externally reported information. Oil and gas prices used for determin- ing asset impairments will generally differ from those used in the standardized measure of discounted future net cash flows, since the standardized measure requires the use of actual prices on the last day of the year. The determination of estimated proved reserves is a signifi- cant element in arriving at the results of operations of exploration and production activities. The Corporation uses independent reservoir engineers to estimate all of its oil and gas reserves. The estimates of proved reserves impact well capitalizations, undeveloped lease impairments and the depreciation rates of proved properties, wells and equip- ment. Reduction in reserve estimates may result in the need for impairments of proved properties and related assets. 28 * Based on information provided by counterparties and other  available sources. Critical Accounting Policies and Estimates Millions of dollars 2003 2002 Investment grade determined by  outside sources $246 $309 Investment grade determined internally* 89 70 Less than investment grade 16 61 Not determined GLYPH<209> 2 $351 $442