notes to consolidated financial statements accounting policies basis of consolidation — the consolidated financial statements include the accounts of utah international inc and all subsidiary companies utah after elimination of significant intercompany items and transactions.the statements are appropriately restated to reflect the effect of mergers accounted for as poolings of in terests when such mergers occur in addition the statements interim reports mining exploration and development costs — mining explora tion costs are expensed until it is determined that the develop ment of a minera deposit is likely to be economically feasible after this determination is made all costs related to further development including financing costs of identifiable new bor rowings associated with the development of new mining projects are capitalized and amortized over the lesser of ten years or the productive life of the property foreign currency translation — foreign currency asset and tltdlt us dll t th h zation emu ucici i t;u in^unit iqa^o vviii^ii cue utiiioiai&u oi niawir cal rates inventories and prepaid expenses are translated at the exchange rate in effect at the balance sheet date as a matter of convenience since the difference between the results so achieved and translation at historical rates is not significant stockholders equity income and expense accounts other than depreciation depletion and amortization are translated at the exchange rates in effect when the transactions occurred all foreign currency exchange gains and losses are included in the determination of net income for the period in which they occur income taxes — deferred income taxes are provided for timing differences in the reporting of certain income and expense items for financial statement and tax purposes no provision is made for permanent differences between financial statement and tax able income attributable to the excess of statutory depletion over book depletion arising from mining and oil and gas activities utah defers the investment credit and amortizes it over the aver age lives of the related assets mining properties mining properties are carried at cost and include expenditures which substantially increase the useful lives of existing assets the cost of mining properties is depre ciated depleted or amortized over the useful lives of the related assets by use of the unit-of-production straight-line or declining balance methods on disposition of an asset its cost and related depreciation depletion or amortization are removed from the accounts and any gain or loss is recorded in income maintenance and repairs on major equipment and facilities are provided for principally over the useful lives of the assets minor maintenance and repairs and minor replacements are charged to operating costs and expenses as incurred maintenance and repairs associated with the development of new mining projects are capitalized oil and gas properties — oil and gas properties are accounted for by use of the full cost method under this method all costs associated with the acquisition exploration and development of oil and gas properties both developed and undeveloped are capitalized not to exceed the fair value of the oil and gas re serves such capitalized costs all of which enter into the full cost pool as incurred are depleted by use of the unit-of-produc tion method by applying the ratio of gross revenues from oil and gas properties in each period to estimated future gross revenues from proven reserves of all oil and gas properties estimated future gross revenues are adjusted periodically whenever sig nificant changes occur in oil and gas prices or in proven reserves such revised future gross revenues are then used to calculate depletion for the current quarter and for future periods inventories — inventories which include principally mined ore and coal metal concentrates and mining supplies are stated at the lower of average cost or market the cost of production in ventories includes both direct and indirect costs consisting of labor purchased supplies and services and depreciation deple tion and amortization of property plant and equipment 1 poolings of interests on november 30 1973 march 29 1974 and october 31 1974 utah acquired ladd petroleum corporation ladd clarcan petroleum corporation clarcan and lvo corporation lvo respectively in mergers which were accounted for as poolings of interests and which resulted in the conversion of all of ladd's clarcan's and lvo's common stock into approximately 2.5 mil lion shares of utah's common stock 2 foreign operations and mineral sales backlog a substantial portion of utah's business is represented by oper ations located outside of the united states as summarized below gross revenues location of in thousands from operations assets united state canada , , , australia . other . . . $ 424,050 107,873 512,907 - 806 686,258 1,045,636 107,086 82,220 a 496,952 b a 98 to japanese customers under long-term sales agreements b 76 to japanese and 23 to european customers under long term sales agreements c includes 81 million of utah's investment in affiliates — a sub stantial portion of the affiliates assets are either located within the united states or are vessels not permanently situated in any one country at october 31 , 1975 approximately 94 of utah's mineral sales backlog totaling 6.45 billion was under long-term sales agree ments which contain escalation clauses affording protection against future cost increases 3 affiliated companies the composition of utah's investment in affiliated companies at october 31 1975 was as follows in thousands equity in undistributed earnings of affiliates — included in retained earnings included in deferred income taxes cost of investments 66,144 3,022 69,166 15,304 84,470 below is a summary of the unaudited financial statements of marcona corporation marcona and cyprus pima mining com pany cyprus pima utah's most significant affiliates and of all affiliates combined as of october 31 1975 before expropriation loss as described below totaling 62,800 before utah's share of expropriation loss as described below totaling 23,809 on july 25 1975 the peruvian government expropriated the iron ore mining properties and facilities of marcona mining company in peru marcona mining company is a wholly owned subsidiary of marcona utah's underlying share of the book value of mar cona's investment in the peruvian properties was approximately 19.1 million which is net of approximately 5 million of income taxes previously provided by utah on the undistributed earnings of marcona subsequent to the expropriation marcona sustained additional losses which are deemed to be directly associated with the takeover by the peruvian government these losses relate to marcona-owned and chartered vessels which were in volved in transporting ore from the peruvian mine such losses totaling approximately 4.7 million utah's share have been combined with utah's share of the book value of marcona's in vestment in the peruvian properties as losses resulting from the expropriation accordingly utah has written off such losses totaling 23.8 million as an extraordinary item during 1975 u.s government officials working together with marcona man agement have held discussions with the peruvian government in an attempt to receive just compensation for the expropriated peruvian assets while it is still premature to predict the outcome of these negotiations any recovery will be recorded as an extra ordinary gain when received 4 joint ventures and partnerships below is a summary of the unaudited balance sheets of harbor bay isle associates a partnership formed to develop a residen tial community in the san francisco area and of all joint ventures and partnerships combined as of october 31 1975 current assets other assets principally land current liabilities long-term liabilities net worth harbor bay isle total joint associates ventures and 50 owned)a partnerships $ 128 $ 1,096 30,023 30,540 30,151 31,636 $ 777 $ 1,238 23,397 b 23,397 5,977 7,001 30,151 31,636 a partnership agreement modifications made in 1975 provide that losses will be allocated in proportion to the partners capital accounts profits if any will be shared equally after partners prior losses have been recovered in effect utah since april 1974 has recorded 100 of the partnership losses b long-term liabilities consist of assessment liens payable to a reclamation district which issued bonds to raise funds for de veloping the project utah acquired substantially all of these bonds and they are included in long-term receivables and other in the accompanying balance sheet because of the difficulties experienced in developing this project utah has provided a significant reserve on its investment in the bonds 5 foreign currency exchange gains and losses prior to 1975 foreign currency exchange gains and losses re lated to foreign borrowings used to finance the development of certain mining properties were deferred and amortized over the estimated lives of such mining operations as a result of a finan cial accounting standards board pronouncement during 1975 all foreign currency exchange gains and losses including the previously deferred items should be included in the determina tion of net income for the period in which they occur the accom panying financial statements have been appropriately restated to comply with this pronouncement and accordingly all such gains and losses have been included in foreign currency exchange gains in the statement of consolidated income the following is a reconciliation of net income and earnings per share as previously reported for 1 974 with such items as restated 1974 net income earnings in thousands per share as previously reported foreign currency exchange gains , as restated 97,632 3.08 03 3.11 6 profit sharing and pension plans utah's retirement program for salaried employees consists of the profit sharing plan the stock investment plan and the retire ment plan the retirement plan is a pension program in which utah is required to contribute sufficient funds each year to fully fund the liabilities of the plan annual contributions to the profit sharing plan and the stock investment plan are based upon a profit sharing formula there are no unamortized past service costs with respect to the retirement plan certain domestic operations provide pension plans resulting from collective bargaining agreements and two subsidiaries operating in foreign countries have established separate retire ment plans fund assets of these plans at october 31 1975