International Accounting for Oil and Gas Training

• International accounting frameworks – IFRS and the influence of US GAAP
• Accounting issues posed by oil and gas contracting arrangements
• Accounting for exploration and development – successful efforts and full cost capitalisation methods of accounting
• Impairment of unproved and proved and producing properties
• Application of units of product depreciation methods
• Accounting for rehabilitation and remediation
• Revenue recognition issues
• Accounting for inventory
• Cost allocations
• Accounting for taxation
• Foreign currency transactions
• Analysis of reserves disclosures

Day 1

1. Overview of oil and gas accounting issues

• Nature of oil and gas entities and commercial arrangements
• Types of accounts required by upstream oil and gas entities
• Overview of traditional financial reporting methods; full cost accounting vs. successful efforts
• Influence, authority and relevance of US accounting treatments for IFRS preparers

2. Prospecting, exploration and evaluation

• Review of full cost vs successful efforts
• How IFRS modifies the full cost and successful effort methods
• Use of framework and IFRS 6 to determine treatments
• Acquisition of mineral interests
• Use of cost centres
• How to treat dry holes
• Presentation and disclosures

CASE STUDY – COMPARING SUCCESSFUL EFFORTS WITH FULL COST CAPITALISATION ACCOUNTING

Day 2

3. Asset impairment principles and application to unproved property

• Overview of economic valuation methods including DCF model, IRR, NPV, market value and fair value
• Impairment testing principles under IFRS
• Impairment testing of exploration assets; indicators and methods
• Cost centres for impairment testing; full cost vs. successful efforts
• Impairment testing on completion of the project evaluation

CASE STUDY – IMPAIRMENT TESTING UNPROVED PROPERTIES

4. Accounting for development

• Applying IAS 38 and the IASB framework
• Treatment of intangible development costs
• Capitalisation of borrowing costs (IAS 23)
• Treatment of dry holes and inefficiencies
• Impairment testing
• Cost centres, direct and indirect cost allocation
• Acquisitions of proved reserves

CASE STUDY – CAPITALISING AND ALLOCATING DEVELOPMENT COSTS

5. Provisions & asset retirement obligations (IAS 37 and IFRIC 1 and IFRIC 5)

• Definitions, measurement and when to provide
• Disclosures and treatment of un-utilised provisions
• Capitalisation of asset retirement obligations
• Accounting for environmental clean-up costs
• Accounting for rehabilitation funds

CASE STUDY – MEASUREMENT AND SUBSEQUENT REMEASUREMENT OF ASSET RETIREMENT OBLIGATIONS

Day 3

6. Accounting for production

• General principles of accounting for property plant and equipment (IAS 16)
• Application of IAS 16 PP&E to upstream
• Cost centres and cash generating units in the upstream business
• Units of production depreciation method
• Impairment testing (application of IAS 36)
• Treatment of direct production costs and overheads

CASE STUDIES – DEPRECIATION AND IMPAIRMENT TESTING

7. Leasing activities (IAS 17)

• Types of leased equipment and leasing arrangements found in the industry
• Accounting by the lessee for finance and operating type leases
• Application of IFRIC 4 contracts containing leases
• Update – overview of IFRS 16 and its impact

CASE STUDY – ACCOUNTING TREATMENT OF FINANCE LEASES

8. Foreign currency transactions (IAS 21)

• Determining the functional currency of the operation
• Measuring the foreign currency transaction at initial recognition
• Identifying and remeasuring monetary items
• Treatment of FX gains and losses

CASE STUDY – ACCOUNTING FOR FX GAINS AND LOSSES

Day 4

9. Revenue recognition (IAS 18) and production inventories (IAS 2)

• Revenue recognition and measurement issues for the oil and gas industry
• Treatments of royalty taxes
• Accounting for production inventory
• Revenue update: overview of IFRS 15, revenue from contracts with customers and expected impact on the industry

CASE STUDIES – REVENUE RECOGNITION POINTS AND REVENUE MEASUREMENT

10. Tax accounting in the oil and gas industry (IAS 12)

• Overview of general principles for accounting for taxation under IFRS
• Current and deferred tax treatments
• Overview of taxation arrangements in relation to oil and gas
• Sales taxes and royalties vs. income taxes

11. Oil and Gas reserves and their analysis

• Adoption of alternative accounting guidance in the absence of IASB standards
• Measuring and disclosing reserves; requirements of SEC / US GAAP
• Illustrations from published disclosures
• Review of IASB discussion paper on extractive industries

CASE STUDY – ANALYSIS OF OIL AND GAS RESERVE DISCLOSURES

12. Conclusions

• Course summary and review