The authors argue that the generally depressed state of the mining industry calls for a conservative accounting treatment based on an asset definition tied to the net present value of future cash flows. They demonstrate how this concept might be applied to expenditures incurred in the various stages (pre-operating, exploration, development. production and post-operating) of mining.

Financial Reporting Standard No. 12, Provisions, Contingent Liabilities and Contingent Assets (FRS 12) became mandatory in March 1999. Although the impact of FRS 12 is perhaps likely to be most pronounced for companies in extractive industries, the standard may also affect other UK companies, particularly those with high levels of provisions. A study of the impact of FRS 12 is especially important in light of the recent movement towards the use of international financial reporting standards for reporting purposes in Europe as well as in many other countries around the world. Consequently, this paper extends prior research by assessing the impact on company value of the introduction of the standard on provisions and contingencies not only on extractive firms, but also on UK firms in other industries.

Europe is currently bracing itself in anticipation of the 2005 implementation of lnternational Financial Reporting Standards (IFRSs) by all listed European companies. In the U.K., this process of change has already begun; over the last few years, the U.K.'s Accounting Standards Board (ASB) has worked closely with the International Accounting Standards Board (lAS B) in developing a number of joint projects. The benefits of increased transparency resulting from the prescriptions of the standard are, in the view of preparers, likely to be of limited value due to an inadequate amount of guidance and disclosure within the standard in key areas. Despite this, the survey reveals that FRS 12 may improve financial reporting of provisions and contingencies.

In this article Messrs. Barton and Zang explain and evaluate the SEC., interpretation in SAB 47 and its proposed rules relating to the exclusion of unevaluated costs from amortization of the full cost pool and for the reporting of gains or losses from brokerage activities and drilling arrangements.

From the date that the SEC published accounting rules to be followed by publicly-held companies using the full cost method, an interesting question has existed over the period of time that application of a ceiling test to capitalized costs incurred in a "new full cost center" may be deferred. In this article, Dr. Porter analyzes this problem, using as a basis for his discussion an assumed set of facts over a five-year period.

Mr. Evans and Mr. Miller have found gas revenue Auditing often inadequate due to both its complexity and the absence of trained employees. The purpose of the article is to present a fundamental introduction to the topic.

The Securities and Exchange Commission (SEC) has moved to require that publicly held companies disclose the fees paid to their external auditors for Auditing and other services in their annual proxy statements, including the amount charged by public accounting firms to conduct the required annual audits of energy companies. Although previous studies have examined factors affecting audit fees, inquiry in this area has been hampered by the lack of publicly available information about audit fees for specific companies. However, recent regulatory actions permit examination of this audit issue facing energy concerns.

An overview of the recent changes in the employment market, generational effects between Baby Boomers and Millennials, and solutions to ensure a strong future for energy organizations

The future of greater transparency regarding payments made to foreign governments by the oil, gas and minerals sector is once again in a state of uncertainty in the United States. This paper will look at those requirements as well as similar requirements in the European Union.

This paper follows a companion discussion paper to the Reportable Quantities of Natural Gas Liquids Reserves discussion paper published in the Petroleum Accounting and Financial Management Journal, Spring 2012, Vol. 31. No. 1., which focused on contractual and processing economics aspects of natural gas liquid production that should be key determinants of reserves reporting. This discussion paper focuses on a more robust review of GAAP considerations related to NGL reserves.

In this comprehensive article, Mr. Borrego examines the problems and rights of producers involved in split stream production, reviews gas balancing agreements, and discusses royalty valuation problems when there are gas balancing agreements. The author points out the importance of having clear gas balancing agreements.

The Oklahoma courts have issued more gas balancing decisions than the courts of any other state. This paper provides an overview of the manner in which the published decisions of the Oklahoma courts have addressed certain issues involving production imbalances and also reviews two preprinted model form gas balancing agreements developed during the 1990s to clarify gas balancing rights and remedies.

The decline in gas prices and the temporary oversupply of gas has led to marked changes in the approaches to drafting gas contracts and in the terms of those contracts. Mr. Rush reviews typical provisions in currently-negotiated contracts, discusses accounting problems brought about by FERC and the deliverability surplus, and analyzes the potential impacts of price decontrol.

In this article, one of three examining full costing in this issue, Messrs. Brock, Klingstedt, and Jones outline the general rules of the full-cost method with special emphasis on amortization calculations and special rules involving mineral conveyances and promotional activities. The article serves as an introduction to the two following articles.

This paper explores the impact of SFAS 131 on the financial reporting practices of multi-national companies in the petroleum industry. Does financial reporting under the new standard (SFAS 131) result in more disaggregation and thus a “finer” information set than under its predecessor (SFAS 14)? The authors examine a sample of companies in other industries to provide a perspective for the disclosures of oil and gas companies.

There are (17) major clauses contained in most leases as identified in this article. While the exact titles and order may change and some may be mingled together, every one is negotiable. This article examines clauses with the most significant negotiable aspects.

During the last year the Securities and Exchange Commission considered elimination of full costing as an acceptable method of accounting for oil and gas exploration and development costs. Although the SEC decided to continue allowing full costing, a number of companies have voluntarily switched from full costing to successful-efforts accounting In this article the authors discuss the factors to consider when reviewing the impact of such a change. They then examine the methodology involved in making the change.

Buckner and Durand summarize the major reporting requirements of the North American Securities Administrators Association and the Securities and Exchange Commission for companies filing registrations of oil and gas programs .

The International Accounting Standards Board's (IASB's) efforts to formulate and release a comprehensive standard for extractive industries seems to have been put on hiatus. This paper examines the history of the full cost versus successful efforts accounting debate in the U.S. and compares and applies that history to the IASB's current situation.

Risk management today involves not only the risks that exist in the core business activities, but also those associated with derivative financial instruments. This article provides a broad overview of typical core business risks, the derivatives used to address those risks, and the risks and controls that are necessary for the derivatives themselves.

With the instability in the crude oil markets, producers, refiners and users need a system to minimize their exposure to price fluctuations. A number of producers and others are finding that petroleum futures options can enable them to avoid the adverse effects of price fluctuations. This article is an introduction to the use of options in the oil industry.

It is not enough anymore for countries to ensure that they have "competitive" or "comparable" terms because "comparable terms" may lead to comparable lackluster exploration activity. To this end, many countries and provinces have been considering how they might possibly double or triple the number of exploratory wells drilled each year. Unfortunately, it is usually difficult for government officials to make big changes because the officials who see the need to make the changes often do not have authority to do so. For those who do have the authority, it is a leap not many are willing to make.

This article traces the history of the petroleum depletion allowance in the U.S. from the late nineteenth century to the present day. Through a detailed analysis of tax law, congressional hearings, and court cases, Craig G. Goodman, Director of Energy Tax Policy within the Department of Energy under the Reagan and Bush administrations, helps explain how and why we got to where we are today.

Do targets or bidders benefit from hostile takeovers? Do friendly acquisitions offer sufficient incentives to avoid prolonged capital market exposure? This article analyzes the impact of hostility on returns to stockholders of both target and bidding firms in mergers and acquisitions involving petrochemical firms from 1988 through 1990.

This study compares the fraud-related performance of U.S. oil and gas firms to that of non-U.S. oil and gas firms for the period 1993-2007 by investigating fraud likelihood in the oil and gas industry in a global setting.

Looks at the new U.S. leasing rules and how they will affect upstream companies.

Oil and gas companies are free to choose either full cost or successful efforts accounting procedures. Unfortunately, differences in accounting for costs incurred in exploring for oil and gas reserves cause problems in comparability across firms using two different methods. This paper examines the cash flow statement reporting of oil and gas companies under SFAS 95.

Mr. McClellan discusses some of the specific COPAS Bulletins and Interpretations that have had an important influence on the oil and gas industry. He points out that the various documents issued by COPAS are commonly accepted in the industry as having somewhat authoritative weight. McClellan maintains that because of the high degree of reliance given COPAS publications by accountants within the industry, broader consensus should be obtained before research papers and other publications are issued. He uses a recently issued research paper setting forth a standardized gas accounting procedure as an example.

The authors have analyzed the "market impact" on gas producing companies of passage of the Natural Gas Policy Act of 1978. They conclude that the impact of passage of the law on shareholders of natural gas production, transmission, and distribution companies was negligible at most.

Regulators in many international jurisdictions have recently voiced explicit concerns about the credibility of the financial reporting system. Some of these concerns relate to the allegation that a number of firms are engaging in earnings management behavior. This paper provides an overview of the issues associated with earnings management, summarizes the research findings on these issues, discusses the implications of the research findings for standard setters and other constituencies, and provides suggestions for future directions.

The publication of FASB Statement No. 158, “Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans,” by the Financial Accounting Standards Board (FASB) is expected to have a significant impact on financial reporting for oil and gas companies with defined benefit pension and other post-retirement plans. FASB Statement No. 158 amends FAS Nos. 87, 88, 106, and 132(R) relative to defined benefit pension and defined benefit post-retirement plans.

Expanding natural gas markets will be critically important for U.S. LNG export entities because the more established markets in Asia and Europe—that had been targeted—now instead have suppliers located closer and thus are better able to compete on price than U.S. firms.

Mr. Coffee reviews recent surveys and literature indicating inconsistent practices in accounting for exploration and development costs in the coal industry. Then he reports on the results of a survey of the financial officers of 172coal producing companies and 52 representatives of national public accounting firms concerning the effects of inconsistent accounting practices.

This paper examines the reaction of security returns in parent firms around the date that captive insurance companies were formed by the parent. Their results suggest that the creation of captive insurance firms create significant positive abnormal returns around the date of formation.

This article explores the impact of SFAS No. 69 disclosure requirements on the valuation placed by the stock market on securities. Dr. Pérez concentrates on the relevance of information about proved reserves and future cash flows and whether the choice of different accounting methods impacts users of financial statements in their evaluation of stocks.

The first quarter of 1986 saw one of the sharpest price declines in the history of the oil industry. Plummeting prices led to massive cuts in domestic exploration and production expenditures, increased foreign exploration, the emergence on natural gas an alternative energy source, and a significant increase in the purchase of proved reserves. The author investigates the impact of the 1986 oil price decline on the reserve replacement strategy of independent O&G producers.

In this article Dr. Cassill presents a detailed analysis of depreciation rules under the 1986 IRC as they apply to assets used in oil and gas production. He thoroughly examines the revised ACRS system, including such topics as property that is eligible for ACRS, cost-recovery periods, cost-recovery methods, conventions, transitional rules and asset dispositions. He also discusses optional depreciation methods.

In this article Messrs. Morris and Smith analyze the adjusted current earnings, or ACE adjustment, which is required to be made in computing the alternative minimum tax for years beginning after 1389. They first present an overview of the AMT, then give a detailed analysis of the required treatment of depreciation, Intangible Drilling Cost, and depletion in computing ACE. The authors also discuss the effects of changes in stock ownership on ACE. Finally tax planning considerations are reviewed

Provision 102 of the American Jobs Creation Act of 2004 (AJCA) added a new deduction based on domestic production activities. Internal Revenue Code (IRC) § 199 implements the domestic production deduction, and the domestic upstream segment of the oil and gas industry should benefit from this. There are, however, many unanswered questions regarding how this deduction will impact oil and gas partnerships. Caution should be exercised in rearranging business affairs to obtain or maximize the IRC § 199 deduction. Other tax and business issues may outweigh the desirability of taking the IRC § 199 deduction.

In September 2006, the FASB released FAS Statement No. 158, “Employers' Accounting for Defined Benefit Pension and Other Post-Retirement Plans,” that amends FAS Nos. 87, 88, 106, and 132® relative to defined benefit pension and defined benefit post-retirement plans. The changes specified in FAS No. 158 may have a significant impact on the financial statements of oil and gas companies and other financial information such as leveraged ratios, other ratios, debt covenants, and market perception of the company's financial results.

In the last two years the FASB has published Statements of Financial Accounting Standards No. 87 and No. 88 dealing with accounting for employee pension funds. This paper provides an overview of pension requirements and the impact of the two statements on the oil and gas industry.

The Omnibus Budget Reconciliation Act of 1990 reversed a 70-year trend in U.S. energy tax policy by shortening the time allowed an investor to recover costs incurred in exploring for and developing new U.S. petroleum resources. Craig G. Goodman, who served as director of oil policy and as Director of the Office of Energy Tax Policy within the Department of Energy under the Reagan and Bush administrations, brings a unique insight into the significance of this legislation to the oil and gas industry.

Professor Grove has developed a decision model for analyzing the impact of using tax accounting methods, such as the Uniform Capitalization rules, for financial reporting purposes. In research funded by the Petroleum Accountants Society of Colorado, the model was applied to integrated oil companies to determine whether they chose UCR rules for financial accounting purposes in order to increase reported income. He concludes that this was not the case.

The authors examined the effects of share prices of the five largest Penn Square Bank loan holders as information about The Penn Square closing became publicly available. They found that prices of stock of those five banks were adversely affected by Penn Square's failure.

Based on data from previous studies of offshore oil and pas fields. Dr. Boynton examines the relative burden to offshore operations of petroleum firms that would result from alternative tax plans with and without (1)the immediate expensing of IDC and (2) the 10 percent investment tax credit. Marginal corporate rates of 46. 30. 35, and 30 percent are studied. Dr. Boynton concludes that firms with a real discount rate of more than 11.19 percent would benefit from a plan with a marginal rate of 46 percent. allowing an immediate write-off of IDC and a 10 percent ITC as opposed to a Plan with no immediate expensing of IDC, no ITC, and a 30 percent marginal rate if prices are $36 per barrel equivalent. If oil prices are $34 per barrel equivalent, the former plan would be preferred by companies with a discount rate greater than 5.81 percent.

Dr. King discusses methods being used by companies using the successful-efforts method in compliance with the requirements of the SEC which state that impairment must be assessed and recorded, if appropriate, on unproved properties. He analyzes techniques used to record impairment both on properties that are "individually significant" and on groups of properties that are not individually significant.

SFAS No. 121, adopted in 1995, concerns accounting for the impairment and disposal of long-lived assets and only applies to successful efforts companies. This survey reports on the progress of implementing this new standard.

In 1996, successful efforts companies began implementing a new FASB standard concerning long-lived assets. Drs. Nichols and Gallun conducted a survey last year asking companies how they expected to implement SFAS. No. 121. In this year's follow-up, they ask the same companies how they actually implemented the new standard.

In this article Drs. Wright and Edwards review the problems arising from APB Opinion Na. II on deferred taxes which gave rise to the issuance of FASB 96. They also discuss some of the problems that will be encountered in applying FASB 96 in the oil and gas industry.

This article discusses the changes in the scope of business processes impacted by risk management and how management can address deviations in a process that threatens the company's ability to achieve its objectives. This represents a shift to view risk management as a continuous improvement process focused on risk reduction.