NOTES TO FINANCIAL STATEMENTS
1. Description of Plan
The following
description of the Devon Energy Corporation Incentive Savings Plan (the “Plan”) is provided for general information purposes only. Participants should refer to the plan agreement and respective amendments for a more complete description of
the Plan’s provisions.
General
The Plan is a multiple employer defined contribution plan covering substantially all United States employees of Devon Energy Corporation
(“Devon”) and is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). Employees are eligible to participate in the Plan as soon as administratively possible following the
completion of one hour of service. There is no minimum age requirement for employees to be eligible.
The plan administrator is a
committee of Devon employees who are appointed by, and serve at the direction of Devon (the “Benefits Committee”). The Benefits Committee is responsible for administration of the Plan, except for the duties related to selecting and
monitoring the Plan’s investment options. The selection and monitoring of investment options, and related functions, is the responsibility of a separate committee of Devon employees who are appointed by, and serve at the direction of Devon (the
“Investments Committee”).
Devon’s Board of Directors, or a committee thereof, has the sole responsibility for appointing
and removing the Plan’s trustee, which is currently Fidelity Management Trust Company (the “Trustee”). Under the terms of an agreement between the Trustee and the Plan, the Trustee administers the Plan’s trust in accordance with
instructions provided by the Benefits Committee.
Contributions
As defined in the Plan, participants may elect to contribute from 1% to 50% of their compensation to the Plan on a pre-tax basis or on an
after-tax, designated Roth basis. The combined pre-tax and designated Roth contributions are subject to limitations under the Internal Revenue Code (the “Code”). Participants who have attained age 50 before the end of the Plan year are
eligible to make pre-tax or designated Roth catch-up contributions. Participants may also contribute amounts representing distributions from other qualified defined benefit or defined contribution plans (“Rollover Contributions”).
Participant Rollover Contributions were approximately $3,666,000 during 2013.
Participants may receive an employer match on their
contribution to the Plan in an amount determined annually by Devon. The amount of the matching contribution will vary according to the participant’s years of service and whether the participant is eligible for enhanced contributions.
Participants employed subsequent to October 1, 2007 and participants who opted out of a separate defined benefit plan sponsored by Devon are eligible for enhanced contributions. During 2013, for all participants with at least five years of
service, Devon contributed amounts equal to 100% of each participant’s contributions to the Plan, with the matching contribution being limited to the lesser of 6% of the participant’s compensation, or $15,300. For participants with less
than five years of service, Devon’s matching contributions in 2013 were limited to the lesser of 3% of the participant’s compensation, or $7,650.
Participants eligible for enhanced contributions also receive additional, nondiscretionary contributions by Devon calculated as a percentage
of their compensation, as defined in the Plan. In 2013, the enhanced contribution percentage ranged from 8% to 16%, depending upon a participant’s years of service.
Participant Accounts
Each
participant’s account is credited with the participant’s contribution, Devon’s contribution and allocations of earnings or losses on the investments selected by the participant, and charged with an allocation of administrative
expenses. Allocations are based on participant earnings, account balances or specific participant transactions, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested
account.
6
DEVON ENERGY CORPORATION INCENTIVE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS – CONTINUED
Investments
Participants direct their account balances to be invested in a number of investment options. Participants may change their investment options
on a daily basis. Investment options of the Plan as of December 31, 2013 consist of mutual funds, equity securities, Devon common stock, money market funds, collective trust funds, stable value fund and Brokerage Link. Brokerage Link is a
self-directed brokerage account that allows participants to invest in a wide variety of funds.
Vesting and Forfeitures
Participants are vested immediately in their contributions, plus the associated investment income or losses. For each year of service up to
four years, a participant becomes 25% vested in employer contributions to their account and the associated investment income or losses. Participants will become vested upon a change of control of Devon, as defined in the Plan, or if the participant
dies, becomes totally disabled or reaches age 65 while employed by Devon or another participating employer.
Upon a termination of service
that results in nonvested amounts in a participant’s account, the nonvested portion is forfeited and used to reduce Devon’s future contributions. Employer contributions were reduced by $967,000 in 2013 due to forfeitures. As of
December 31, 2013 and 2012, there were approximately $1,739,000 and $976,000, respectively, of forfeitures available to reduce future employer contributions.
Notes Receivable from Participants
Participants may borrow from their fund accounts and may have up to two loans outstanding at any time. Total borrowings may not exceed the
lesser of 50% of a participant’s vested balance or $50,000. The loans are secured by the balance in the participants’ accounts. The loans bear interest at a fixed rate, which approximates the rate generally charged for consumer loans
secured by certificates of deposit or marketable securities. The interest rates ranged from 4.25% to 9.75% at December 31, 2013. The terms of the loans may not exceed five years, except for loans used to purchase a primary residence, in which
case the loan term generally will not exceed 15 years. Maturity dates ranged from January 2014 to November 2023 at December 31, 2013. Principal and interest is repaid through biweekly payroll deductions from the participants’ wages.
Payment of Benefits
While still
employed, a participant who is age 59
1
⁄
2
or older may withdraw all or part of the vested interest in their account at any time. Participants who are still
employed also may withdraw their Rollover Contributions regardless of age. In addition, participants who are still employed and who have taken all other withdrawals and loans available under the Plan may also request a withdrawal in an amount
necessary to satisfy an immediate and heavy financial need.
On termination of service due to death, disability or upon retirement,
participants (or a beneficiary in the case of death) may elect to receive either a lump-sum amount equal to the value of the participant’s vested interest in their account or equal installments (monthly, quarterly, semi-annually or annually)
for any period less than the life expectancy of the participant and their beneficiary. For termination of service for other reasons, participants may receive the value of the vested interest in their account as a lump-sum distribution. Depending on
the value of the participant’s vested interest in their account at the time of their termination of service, the value of the participant’s vested interest may be automatically paid in a lump-sum distribution, paid in a direct rollover or
automatically rolled over to an individual retirement account or annuity established in the participant’s or beneficiary’s name.
7
DEVON ENERGY CORPORATION INCENTIVE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS – CONTINUED
2. Summary of Significant Accounting Policies
The following are the significant accounting policies followed by the Plan in preparing the accompanying financial statements.
Basis of Presentation
The
financial statements have been prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America.
Use of Estimates
The preparation
of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and changes therein,
and disclosure of contingent assets and liabilities. Actual results could differ from those estimates.
Investment Valuation and Income Recognition
The Plan’s investments are stated at fair value. Fair value is the price that would be received to sell the investment in an
orderly transaction between market participants. This price is commonly referred to as the “exit price.” Fair value measurements are classified according to a hierarchy that prioritizes the inputs underlying the valuation techniques. This
hierarchy consists of three broad levels:
|
|
•
|
|
Level 1 – Inputs consist of unadjusted quoted prices in active markets for identical assets and have the highest priority. When available, Level 1 inputs are used to measure fair value because they generally
provide the most reliable evidence of fair value.
|
|
|
•
|
|
Level 2 – Inputs consist of quoted prices that are generally observable for the asset. Common examples of Level 2 inputs include quoted prices for similar assets in active markets or quoted prices for identical
assets in markets not considered to be active.
|
|
|
•
|
|
Level 3 – Inputs are not observable from objective sources and have the lowest priority. The most common Level 3 fair value measurement is an internally developed cash flow model.
|
Realized gains or losses are calculated based on proceeds from the sale of investments and the fair value of the investments at the beginning
of the plan year or at time of purchase if acquired during the current plan year. Unrealized appreciation or depreciation of the investments is calculated based on the fair value of the investments at the end of the plan year and the fair value of
the investments at the beginning of the plan year or at time of purchase if acquired during the current plan year. Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are
recorded on the ex-dividend date.
Investment contracts held by a defined contribution plan are required to be reported at fair value.
However, contract value is the relevant measurement attribute for that portion of the net assets available for benefits of a defined contribution plan attributable to fully benefit-responsive investment contracts because contract value is the amount
participants would receive if they were to initiate permitted transactions under the terms of the Plan. The accompanying Statements of Net Assets Available for Benefits present the fair value of the investment contracts as well as the adjustment of
the fully benefit-responsive investment contracts from fair value to contract value. The accompanying Statement of Changes in Net Assets Available for Benefits is prepared on a contract value basis for fully benefit-responsive investment contracts.
Contract value represents the principal balance of the underlying investment contracts, plus accrued interest at the stated contract rates, less withdrawals and administrative charges by the financial institutions. There are no material reserves
against contract value for credit risk of the contract issuers or otherwise.
8
DEVON ENERGY CORPORATION INCENTIVE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS – CONTINUED
Notes Receivable from Participants
Notes receivable from participants are measured at their unpaid principal balance plus any accrued but unpaid interest. Interest income is
recorded on the accrual basis. No allowance for credit losses has been recorded as of December 31, 2013 or 2012. Delinquent participant loans are reclassified as distributions based upon the terms of the plan document.
Payment of Benefits
Benefits are
recorded when paid.
Administrative Expenses
Trustee, audit and certain other administrative fees are paid by Devon on behalf of the Plan and are excluded from these financial statements.
Fees related to the administration of notes receivable from participants are charged directly to the participant’s account and are included in administrative expenses. Investment related expenses are included in net appreciation of fair value
of investments.
3. Reclassifications
Certain reclassifications of prior year comparative information have been made in order to conform to current year presentation. These
reclassifications had no effect on net assets or the change in net assets.
4. Fair Value Measurements
The following tables provide the Plan’s investments at fair value according to the fair value hierarchy. The Plan had no Level 3
investments as of December 31, 2013 and 2012. There have been no changes in the methodologies used at December 31, 2013 and 2012.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2013
|
|
|
|
|
|
|
|
Fair Value Measurements Using:
|
|
|
|
|
Total
|
|
|
Level 1 Inputs
|
|
|
Level 2 Inputs
|
|
|
Mutual funds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Growth funds
|
|
$
|
45,244,880
|
|
|
$
|
45,244,880
|
|
|
$
|
—
|
|
|
Fixed income funds
|
|
|
97,728,799
|
|
|
|
97,728,799
|
|
|
|
—
|
|
|
Balanced funds
|
|
|
37,037,603
|
|
|
|
37,037,603
|
|
|
|
—
|
|
|
Other funds
|
|
|
16,049,371
|
|
|
|
16,049,371
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mutual funds
|
|
|
196,060,653
|
|
|
|
196,060,653
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employer stock
|
|
|
58,527,349
|
|
|
|
58,527,349
|
|
|
|
—
|
|
|
Domestic large cap value
|
|
|
66,596,374
|
|
|
|
66,596,374
|
|
|
|
—
|
|
|
Domestic large cap growth
|
|
|
65,305,737
|
|
|
|
65,305,737
|
|
|
|
—
|
|
|
Domestic small cap value
|
|
|
47,405,259
|
|
|
|
47,405,259
|
|
|
|
—
|
|
|
Domestic small cap growth
|
|
|
33,143,613
|
|
|
|
33,143,613
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity securities
|
|
|
270,978,332
|
|
|
|
270,978,332
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
|
41,856,688
|
|
|
|
41,856,688
|
|
|
|
—
|
|
|
Collective trust funds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. equity index
(1)
|
|
|
93,521,199
|
|
|
|
—
|
|
|
|
93,521,199
|
|
|
Stable value
(2)
|
|
|
39,870,835
|
|
|
|
—
|
|
|
|
39,870,835
|
|
|
International equity index
(3)
|
|
|
72,857,556
|
|
|
|
—
|
|
|
|
72,857,556
|
|
|
Real estate investment trust
(4)
|
|
|
4,548,122
|
|
|
|
—
|
|
|
|
4,548,122
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total collective trust funds
|
|
|
210,797,712
|
|
|
|
—
|
|
|
|
210,797,712
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments
|
|
$
|
719,693,385
|
|
|
$
|
508,895,673
|
|
|
$
|
210,797,712
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
DEVON ENERGY CORPORATION INCENTIVE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS – CONTINUED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2012
|
|
|
|
|
|
|
|
Fair Value Measurements Using:
|
|
|
|
|
Total
|
|
|
Level 1 Inputs
|
|
|
Level 2 Inputs
|
|
|
Mutual funds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Growth funds
|
|
$
|
33,431,939
|
|
|
$
|
33,431,939
|
|
|
$
|
—
|
|
|
Fixed income funds
|
|
|
107,270,465
|
|
|
|
107,270,465
|
|
|
|
—
|
|
|
Balanced funds
|
|
|
28,945,217
|
|
|
|
28,945,217
|
|
|
|
—
|
|
|
Other funds
|
|
|
13,680,685
|
|
|
|
13,680,685
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mutual funds
|
|
|
183,328,306
|
|
|
|
183,328,306
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employer stock
|
|
|
57,229,169
|
|
|
|
57,229,169
|
|
|
|
—
|
|
|
Domestic large cap value
|
|
|
55,083,236
|
|
|
|
55,083,236
|
|
|
|
—
|
|
|
Domestic large cap growth
|
|
|
52,141,542
|
|
|
|
52,141,542
|
|
|
|
—
|
|
|
Domestic small cap value
|
|
|
35,592,002
|
|
|
|
35,592,002
|
|
|
|
—
|
|
|
Domestic small cap growth
|
|
|
24,838,748
|
|
|
|
24,838,748
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity securities
|
|
|
224,884,697
|
|
|
|
224,884,697
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
|
45,639,449
|
|
|
|
45,639,449
|
|
|
|
—
|
|
|
Collective trust funds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. equity index
(1)
|
|
|
75,393,713
|
|
|
|
—
|
|
|
|
75,393,713
|
|
|
Stable value
(2)
|
|
|
40,392,154
|
|
|
|
—
|
|
|
|
40,392,154
|
|
|
International equity index
(3)
|
|
|
65,838,189
|
|
|
|
—
|
|
|
|
65,838,189
|
|
|
Real estate investment trust
(4)
|
|
|
3,511,291
|
|
|
|
—
|
|
|
|
3,511,291
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total collective trust funds
|
|
|
185,135,347
|
|
|
|
—
|
|
|
|
185,135,347
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments
|
|
$
|
638,987,799
|
|
|
$
|
453,852,452
|
|
|
$
|
185,135,347
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Investment fund seeks results that correspond generally to the price and yield performance, before fees and expenses, of the Russell 3000 index. This fund allows for daily redemptions with no unfunded commitments.
|
|
(2)
|
Investment fund seeks preservation of principal and to earn current income while tracking interest rates over the intermediate term by investing in a diversified portfolio of stable value contracts, including wrap
contracts issued by insurance companies, banks and other financial institutions. This fund allows for daily redemptions with no unfunded commitments.
|
|
(3)
|
Investment fund seeks results that correspond generally to the price and yield performance, before fees and expenses, of the MSCI ACWI ex-U.S. IMI Index. This fund allows for daily redemptions with no unfunded
commitments.
|
|
(4)
|
Investment fund seeks results through active management that correspond generally to the price and yield performance, after fees and expenses, of the FRSE NAREIT Equity REITS Index. This fund allows for daily
redemptions with no unfunded commitments.
|
The following methods and assumptions were used to estimate the fair values in
the tables above.
Level 1 Fair Value Measurements
Amounts consist primarily of mutual funds, equity securities and money market funds that are actively traded and can be redeemed upon demand.
The fair values of these instruments are based upon unadjusted quoted market prices.
Level 2 Fair Value Measurements
Amounts consist primarily of collective trust funds. These funds can be redeemed upon demand. The fair values are based upon the net asset
values (“NAV”) provided by investment managers. The NAV is used as a practical expedient to estimate fair value. The NAV is based on the fair value of the underlying investments held by the fund less its liabilities. This practical
expedient is not used when it is determined to be probable that the fund will sell the
10
DEVON ENERGY CORPORATION INCENTIVE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS – CONTINUED
investment for an amount different than the reported NAV. Participant purchases and sales transactions may occur daily. In the event the Plan initiates a full redemption of one of the collective
trusts, the investment managers reserve the right to temporarily delay withdrawal from the trust in order to ensure that securities liquidations will be carried out in an orderly business manner.
The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future
fair values. Furthermore, although these valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in
a different estimate of fair value at the reporting date.
5. Stable Value Fund
The PIMCO Stable Income Fund (the “Fund”) is a collective trust fund sponsored by SEI Trust Company. The beneficial interest of each
participant is represented by units. Units are issued and redeemed daily at the Fund’s constant NAV of approximately $100 per unit. Distribution to the Fund’s unit holders are declared daily from the net investment income and automatically
reinvested in the Fund on a monthly basis. It is the policy of the Fund to use its best efforts to maintain a stable net asset value of approximately $100 per unit, although, there is no guarantee that the Fund will be able to maintain this value.
The Fund has certain restrictions on withdrawals and transfers as follows. Withdrawals directed by the Plan require written notice to the
Trustee. The Trustee shall notify the Plan that such request will be fulfilled as either, (1) a deferred book value plan withdrawal, which the Trustee will act in good faith to complete by the fifth business day of the month that follows the
date that is 24 months after the Trustee’s receipt of the Plan’s request for a withdrawal or (2) an ordinary plan withdrawal to be completed on or prior to the first business day that is within 45 days of the Plan’s request for
withdrawal. The methodology chosen by the Trustee will depend on the value of the Fund’s portfolio, taking into account any adverse market value adjustments applicable to such withdrawal under the Fund’s investment contracts.
Withdrawals made in order to accommodate distribution to participants, whether in-service or following termination of employment may be made
on any business day. Withdrawals made in order to accommodate a participant-directed exchange to another investment option may be made on any business day, provided that the exchange is not directed to competing investment options, which consist of
the Vanguard Money Market Fund and Brokerage Link. Transferred amounts must be held in a non-competing investment option for 90 days before subsequent transfers to a competing fund can occur. The Trustee reserves the right to delay participant
withdrawals up to 30 days in order to maintain liquidity for the Trust or if it determines that an immediate withdrawal would have an adverse impact on the Trust.
The average yield earned by the Trust at December 31, 2013, representing the annualized earnings of all investments in the Trust divided
by the period-end fair value of all investments in the Trust was 1.41%. The average yield earned by the Trust at December 31, 2013, representing the annualized earnings credited to participants in the Trust as of the last day of the period,
divided by the period-end fair value of all investments in the Trust was .69%. Certain events may limit the ability of the Fund to realize the contract value of investment contracts and may therefore result in payments to participants that reflect
fair value rather than contract value. Such events include, but are not limited to, certain amendments to the Plan documents or the Fund’s investment guidelines that are not approved by issuers of investment contracts, failure to comply with
certain contract provisions, complete or partial termination of the Plan or merger with another plan or bankruptcy of the Plan. The Benefits and Investments Committees believe that the occurrence of events that would cause the Fund to transact at
less than contract value is not probable.
6. Plan Termination
Although Devon has not expressed any intent to terminate the Plan, it may do so at any time. Benefits owed to participants are not actuarially
determined and the aggregate vested benefits are limited to the Plan’s net assets available for plan benefits. In the event of the Plan’s termination, participants would become 100% vested in their accounts.
11
DEVON ENERGY CORPORATION INCENTIVE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS – CONTINUED
7. Plan Investment Assets
Following is a schedule of the Plan’s investments that exceed 5% of the Plan’s net assets at December 31, 2013 and 2012, and the
fair value of such investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
Number of
shares or
units
|
|
|
Fair value
|
|
|
Number of
shares or
units
|
|
|
Fair value
|
|
|
PIMCO Total Return Fund
|
|
|
5,805,895
|
|
|
$
|
62,065,017
|
|
|
|
6,857,697
|
|
|
$
|
77,080,517
|
|
|
BlackRock, Inc. U.S. Equity Index
|
|
|
4,807,991
|
|
|
$
|
93,521,199
|
|
|
|
5,174,586
|
|
|
$
|
75,393,713
|
|
|
BlackRock, Inc. International Equity Index
|
|
|
5,647,129
|
|
|
$
|
72,857,556
|
|
|
|
5,878,410
|
|
|
$
|
65,838,189
|
|
|
Devon Energy Corporation Common Stock
|
|
|
945,973
|
|
|
$
|
58,527,349
|
|
|
|
1,099,715
|
|
|
$
|
57,229,169
|
|
|
PIMCO Stable Income Fund
|
|
|
402,975
|
|
|
$
|
39,870,835
|
|
|
|
401,067
|
|
|
$
|
40,392,154
|
|
|
Vanguard Prime Money Market Fund
|
|
|
*
|
|
|
$
|
*
|
|
|
|
34,424,570
|
|
|
$
|
34,424,570
|
|
|
Harbor International Fund
|
|
|
537,950
|
|
|
$
|
38,199,848
|
|
|
|
*
|
|
|
$
|
*
|
|
|
*
|
Investment did not represent five percent or more of the Plan’s net assets.
|
During 2013,
the Plan’s investments (including gains and losses on investments bought and sold, as well as held during the year) appreciated (depreciated) in value as follows:
|
|
|
|
|
|
|
Mutual funds
|
|
$
|
(1,143,639
|
)
|
|
Collective trust funds
|
|
|
34,323,570
|
|
|
Equity securities
|
|
|
76,897,457
|
|
|
|
|
|
|
|
|
|
|
$
|
110,077,388
|
|
|
|
|
|
|
|
8. Related Party Transactions
The Trustee and Devon are parties in interest as defined by ERISA. Certain plan investments are shares of mutual funds managed by Fidelity
Management & Research Company, which is an affiliate of the Trustee. The Trustee also invests certain Plan assets in the Devon Stock Fund. Such transactions qualify as party-in-interest transactions permitted by the Department of Labor
regulations.
9. Tax Status
The
Internal Revenue Service has determined and informed Devon by a letter dated April 16, 2010, that the Plan and related trusts are designed in accordance with applicable sections of the Code. Prior to April 16, 2010, the Plan operated under
a determination letter dated August 1, 2002. Although the Plan has been amended since receiving the determination letter, the Benefits Committee believes that the Plan is designed and is currently being operated in compliance with the
applicable provisions of the Code.
Accounting principles generally accepted in the United States of America require plan management to
evaluate tax positions taken by the Plan and recognize a tax liability if the Plan has taken an uncertain position that more likely than not would not be sustained upon examination by the Internal Revenue Service. The Benefits Committee has analyzed
the tax positions taken by the Plan, and has concluded that as of December 31, 2013 and 2012, there are no uncertain positions taken or expected to be taken that would require recognition of a liability or disclosure in the financial
statements.
The Plan is subject to routine audits by taxing jurisdictions. The Internal Revenue Service conducted routine audits of
Devon, including the Plan, for the 2008 and 2009 tax years and had no adverse findings regarding operation of the plan. The Benefits Committee believes it is no longer subject to income tax examinations for years prior to 2010.
12
DEVON ENERGY CORPORATION INCENTIVE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS – CONTINUED
10. Risk and Uncertainties
In general, the investments provided by the Plan are exposed to various risks, such as interest rate, credit and overall market volatility
risks. Because of the risks associated with investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and that such change could materially affect the participants’ account
balances and the amounts reported in the statements of net assets available for benefits.
11. Reconciliation of Financial Statement to Form 5500
The following is a reconciliation of net assets available for benefits per the financial statements at December 31, 2013 and 2012
to Form 5500.
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
Net assets available for benefits per the financial statements
|
|
$
|
736,641,544
|
|
|
$
|
671,177,255
|
|
|
Adjustment from contract value to fair value for interest in collective trust relating to fully benefit-responsive investment
contracts
|
|
|
(773,253
|
)
|
|
|
120,975
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets available for benefits per Form 5500
|
|
$
|
735,868,291
|
|
|
$
|
671,298,230
|
|
|
|
|
|
|
|
|
|
|
|
The following is a reconciliation of investment income per the financial statements for 2013 to Form 5500:
|
|
|
|
|
|
|
|
|
2013
|
|
|
Net investment income per financial statements
|
|
$
|
121,158,608
|
|
|
Interest income on notes receivable from participants
|
|
|
448,242
|
|
|
Adjustment from contract value to fair value for interest in collective trust relating to fully benefit-responsive investment
contracts
|
|
|
(894,228
|
)
|
|
|
|
|
|
|
|
Net investment income per Form 5500
|
|
$
|
120,712,622
|
|
|
|
|
|
|
|
13