This article summarizes the principal financial reporting objectives for AROs and explains how SFAS 143, FR-67 and FR-72 were designed to further these objectives, describes the tests used to measure the performance of the oil and gas industry against these objectives, and presents related conclusions and recommendations.

Due to the proliferation of laws regulating and protecting the environment, environmental due diligence on the part of oil and gas companies should include full disclosure of all existing or potential liabilities that pertain to such laws.

Environmental issues are increasingly important in both developed and developing nations. The need to collect information on environmental performance and to provide a means for appropriate environmental decision making is becoming more important. Pressure to control pollution and to remediate environmental damage is unlikely to decrease. Taking a proactive stance toward environmental costs is potentially beneficial in terms of risk reduction, prevention of liabilities, and the preservation of firm reputation. Managerial accounting can provide assistance in identifying and controlling environmental costs in several ways.

Environmental issues are increasingly important in both developed and developing nations. No matter where a firm operates, the need to collect information on environmental performance and to provide a means for appropriate environmental decision making is becoming more important. Pressure to control pollution and to remediate environmental damage is unlikely to decrease. Taking a proactive stance toward environmental costs is potentially beneficial in terms of risk reduction, prevention of liabilities, and the preservation of firm reputation. Managerial accounting can provide assistance in identifying and controlling environmental costs in several ways.

This study presents analysis examining the relative size of equity income to income from continuing operations within the energy sector. In addition, equity income is examined within a regression model to determine if it is associated with the credit ratings of equity sector firms.

This paper examines the presence of equity income in the earnings of energy firms and finds that the amounts are usually material but not likely a source of cash inflows.

Oil and gas drilling partnerships are common in the oil and gas industry. Unfortunately, drilling ventures do not always succeed and an investor may, in some cases, find himself owning a worthless partnership interest. This article explores the current state of the law regarding the abandonment of partnership interests with an emphasis on oil and gas drilling partnerships.

Dr. Koch describes the use of cost-volume-profit analysis used to compare the net benefits to the State of Texas from "bonus bids" and "royalty bids" for its offshore oil and gas leases. The general conclusion is that, because of low expected production, the bonus bid system has been more beneficial to the state.

This paper investigates the possibility of defeasance as an approach to reducing the cost of debt capital of two electric utility cooperatives in Alaska. Unlike investor-based utilities, the two utilities in question—Chugach Electric Association and Matanuska Electric Association—are both cooperatives whose boards of directors have been hostile to each other for the last decade. The proposed acquisition has divided the communities in Alaska's Railbelt area.

Professors Deakin and Deitrick summarize the results of a survey of 190 financial analysts regarding disclosure requirements for oil and gas companies. They conclude that a vast majority of financial analysts find companies' own reserve value estimates useful and that a substantial majority strongly prefer the inclusion of RRA-type values of proved reserves in financial reports of oil and gas producers. They also find that three out of four analysts responding favored an association of changes in reserve values with evaluated costs in a supplemental statement of oil and gas producing activities. However, far fewer analysts find the requirements of FASB Statements 33 and 39 useful.

The Oil and Gas (O&G) industry is experiencing a sustained wave of innovation, investment, and change. This article discusses the tax implications for O&G companies related to the evolving U. S. Department of Treasury and Internal Revenue Service tangible property regulations.

The evolving nature of the oil and gas industry and the proliferation of joint operating agreements have exacerbated the difficulty of providing accounting that properly reflects equality among all parties in a joint venture. COPAS has developed and published standardized accounting procedures to address this problem, but they have not always succeeded.

Should these G & G costs be included in the full cost amortization pool?

Professors Pearson and Gallun discuss whether step-out wells may be excluded from amortization by full-cost companies under the SEC's Financial Reporting Release No. lit. issued in the fall of 1983. Their discussion centers around whether or not a step-our well is associated with an unproved property. They also discuss the uncertainty resulting from the SEC's statement that unevaluated costs may be excluded from amortization until complete evaluation of the property has been made.

SFAS No. 123 now requires oil and gas firms to report stock options as a part of the executive compensation package. The authors use a hypothetical petroleum firm to illustrate the significant financial reporting consequences for oil and gas firms between the old and new reporting requirements.

Some oil industry analysts allege that petroleum companies overinvested in unwise and unprofitable exploration projects during the 1980s. This article compares the returns-to-spending performance of a selected group of oil and gas companies across the decade to evaluate the accuracy of this theory.

The oil and gas lease is an American invention designed to give the lessee an exclusive option to develop leased land. However, the term "royalty" does not describe what the lessor is entitled to in the event of production; it merely indicates the lessor will be compensated in some fashion if development is successful. The precise terms of the lease will define the "royalty" that is due.

The objective of the Extractive Industries Transparency Initiative (EITI) is to encourage the extractive industries to make public the amounts and sources of monies paid to governments for natural resources. This article discusses the background that led to this initiative, the escalation of public commitment to it, the pressures on extractive firms to comply with it, and the current level of participation.

Companies in the extractive industry operate in an environment that is increasingly dynamic, unstable, and complex. This paper assesses the characteristics and risks that the surrounding environment of the industry poses to the accounting policy issues faced by the industry.

There are a number of transactional, reporting, regulator, and legal reasons why it may be necessary to estimate the value of proven and prospective oil and gas properties. This article is not intended to provide a comprehensive description of all the valuation methods and metrics that are available, but rather to discuss some of the commonly-used methodologies and resources and to point out some of the inherent advantages and challenges.

The FASB has issued an exposure draft of a Statement of Financial Accounting Standards that would significantly change the current requirements for accounting for deferred income taxes. Mr. De Loach and Mr. Downs review the exposure draft, directing specific attention to changes in the accounting rules that affect oil and gas companies. Among the topics discussed are: comprehensive allocation for all book/tax differences, balance sheet classification of deferred obligations or charges, accounting for effects of tax rate changes, restrictions on recognition of tax assets, income statement treatment for NOL carryforward benefits, tax deferrals for business combinations, impact of the AMT and tax preference depletion.

FASB Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations: An Interpretation of FASB Statement No. 143” (FIN No. 47) became effective for fiscal years ending after December 15, 2005. Implementation requires extensive review of the processes used in identifying and accounting for asset retirement obligations (AROs) as originally mandated by SFAS No. 143, “Accounting for Asset Retirement Obligations”. The FASB concluded that FIN No. 47 was necessary in order to provide clarity in situations where sufficient information exists to estimate the fair value of an ARO even where uncertainty exists regarding the timing and/or method of retirement.

Mr. Boldt, Associate Director for Royalty Management of the U.S. Department of Interior, describes changes that have been made to make the Royalty Management Program more efficient and understandable. He discusses the new royalty accounting systems, operation of the audit function for royalty interests, the problem of product valuation, and new legislation relating to royalty management.

Over the last 18 months, oil prices have declined more than 70 percent, the biggest drop the country has seen in more than a decade. This article discusses three types of tax planning opportunities in this unique and dynamic economic environment which may help companies reduce tax liabilities or increase refunds of taxes due to net operating loss carry backs.

Tax reform isn't dead, but it isn't as sexy as it used to be. Bold initiatives appear to be taking a back seat to tweaks and fixes. Congress seems to have difficulty in finding a vehicle for tax legislation, and with the Bush Administrations and Democrats in Congress at odds, any hope for meaningful tax legislation seems pretty much stalled for now.

A review of some of the recently enacted legislative changes impacting 2009, 2010 and some proposed tax changes for 2011.

The authors provide an understanding how fraud can occur and enhancing good old-fashioned skepticism and diligence with data analytics technologies to fight fraud in one of the most targeted functions—purchasing and procurement.

Jointly operated gas wells often generate complicated gas balancing situations, particularly when the co-producers report under different accounting methods. The IRS has attempted to address this issue by requiring the joint operators to adhere to the same reporting methods.

The authors examine the current price spread between electric cars and hybrid vehicles, analyze breakeven years and the final steps needed on the pathway to green.

A large number of developed and developing countries in which extractive industries represent an essential part of the economy lack a specific accounting regulation, nor have they adopted the standards issued by the FASB, the SEC, the OIAC, or the NASB. In 1999 the International Accounting Standards Committee (IASC) launched a project aimed at developing an International Accounting Standard (IAS) applicable to mining, oil, and gas companies. This paper provides a view on (1) the accounting standards for extractive industries in Spain, (2) the actual accounting practices followed by the main Spanish oil companies, and (3) the limitations they find in the ability of the current accounting model to provide a true and fair view of their financial position.

The accounting rules mandated by the FASB and SEC in 1977 have remained, for the most part, unchanged for over a decade. This article explores the possibility that the financial accounting practices of oil and gas companies may be inflating the net book values of mature-stage producing properties. Given the current economic climate, this issue is significant in that accounting practices developed when times were good may be resulting in inflated net book values, increased depreciation expenses, lower profits, and dismal accounting rates of return in a sagging economy.

Mr. Avard reports on a research project in which he attempted to determine the attitudes and opinions of financial analysts toward the FASB's Proposed Statement on disclosures. He concludes that there is strong support for the disclosures already required under FAS 19, but that support for the standardized measure of discounted cash flow is limited.

The authors examine the determinants of risk in securities of oil and gas companies. Based on a sample of 168 companies in the industry, the authors analyze the relationship between security risk and twenty independent variables. The study confirms previous studies that conclude: - Size is significantly related to risk; - Dividends are significantly negatively related to risk; - Financial leverage is directly related to risk; - Liquidity has a significant negative relation to risk; - Net profit margin is significantly negatively related to risk.

Mr. Hunt describes and illustrates various types of analyses to assist management in evaluating an oil and gas company's operations and in making decisions. He examines such techniques as quarterly variation analysis, computing key operating statistics, and cash flow analysis.

This article compares the energy cost of The General Motors Chevrolet Volt and the Toyota Prius, as it relates to the corresponding green objective.

This report is a survey of operating results for oil and gas producers in 1987. The report is drawn from the Institute of Petroleum Accounting's data base. It shows results of overall company operations, oil and gas operations, reserve data and standardized measure data for the industry and compares 1987 with 1986 on several important dimensions. Per barrel or mcf and per share data are presented together with year-to-year change statistics for the industry as a whole and for primary industry segments. The results are useful to those wanting to see how the industry performed, generally and to compare their own firm performance with the industry averages.

Mr. Guest reports on a survey of financial reporting techniques used by drilling funds in reporting to owners. The author presents illustrative financial statements that may be used by these entitles.

Mr. Brooks discusses the need for standardization of accounting practices in the United Kingdom oil industry. He reviews the history and purposes of the Oil Industry Accounting Committee. The author then reports on the committees work related to five accounting and reporting issues: exploration costs, reserve quantities and values, decommissioning costs, petroleum revenue tax, and disclosures.

Accounting practices in the U. S. Petroleum industry are subject to a number of different considerations than in other industries. This review of 150 oil and gas company corporate annual reports shows how the industry accounted for assets, liabilities, and equities as well as the treatment of supplemental disclosure and footnote items. The article includes many examples of presentations drawn from these reports.

Accounting practices in the U.S. Petroleum industry are subject to a number of different considerations than in other industries. This review of 148 oil and gas company corporate annual reports shows how the industry accounted for assets, liabilities and equities as well as the treatment of supplemental disclosure and footnote items. The article includes many examples of presentations drawn from these reports.

Mr. Spear, a research associate in the Institute of Petroleum Accounting, reports on the Institute's annual survey of reporting practices of 197 oil and gas companies. The survey covers the balance sheet, income statement, notes to the financial statements, and supplemental oil and gas disclosures. Ninety-four companies using the full cost method and 103 using the successful efforts method are included.

This Financial Accounting Standards Board (FASB) requires corporations disclose uncertain tax positions in financial statements. Starting with the 2010 tax year, the Internal Revenue Service (IRS) also requires that many corporate taxpayers identify such positions in their income tax returns. This article discusses industry-specific accounting and reporting items, and that oil and gas companies must also comply with UTP recognition and disclosure requirements in their financial statements and tax returns.

Prominent among the reactions to falling oil prices have been changes in U.S. exploration and development strategies, a substantial reduction in domestic exploration and development activity, the exiting of many companies from the industry, and the consolidation of oil and gas assets among the remaining companies. Many oil and gas companies are facing the make-or-buy decision--whether to purchase existing reserves to replace production or to find and develop new reserves. This article breaks down the 22 major and 202 publicly traded oil and gas producers studied into two classes based on above or below average purchase of reserves and analyzes the efficacy of the two strategies.

The lack of consistency in defining and reporting on finding costs has resulted in problems in comparing the efficiency of oil companies and predicting their future profitability. Investment bankers and security analysts rely on finding costs as disclosed in annual reports when making investment decisions. The dilemma of non-comparability brought on by differences in conversion ratios, operations, accounting methods, product quality, and cost classifications argues the need for a standardized finding cost calculation.

Do big oil companies fleece America? The common public perception is that oil companies make huge windfall profits on the one hand and use their clout with political leaders to receive massive tax breaks on the other. There is also anecdotal evidence from the popular press that the sole aim of oil companies is to satisfy shareholders and ignore other stakeholders—especially consumers. Critics contend that oil companies, therefore, distribute vast amounts of shareholder dividends instead of investing in capital expenditures. These charges are brushed aside by oil companies. Oil companies claim that they not only invest substantial amounts on capital expenditure but also restrain shareholder dividends. Who's right?

The uncovering of fraud—depending on who uncovers the fraud— can make or break an auditor's career. An audit department that works effectively within the organization on fraud detection will earn the appreciation of management, while increasing shareholder and public confidence in the company.

Given the need to better match information technology infrastructure with changing company needs and the desire to shift more infrastructure costs from capital to operational expenses, this article discusses the technology needs of the upstream and the concept of on demand private cloud computing and modular/containers.

A recent tax court case involving energy sales to Japanese companies by Phillips Petroleum hinged on the definition of independent distributor, income sourcing, and the inclusion of "shaken," a Japanese concept related to the U.S. accounting concept of goodwill, as an intangible asset.

Utilizing data from a study conducted by the Association of Fraud Examiners (ACFE), the authors analyze 41 cases of fraud which occurred in the oil and gas industry. The findings reported by the authors may serve to alert managers and auditors—both internal and external—to areas under their control that are particularly vulnerable to fraud.

A look at global fraud trends, generally classified into three categories: corruption, asset misappropriation, and financial statement fraud. Anti-fraud programs and assessing risks of fraud are also discussed.