A project team for the International Accounting Standards Board (IASB) is working toward the release of a discussion paper on the accounting, disclosure, and valuation of reserves and resources sometime during the first quarter of 2009.The project team has identified three possible valuation approaches: historical cost, current value, and fair value. The discussion paper should generate some very interesting comments. It is interesting that the IASB seems to be intent on the adoption of some form of fair value accounting method despite the apparent lack of enthusiasm for such an approach.

Current Developments in International Financial Reporting. Wright, Charlotte, Fall/Winter 2008, pp. 1‑7.

Acquisitions are important to an MLP's long-term prosperity, therefore current market conditions may be changing the rules of the game. MLP valuations are sharply depressed and capital markets are extremely volatile, with credit markets being difficult to access. As such, MLPs, like all market participants, may experience trouble financing acquisitions and capital development projects. MLPs may need to either look for new ways to finance their external capital requirements or temporarily reduce spending.

Master Limited Partnerships. Pickle, Elaine, Fall/Winter 2008, pp. 8‑14.

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 Fleecing of America: Are Big Oil Companies Guilty? Iyengar, Raghavan J.; Moffie, Robert P.; and Sahoo, Bijoy K., Fall/Winter 2008, pp. 15‑36.

Proved O&G reserves represent the primary operating assets of O&G producing firms. Based on the historical costs incurred in finding and developing O&G reserves, these assets are accounted for using either the full cost method or the successful efforts method. However, regardless of the accounting method used—or the degree of conservatism imbedded in accounting rules and estimates—movements in O&G prices (as well as revisions to reserve estimates and changes in development and production costs) may lead to significant changes in the level of accounting conservatism applied to O&G assets. Under certain circumstances, this may result in aggressive accounting treatments by both FC and SE firms.

Asset Impairment and Accounting Conservatism: Evidence from the Oil and Gas Industry. Spear, Nasser and Jabr, Yahya Al, Fall/Winter 2008, pp. 37‑60.

Many current oil and gas leases contain clauses obligating the operator to compensate the surface owner for losses such as crop damages, damages to land and structures, and diminished value. Surface owners are also commonly paid for easements and for the use of non-oil and gas resources from the property, such as water. This article discusses the federal income tax implications of such payments from the perspective of the payee surface owner, with an emphasis on payments to surface owners in connection with constructing well pads in the Barnett Shale Formation in North Texas.

Issues Involving Payments to Surface Owners in Connection with Oil and Gas Drilling Activities. Wells, Charles, Fall/Winter 2008, pp. 61‑72.

In the U.S., the issue of reserve quantity and the value relevance of non-earnings performance metrics have been the focus of a great deal of attention for quite sometime. The authors examine the potential role of various non-financial performance indicators in predicting the future performance of 25 U.S. oil and gas companies over a time-period from 2002 through 2006. They further investigate whether these performance metrics have an incremental valuation implication for the capital market in pricing equity securities in the presence of other traditional earnings-based financial variables.

Incremental Role of Non-Financial Metrics in Predicting Performance and Market Valuation of the U.S. Oil and Gas Companies. Mitra, Santanu and Crumbley, D. Larry, Fall/Winter 2008, pp. 73‑98.

This article evaluates the two alternative accounting methods that are acceptable for use in the extractive industries ─ successful efforts (SE) and full costing (FC)—and compares the earnings quality of each method. While the earnings quality literature defines earnings quality several different ways, the authors of this article utilize two closely-aligned definitions that focus on the association between earnings and cash flows.

An Investigation of the Earnings Quality of the Successful Efforts and Full Costing Methods. Murdoch, Brock and Krause, Paul, Fall/Winter 2008, pp. 99‑111.

It is of benefit to all parties concerned to understand the contents, rights, and obligations incumbent in a lease. The mineral owner benefits by being able to get a better deal for his or her minerals. The energy company benefits by understanding what is most important to the mineral owner, which may save it a lot of time, money, and legal fees during the leasing process. This articles concludes a two-part series designed to make that experience a little less frightening.

What's in a Lease? You've Just Been Handed One, Part II. Hoffman, Jim, Fall/Winter 2008, pp. 112‑116.