A continuing column which provides short summaries and updates of recent events that affect oil and gas taxation. This issue's topics include: Interest Payments on Refunds, Intangible Drilling and Development Costs, Percentage Depletion, Timing of Depletion, Property Aggregations, Windfall Profit Tax Litigation, Windfall Profit Tax Audits.

Current Developments in Oil and Gas Taxation. Mark, Richard S., Fall/Winter 1987, pp. 3‑6.

The 1986 Tax Reform Act created a new Alternative Minimum Tax on corporations. This promises not only to increase the tax liability of many corporations, but also will lead to a great increase in the record keeping burden. In this article Messrs. McDowell and Beck explain the major features of the AMT and its likely impact on oil and gas producing companies.

The Corporate Alternative Minimum Tax and Its Impact on the Oil and Gas Industry. McDowell, Larry T. and Beck, David W., Fall/Winter 1987, pp. 7‑20.

The 1986 Tax Reform Act initiated a single, uniform comprehensive set of cost capitalization criteria. Included is a requirement that costs (including overhead) attributable to producing or acquiring inventory or other property must be capitalized. In addition, interest incurred by a taxpayer with respect to produced property must be capitalized to the extent paid or incurred during the construction period. In this article, the authors discuss some of the uncertainties surrounding these requirements and their application to independent producers of oil and gas.

Application of the Uniform Cost-Capitalization Provisions to Independent Producers of Oil and Gas. Robason, Randy D. and Ozanus, P. Scott, Fall/Winter 1987, pp. 21‑28.

The author discusses the rights and obligations of the parties to take-or-pay provisions in minimum quantity clauses of gas purchase agreements. The article analyzes typical contractual considerations given to take-or-pay situations and reviews the options available to sellers and purchasers in resolving disputes created by rake-or-pay provisions.

Treatment of Take-or-Pay: Management Considerations under Gas Purchase Contracts. Miller, Britann E., Fall/Winter 1987, pp. 29‑34.

Mr. Duet explains the features of interest-rate swaps and uses a similar approach in examining the new commodity-linked swaps. He illustrates oil price swaps and points out their potential benefits to oil and gas managers.

An Analysis of Commodity-Linked Swaps. Duett, Edwin H., Fall/Winter 1987, pp. 35‑42.

James L. Smith and C. S. Agnes Cheng provide analysis of Bruce Koch's article from the Summer 1986 issue of the journal. This article is followed by a response by Dr. Koch.

Cost-Volume-Profit Analysis of Offshore Energy Leases. Cheng, C. S. Agnes and Smith, James L., Fall/Winter 1987, pp. 43‑50.

In the Summer, 1986, edition of the Journal of Petroleum Accounting, Dr. Koch described the use of cost-volume-profit analysis in comparing bonus bids and royalty bids for offshore tracts. In this article Professors Cheng and Smith analyze Koch's work and Point out certain perceived shortcomings in his methodology and conclusions. Dr. Koch also responds to these criticisms.

Response to Professors Cheng and Smith. Koch, Bruce S., Fall/Winter 1987, pp. 51‑52.

In this article the authors discuss the expansion of traditional cash flow analysis in order to make different financial methods for oil and gas properties more compatible. A case study is used to illustrate this cash flow strategy.

Cash Flow Analysis in Oil and Gas Accounting: The Statement of Cash Flows. Grove, Hugh D. and Bazley, John D., Fall/Winter 1987, pp. 53‑62.

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.

Impact of the New Pension Pronouncements on the Petroleum Industry. Jarnagin, Bill D.; Hudson, Dennis; and Askren, Barbara, Fall/Winter 1987, pp. 63‑78.

Ms. Wright discusses the argument that in making "capital market studies "confounding events should be explicitly controlled. Ms. Wright uses as an example her prior research into the effects of oil and gas company news releases on stock prices.

Detecting Confounding Events in Accounting Capital Market Research—the Case of the Oil and Gas Industry. Wright, Charlotte, Fall/Winter 1987, pp. 79‑92.

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.

The Impact of Oil and Gas Company Captive Insurer Formation on the Parent Company's Firm Value. Cross, Mark L.; Davidson, Wallace N.; and Thornton, John H., Fall/Winter 1987, pp. 93‑100.

The authors examine the relationships between the average return on company stocks, the gross national product, the Consumer Price Index, prime interest rate and other economic factors for the years 1963-1984.

An Analysis of the Relationships between the Oil Industry and the U.S. Economy 1963-1984. Anderson, Dwight C. and Chapman, William B., Fall/Winter 1987, pp. 101‑109.