A continuing column which provides summaries of updates in the area of financial accounting. This issue's column includes: a discussion of Staff Accounting Bulletin No. 67, Successful Efforts Ceiling Test, Statement No. 69 Disclosures, SEC Full Cost Rules, COPAS.

Current Developments in Financial Accounting. Hall, James D., Spring 1987, pp. 1‑4.

A continuing column which provides short summaries and updates of recent events that affect oil and gas taxation. This issue's topics include: Recent Cases and Rulings Involving Oil and Gas, General Counsel Memorandum 39572, Lawrence Gilbertz and Verna Ann Gilbertz vs. U.S., IRS Hearings, Private Letter Ruling 8701058, Deductibility of Prepaid IDC.

Current Developments in Oil and Gas Taxation. Mark, Richard, Spring 1987, pp. 5‑10.

Professor File examines authoritative pronouncements on audit requirements relating to oil and gas reserves. He then articulates an audit approach to reserves. In the appendix to this article, a suggested audit program and the risk levels associated with different reserve estimation processes are presented.

Auditing Oil and Gas Companies' Financial Statements: The Need to Examine Reserve Estimates. File, Richard G., Spring 1987, pp. 11‑26.

The Electronic Data Communications Special Committee was founded by the Council of Petroleum Accountants Societies in 1986. In this article the co-chairmen of that committee review certain electronic data communications that have been developed through the cooperative efforts of the petroleum industry and General Electric Company. These include the Petroleum Product Exchange Data System (PETROEX), the Automated Exchange Reconciliation (RECON), Crude Oil Data Exchange (CODE), Check Stub Data Exchange (CDEX), Gas Revenue Accounting Data Exchange (GRADE), Computerized Equipment Pricing Systems (CEPS), and Joint Interest Billing Exchange (JIBE).

EDI—Cost Cutting Applications for Petroleum Accountants. Petree, Dale L. and Robertson, Ken, Spring 1987, pp. 27‑36.

The authors examine the structure of net back agreements as a pricing mechanism in the petroleum industry. The use of crude oil spot prices and product prices as a starting point for determining the setback price is discussed Yield assumptions and allowances, and fees are then summarized.

Review of Crude Oil Net Back Contracts. Deakin, Edward B. and Melo, Javier Luna, Spring 1987, pp. 37‑46.

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.

Guide to Converting from Full Cost to Successful Efforts Accounting. Smith, Kathy Durett and Klaver, Keith C., Spring 1987, pp. 47‑52.

Because of the plunge in oil and gas prices in the last 18 months resulting in a decline in value of oil and gas reserves, many companies using the successful-efforts method have considered applying a ceiling on capitalized costs of proved reserves. This article reports on a survey conducted by the Institute of Petroleum Accounting to determine the experiences of companies in applying a cost ceiling and to gather the opinions of respondents of whether a ceiling is appropriate and how it should be computed and applied.

Applying a Cost Ceiling under Successful Efforts: An IPA Survey. Brock, Horace R., Spring 1987, pp. 53‑64.

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.

Financial Reporting in the UK Oil and Gas Industry and the Role of the Oil Industry Accounting Committee. Brooks, M. J., Spring 1987, pp. 65‑72.

Mr. Yehle's article concentrates upon operational differences between accounting procedures for joint interests in the U.S. and the U.K. He examines differences in such areas as contracting, cash management administrative overheads, parent company overhead, and warehousing.

Joint Interest Accounting—a Comparison of UK and US Practices. Yehle, Richard E., Spring 1987, pp. 73‑82.

Mr. Robason reviews the provisions of the 1986 Tax Reform Act that have an impact on the oil and gas industry. These changes include such industry-specific items as percentage depletion, IDC, and recapture of IDC and depletion on disposition of an oil and gas property. Non-specific changes include changes in such items as ACRS, the ITC, accounting rules, passive loss limitations, the alternative minimum tax, investment interest limitations, elimination of capital gains treatment, and foreign investment taxation.

The Tax Reform Act of 1986: An Oil and Gas Perspective. Robason, Randy D., Spring 1987, pp. 83‑94.

The 1986 Tax Reform Act made two major changes in IRC Sec. 1254, relating to "recapture" on disposition of a developed oil or gas property. First, all IDC deducted on a property placed in service after 1986 will be subject to recapture when a property is disposed of. Second depletion which reduced the basis of the property is also subject to recapture. The author discusses these two new rules, along with Technical Advice Memorandum 8622005, which relates to recapture of IDC on the carve-out of an overriding royalty interest.

Recapture of Intangible Drilling and Development Costs—Current Developments. Ratliff, R. Byron, Spring 1987, pp. 95‑102.

The authors report on a research project to explore the use of 401(K) retirement plans by 51 companies in the petroleum industry. Such areas as the method of funding, nature of the plans, and participation of employees are examined

401(k) Plans in the Petroleum Industry: Bonanza or Bust? Shum, Connie; Posey, C.L.; and Anderson, Dwight, Spring 1987, pp. 103‑121.