The Committee of Sponsoring Organizations of the Treadway Commission (COSO) has released "Interna1 Control--Integrated Framework." The Petroleum Accountants Society of Dallas will release "Guidelines for Use in Determining Finding/Acquisition Costs." The Petroleum Accountants Society of Houston has completed a survey of the treatment of reserves and related issues associated with foreign production sharing. The SEC staff has turned down all requests for waivers from ceiling test write-downs on quarterly financial statements, is requesting better disclosure of environmental cost issues and accruals, and has interpreted SAB No. 74 to require disclosure both in the MDA sections and in footnotes. The SEC has approved changes to the rules regarding insider trading. The FASB has tentatively decided to supersede SEAS No. 96 with a standard that would recognize and measure a deferred tax asset for an enterprise's deductible temporary differences and operating loss and tax credit carry-forwards. When reviewing findings the SEC is relying extensively on a document produced by the Auditing Standards Division of the AICPA : "Oil and Gas Producers Industry Developments--1990."

Current Developments in Financial Accounting and Reporting. Jennings, Dennis R., Summer 1991, pp. 1‑9.

Topics reviewed include: IDC recapture; sales versus lease arrangements; working interest income as self-employment income; final regulations on partners' and S shareholders' percentage depletion; taxable income limitation; pre-August 16, 1986 bonus and advance royalties; non conventional fuels credit; tar sands production by new technology; alternative minimum tax (AMT) adjusted current earnings(ACE) reduction in IDC amortization amount as a result of the alternate tax energy deduction; the treatment of an aggregated non-operating interest as a separate tax property; ordinary loss on a stock sale; and worthlessness loss.

Current Update in Oil and Gas Taxation. Mark, Richard S., Summer 1991, pp. 10‑25.

Discussions at the COPAS Board of Directors February 1990 meeting included a review of the Computerized Equipment Pricing System (CEPS) contract with General Electric Information Services and the activities of the Natural Gas Review Committee (NGRC). At the spring 1991 COPAS meeting in March the following items were approved: Bulletin #24, Producer Gas Imbalance, new audit per diem rates, and Revised Interpretation #11, Employee Benefits Included Within Operator's Percentage Calculation Charged to Joint Operations . The activities of various COPAS committees are discussed.

COPAS: An Update. Westbrook, J. W., Summer 1991, pp. 26‑32.

The two questions from readers addressed in this issue concern the appropriate statement presentation of liquid reserves related to gas processing giant operations when the plant is entitled to retain as compensation all liquid products removed from the gas stream and how to account for costs incurred in the "workover" of producing oil and gas wells.

Accounting Forum. Brock, Horace, Summer 1991, pp. 33‑37.

In the Journal's annual survey, Professors Spear and Aldiab present comparative data from the financial statements of 90 of the largest oil and gas producing companies for the years 1988, 1989, and 1990. The data include selected items from the income statement, the balance sheet, and oil and gas reserves for the companies. Also presented are measures of profitability, solvency risk, and finding cost performance. The data is aggregate data reported separately for the largest 14 companies and the remaining 76 firms, subdivided by the firm's accounting method, either successful efforts (SE) or full cost (FC).

A Comparative Analysis of the Operating and Financial Performance of U.S. Oil and Gas Producing Companies for the Years 1988-1990. Spear, Nasser A. and Aldiab, Taisier F., Summer 1991, pp. 38‑66.

In an update to his very successful article in the Summer 1990 Journal, Mr. Goleman addresses topics of critical importance in the post-Exxon Valdez spill era: implications of the 1990 Federal Clean Air Act amendments; past exploration, production, transmission, and refining practices and their legacies--cleanups under RCRA and Superfund; community right-to-know implementation and its progeny-environmental and toxic tort litigation; and management of environmental Programs in the 1990's.

The Church of What's Happening Now—Revisited: Environmental Issues Impacting the Oil and Gas Industry. Golemon, R. Kinnan, Summer 1991, pp. 67‑129.

A typical lease habendum clause deals with the lessee's right, after the primary term of the lease, to keep the lease in force as long as production from the lease is in paying quantities. If a lessor successfully asserts that the lease has terminated because of nonpaying production, the lessor is entitled to all of the working interest proceeds for the period under claim.

Accounting for Production in Paying Quantities under the Habendum Clause. Wilson, John L., Summer 1991, pp. 130‑136.

Because gas has a wide span of heating values, the conversion of the MCF price to its BTU equivalent, MMBTU, is essential. Because the contract dictates the conversions that apply, the auditor must know what the contract contains and must be able to verify both the raw measurements and the conversion applied.

Revenue Auditing Requires Contract Knowledge. Howard, John D., Summer 1991, pp. 137‑142.

This article addresses the practice of adding back total exploration expenses or exploratory dry-hole expenses in preparing cash flow statements for successful efforts (SE) firms. Comparing SE and full-cost (FC) rules and the objectives of SFAS No. 95 with an analysis of the cash flow statements of 125 oil and gas firms, Professor Porter argues that there is a current need for greater comparability and presents recommendations for improving that comparability, in particular, to require disclosures of cash Inflows from oil and gas sales and cash outflows for property acquisition, exploration, development, and production activities.

Improving Comparability of Cash-Flow Statements by Oil and Gas Producing Companies. Porter, Alan, Summer 1991, pp. 143‑167.

In 1973, the Federal Trade Commission(FTC) filed an antitrust suit against the nation's eight largest oil producing firms. This article examines whether oil firms reduced their discretionary accruals in response to the FTC antitrust lawsuit and Congressional interest in divestitures. The evidence indicates that the eight firms named in the FTC lawsuit took lower discretionary accruals in the period when the lawsuit was pending. Similar tests show the 17 firms affected by the divestiture legislation took lower discretionary accruals while the legislation was before Congress.

Accrual Choices of Oil Firms in Response to Vertical Divestiture Litigation and Legislation. Cahan, Steven E., Summer 1991, pp. 168‑194.

Petroleum company divestiture was a controversial issue in the 1970's. Forced divestiture activity has been seen to result in adverse stock price performance. This study addresses the stock price effect of one form of voluntary divestiture: the sale of assets to a third party. Overall results indicate that petroleum sell offs result in a positive stock price reaction. Moreover, petroleum sellers perform better than petroleum buyers.

A Comparative Analysis of Stock Price Effects of Petroleum Sell Offs. Cheng, Louis T. W. and Shum, Connie., Summer 1991, pp. 195‑217.