b'KOSMOS ENERGY LTD.Notes to Consolidated Financial Statements (Continued)2. Accounting Policies (Continued)Income TaxesThe Company accounts for income taxes as required by ASC 740Income Taxes. Under thismethod, deferred income taxes are determined based on the difference between the financial statementand tax basis of assets and liabilities using enacted tax rates in effect for the year in which thedifferences are expected to reverse. Valuation allowances are established when necessary to reducedeferred tax assets to the amounts expected to be realized. On a quarterly basis, management evaluatesthe need for and adequacy of valuation allowances based on the expected realizability of the deferredtax assets and adjusts the amount of such allowances, if necessary.We recognize tax benefits from uncertain tax positions only if it is more likely than not that the taxposition will be sustained upon examination by the tax authorities, based on the technical merits of theposition. Accordingly, we measure tax benefits from such positions based on the most likely outcome tobe realized.FASB Staff Accounting Bulletin 118 (SAB 118) was issued in January 2018 to address situationswhere certain aspects of the Tax Reform Act are unclear at issuance of a registrants financialstatements for the reporting period in which the Tax Reform Act became law. As of December 2018,SAB 118 provisional period has expired and the Company has no further provisional amounts recordedin our financial statements.Foreign Currency TranslationThe U.S. dollar is the functional currency for all of the Companys material foreign operations.Foreign currency transaction gains and losses and adjustments resulting from translating monetaryassets and liabilities denominated in foreign currencies are included in other expenses. Cash balancesheld in foreign currencies are not significant, and as such, the effect of exchange rate changes is notmaterial to any reporting period.Concentration of Credit RiskOur revenue can be materially affected by current economic conditions and the price of oil.However, based on the current demand for crude oil and the fact that alternative purchasers arereadily available, we believe that the loss of our marketing agent and/or any of the purchasersidentified by our marketing agent would not have a long-term material adverse effect on our financialposition or results of international operations. For our U.S. Gulf of Mexico operations, crude oil andnatural gas are transported to customers using third-party pipelines. For the year ended December 31,2018, revenue from Phillips 66 Company made up approximately 11% of our total consolidated revenueand was included in our U.S. Gulf of Mexico segment.Recent Accounting StandardsRecently AdoptedIn May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers(Topic 606), which supersedes the revenue recognition requirements in ASC 605, RevenueRecognition, and most industry-specific guidance. ASU 2014-09 is based on the principle that revenueis recognized to depict the transfer of goods or services to customers in an amount that reflects theconsideration to which the entity expects to be entitled in exchange for those goods or services.116'