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.

Recent developments affecting financial accounting and reporting for the petroleum industry are reviewed in this section.

Among the important developments discussed in this column are the increased emphasis of the SEC on management's discussion and analysis in reports filed with the SEC, the SEC's SAB 85, which permits the inclusion of coal seam gas in natural gas reserves and gives wider approval to use of the revenue method of amortization by full cost companies, and the FASB's project on impairment of assets.

Mr. Jennings reviews recent activities of COPAS, the FASB, the SEC, the Auditing Standards Board of the AICPA, the International Accounting Standards Committee, and the Accounting Standards Executive Committee of the AICPA. Among items of special interest to petroleum accountants is Mr. Jennings' discussion of the SEC's requirement for disclosure of the method being used to account for gas imbalances and also the SEC's consideration of the question of quarterly ceiling tests.

Mr. Jennings reports that the FASB is considering significant changes to SFAS 96, "Accounting for Income Taxes," and that the Board has tentatively agreed to significant changes in the Exposure Draft on "Employers' Accounting for Post-Retirement Benefits Other than Pensions." Mr. Jennings also relates that the FASB has recently issued SFAS 105, "Disclosure of Information About Financial Instruments with Concentrations of Credit Risks." The Auditing Standards Board has responded to SEC staff concerns on "going-concern" paragraphs in the "Omnibus Statement on Auditing Standards - 1990." The last issue that Mr. Jennings takes up is the prospect that Congress may act to require an auditor to inform the SEC of a dispute with a company concerning the failure of the company to take appropriate action after the auditor reports to the company the detection of possible illegal acts on the part of the company.

The Emerging Issues Task Force (EITF) of the FASB considered accounting for gas balancing arrangements. The FASB issued SFAS No. 106 on employers' accounting for post-retirement benefits other than pensions. SEC concerns include: oil and gas prices in SEAS NO.69 disclosures; environmental costs and liabilities in SFAS No. 5 disclosures; combined historical financial statements of all limited Partnerships involved in a roll up; goodwill in the acquisition of an oil and gas exploration and production company; the definition of proved reserves to be recovered by Improved recovery techniques; and the successful efforts ceiling test. The AICPA Accounting Standards Executive Committee addressed financial reporting by entities in reorganization under the Bankruptcy Code.

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."

The FASB has released an exposure draft response to criticism about the complexity of FAS 96 on accounting for income taxes and the limitation therein on the recognition of deferred tax assets. Continuing the use of the liability method set forth in FAS 96, future taxable income maybe considered when recognizing a deferred tax asset. COPAS Bulletin no. 24, Producer gas Imbalances illustrates how complex gas imbalance accounting has become and lists seventeen required and nine conditional items of data on the operator's monthly gas imbalance statement. The SEC staff has not yet taken a position on whether imbalances should be reported on the entitlement method or sales method, but informal comments have been made on disclosure and uniformity. The AICPA has released a proposed SAS, "Review of or Performing Procedures on Interim Financial Information," to supersede SAS 36 and SAS 66 effective for interim financial information filed with specified regulatory agencies for interim periods ending after September 15, 1991. The AICPA has released Financial Report Survey No. 45, "Illustrations of Management's Discussion and Analysis of Financial Condition and Results of Operations." The survey covers the initial response in practice to Financial Reporting Release No. 36 issued May 18, 1989. The most important change is in the emphasis on disclosure of forward-looking information by management.

The FASB will be probably be issuing a new Statement on Accounting for Income Taxes in the first quarter of this year. A new Discussion Memorandum from the FASB considers the issue of a change in the basis of accounting. SEC topics of concern include accounting and disclosure of uncertainties, range of probable losses, insurance coverage, "reasonably possible" disclosures, contingencies for future environmental costs, financial instruments embedded within other financial instruments, accounting for income taxes, valuation allowance, recognition of NOL carry forwards, SAB No. 74, and OPEBs. An informal discussion with SEC staff touched on the topics of SFAS No. 69 disclosures, revenues from contracting out excess pipeline capacity, hedging activities in reserve based disclosures, Section 29 credits in reserve based disclosures, new cost centers, full cost and successful efforts ceiling tests, accounting for prepaid price swaps, hedging of oil and gas production, goodwill, environmental matters, and gas imbalances. Proposed revisions to the Framework as a result of a Committee of Sponsoring Organizations of the Treadway Commission exposure draft on internal control include defining internal control, streamlining components to eliminate unnecessary overlaps, and problems of management reporting.

The new FASB Statement No. 109 on accounting for income taxes requires, among other changes, an asset and liability approach. A Special Report, A Guide to Implementation of Statement 109 on Accounting for Income Taxes, accompanies the statement. The new Interpretation No.39 addresses applicability of the principle of right of setoff to interest rate and currency swaps, options, forwards, and other conditional or exchange contracts. Also in FASB news, Mr. Jennings discusses the significance of Issue No. 91-4, "Hedging Foreign Currency Risks with Purchased Options" and Issue No. 91-6, "Revenue Recognition of Long-Term Power Sales Contracts." Recent SEC rulings impact environmental matters, income taxes, and other oil and gas issues. The AICPA opposes a bill requiring independent auditors to notify the SEC of illegal acts by publicly held companies.

FASB Statements No. 106, "Employers Accounting for Post-Retirement Benefits Other Than Pensions," and No. 109, "Accounting for Income Taxes," are effective for fiscal years beginning after Dec. 15, 1992. FASB Statement No. 107, "Disclosures About Fair Value of Financial Instruments," requires not only fair value estimates of a variety of on-and-off-balance-sheet financial instruments, but also disclosure of the methods and significant assumptions. The SEC proposes new rules and amendments to existing rules and forms to implement the EDGAR system beginning in April 1993. The SEC wants separate disclosure of probable liability for environmental clean-up either on the face of the balance sheet or in a note in the financial statement. Gas pipeline companies should disclose to potential investors the magnitude of commitment and extent of uncertainties inherent in take-or-pay contracts. Internal Control--Integrated Framework, released Sept. 4 by COSO, is expected to have far-reaching implications for the financial community. The landmark study provides not only a conceptual framework, but also a standard against which companies can assess their internal control systems and judge their effectiveness.

SFAS 112, Employer's Accounting for Post-Employment Benefits, requires accrual accounting for benefits provided to former or inactive employees after employment but before retirement. Topics on the agenda at the 1993 AICPA Conference on Current SEC Developments included offsetting and disclosure contingencies, discounting of liabilities, and extraordinary losses. The SEC staff has clarified the disclosures of deferred tax assets required in MD&A Other discussion items include separate financial statements of a subsidiary, implication of tax-planning strategies, joint ventures, and mandatorily redeemable preferred stock-EPS treatment. Interim reports concern adoption of new standards, restatement of quarterly information, and SFAS 107 disclosures. Issues receiving current review emphasis by the SEC include MD&As, SAB 74, segment information, and proxy information. Beginning in 1993, new SEC rules will require changes to executive compensation disclosure. The AICPA has issued a specific industry audit risk alert, Oil and Gas procedures Industry Developments--1992.

FASB activity reported in this issue includes an exposure draft on employee stock options, an EITF on environmental liabilities, and Issue No. 93-6, "Accounting for Funding Cover Reinsurance Arrangements." The SEC issued the final rules for EDGAR on March 18, 1993. The Accounting Standards Executive Committee issued an exposure draft on disclosure of risks and uncertainties. The Auditing Standards Board issued an exposure draft on using the work of a specialist. Legislation is pending on the Financial Fraud Detection and Disclosure Act.

The FASB issued an exposure draft in June 1993 concerning accounting for stock-based compensation. This issue's column discusses at length the possible repercussions of this controversial and far-reaching proposal. Also in June of this year, the SEC issued SAB No. 92 which deals with accounting for and disclosure of environmental costs.

The FASB has issued an SPAS exposure draft addressing accounting for impairment of long-lived assets, identifiable intangibles, and goodwill related to those assets. The recent FASB exposure draft on stock-based compensation has generated considerable controversy. SEC news focuses on discount rates measuring obligations and costs under SEAS No. 87 and No. 106. In an address to the American Bar Association in August of 1993, SEC Commissioner Richard Roberts discussed the Commission's stand on materiality. The AICPA's "Audit Risk Alert-1993"is highlighted.

An update on recent activities of the FASB and SEC including new EITFs: accounting for restructuring charges and employer liability for termination benefits.

An update of recent SEC and FASB activities including a report on the EITF meetings regarding liability recognition for costs to exit an activity and SEC emphasis on derivatives and financial instruments. Also included is a report on AICPA release on understanding derivatives.

An update of recent SEC and FASB rulings and activities including the SEC's clarification of accounting for "goodwill" and the recent release regarding purchase accounting. FASB news includes an exposure draft on stock-based compensation and an EITF on involuntary termination benefits.

This issue's update on SEC, AICPA, and FASB activities discusses in detail AcSEC's SOP 95-2, Financial Reporting by Nonpublic Investment Partnerships, and SOP 94-6, Disclosure of Certain Significant Risks and Uncertainties. Other news includes an amendment to SAS 58, Reports on Audited Financial Statements, to eliminate the required uncertainties paragraph in the auditor's report and a new EITF concerning the types of direct, integration, or exit costs that should be accrued as liabilities in a purchase business combination under ABP 16, Business Combinations.

A new exposure draft from the SEC on derivative disclosures is expected to address the areas of accounting disclosures, impact of derivatives on balance sheet positions disclosed in the footnotes, and quantitative and qualitative information about market risks. A new statement of position from the AICPA, "Accounting for Contingencies," may mean significant changes in recording environmental liabilities, SFAS no.123, "Accounting for Stock-Based Compensation," encourages employers to adopt a prescribed fair value-based method for employee stock compensation plans.

Proposed Statements from the FASB address closure or removal of long-lived assets, earnings per share (EPS), and disaggregated information. The SEC staff at the 1996 AICPA conference discussed interest rate swaps, disclosure of accounting policies, alternative measures of performance, environmental liabilities, SFAS No. 21 implementation, segment reporting, statement of cash flows, and valuation allowance for deferred tax assets.

The FASB has delayed the effective date for the proposed Statement on closure and removal of long-lived assets. EITF Issue 96-14 addresses the problems associated with modifying computer software for the year 2000. New EDs seek to establish standards for reporting comprehensive income and accounting for derivatives and similar financial instruments and for hedging activities. A new draft from the AICPA SEC Regulations Committee contains recommendations for communicating with the SEC.

The FASB has issued an exposure draft delaying implementation of certain sections of FAS 125. The EITF is considering Issue 96-2, Impairment Recognition on Transfers and Exchanges of Non-monetary Assets, and Issue 96-17, Non-utility Generators. The International Accounting Standards Committee accelerates the completion of the new international accounting rules. New SOP's address environmental remediation liabilities and internal-use software costs.

A recent report by the IASC Steering Committee compares U.S. GAAP to international accounting standards. A new exposure draft from the FASB on accounting for derivatives and hedging activities has with stiff opposition. A SEC staff meeting over viewed a wide variety of issues including pooling of interest, SAB 96, and splits and spin-offs. The SEC unanimously approved the proposed rules on derivatives and other financial instruments and also advised independent auditors to exercise an appropriate level of professional skepticism.

New statements from the FASB concern disclosure of information about capital structure (FAS 129), reporting comprehensive income (FAS 130), and disclosures about segments of an enterprise and related information (FAS 131). An exposure draft issued in June addresses using cash flow information in accounting measurements. In AICPA activity, the AcSEC issued proposed SOPs on reporting on the costs of start-up activities and accounting for the costs of computer software developed for internal use.

FASB news in this issue includes an EITF on minority shareholder rights, accounting for delayed receipt of exercised option shares, pooling-of-interests accounting, and employee stock purchase plans. The SEC addresses year 2000 issues, corporate spin-offs, business combinations, and audit re-engineering.

In this issue, Mr. Jennings reports on EITF 98-4, the recording of goodwill in a purchase business combination, and Issues 98-1 and 97-15. The SEC has issued SAB 98 which offers some guidance concerning FAS 128 and 130; the SEC staff have also recently clarified their position on FAS 131. A new ruling by the SEC requires "plain English" usage for the cover page, summary, and risk-factors section of all prospectuses. SOP 98-1, issued in March by the AICPA Accounting Standards Executive Committee, addresses whether and under what circumstances internal-use software should be capitalized.

FASB activity includes the release of FAS 133, Accounting for Derivative Instruments and Hedging Activities; the coming Euro conversion; and accounting for Year 2000 modification costs. At the request of the AICPA , the SEC is considering an amendment clarifying improper professional conduct . The ASB's new interpretation of AU Section 341 addresses the impact of Year 2000 problems on an entity's ability to continue as a going concern.

FASB Board discussions have centered primarily on accounting for goodwill and other intangible assets and business combinations. SEC Chairman Arthur Levitt laid out a nine-point action plan in a major address on the state of accounting in September. Other SEC news centers on assigning fair-value to in-process research and development in purchase business combinations. AICPA assesses the possible impact of the Asian crisis on this year's audits. Congress passes the Year 2000 information-sharing bill.

The FASB has issued a special report, International Accounting Standard: A Vision for the Future. EITF Issue No. 96-14 addresses accounting for the costs of modifying software for the Y2K problem. Mr. Jennings offers an overview of the remarks of SEC Chairman Arthur Levitt and SEC Chief Accountant Ted Lewis, as well as others, at the recent AICPA conference.

The FASB has delayed the effective date for FAS 133, Accounting for Derivative Instruments and Hedging Activities, until fiscal years beginning after June 15, 2000. Other issues addressed by the FASB at its April meeting include the future of pooling of interests accounting, impairment and disposal of assets, and consolidated financial statements. The Auditing Standards Board (ASB) addressed the problem of financial statement misstatements. Congress may become involved in standard setting. COSO releases a landmark study on fraud in financial reporting.

The FASB recently issued an exposure draft on business combinations and intangible assets. The EITF has reached a consensus on how to account for unexpected adverse events associated with Y2K compliance. An exposure draft from the AICPA's Auditing Standards Board proposes amendments to SAS No. 61 ("communication with Audit Committees") and SAS No. 71 ("Interim Financial Information"). The SEC released SAB No. 99 which addresses materiality and SAB No. 100 on restructuring and impairment charges.

Debate continues on several SFASs concerning retirement of long-lived assets, derivatives and hedging, and business combinations and intangible assets. Two EITF issues reach consensus: subsequent events caused by Y2K problems and accounting for weather derivatives. The SEC recently issued opinions on including probable and possible reserves when measuring impairment under SFAS 121 and appropriate year-end prices of the SMOG and full-cost ceiling test.

Accounting discussions in the petroleum industry over the summer of 2008 often centered around the SEC's proposed rule for modernization of the oil and gas reporting requirements, which was released on July 15, 2008. In FASB news, calendar-year companies were required to adopt SFAS 157 which codifies the meaning of fair value used in existing GAAP.

This article covers the SEC's final rule amending its oil and gas reporting requirements (“Modernization of Oil and Gas Reporting Requirements) issued in 2008. Additional items include recent pronouncements and interpretations issued by the FASB: a proposed statement, “The Hierarchy of Generally Accepted Accounting Principles, a Replacement of FASB Statement № 162"; FAS statement 141R Business Combinations; EITF 08-6 Equity Method Investment Accounting Considerations; FASB exposure draft on “Accounting for Hedging Activities”; FSP FAS 157-3 “Determining Fair Value of a Financial Asset when the Market for that Asset is Not Active; and FSP FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairment.

This article summarizes updates and current status of Financial Accounting Standards Boards (FASB), Securities Exchange Commission (SEC) and International Accounting Standards Board (IASB) pronouncements, including convergence to International Financial Reporting Standards.

This article covers recent pronouncements and interpretations from the Financial Accounting Standards Board including the January 15, 2008 release of the long-awaited FASB Accounting Standards Codification for a one-year verification period. Pronouncements and interpretations issued by the FASB include FAS 157 (fair value measurements); FAS 141(R), Business Combinations; FAS 160, Non-controlling Interests in Consolidated Financial Statements; and FAS 161, Disclosures About Derivative Instruments and Hedging Activities, an amendment to FAS 133. The SEC has had several releases, including new disclosure rules for smaller companies, a proposal to defer the section 404 attest requirement for smaller public companies and various clarifications and recommendations for improving fair value disclosures in MD&A, all of which are applicable to many industries. Specific to oil and gas, the SEC is beginning to talk about reserve definitions again.

The SEC wants U.S. registrants to make the transition to International Financial Reporting Standards (IFRS) by 2014. On August 27 of this year the SEC voted unanimously to establish a path that would eventually require U.S. companies to use international accounting standards instead of U.S. Generally Accepted Accounting Principles (GAAP) and has laid out “milestones” that must be achieved in order to go forward with the mandatory move to IFRS.

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.

A continuing column which provides short summaries and updates of recent events that affect oil and gas taxation. This issue's topics include: Netting of Income and Expense, WPT Audits, Partnership Audits, Partnership Special Allocations, Proposed Tax Legislation.

Mr. Mark summarizes the major provisions of the 1986 Tax Reform Act that are of special importance to the oil and gas industry. These topics include the elimination of percentage depletion on bonuses, the reduction of immediate IDC expensing by integrated companies, the elimination on expensing of foreign IDC on productive wells, the extension of the alternative minimum tax, the recapture of IDC and depletion, and certain changes for producers of hard-rock minerals. Mr. Mark also reviews recently-issued WPT regulations.

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.

This section of the Journal summarizes the most important recent tax developments affecting oil and gas companies.

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.

A continuing column which provides short summaries and updates of recent events that affect oil and gas taxation. This issue's topics include: 1987 Omnibus Reconciliation Act; Publicly-traded Partnerships; Intangible Drilling costs.

A continuing column which provides short summaries and updates of recent events that affect oil and gas taxation. This issue's topics include: Loss Limitations; Drilling-related expenses and Interest Arrangements; Depletion; Windfall Profit Tax.

A continuing column which provides short summaries and updates of recent events that affect oil and gas taxation. This issue's column includes: IPAA, S Corporations, Self-Employment Income, Capitalized Costs, Depletion, Tax Shelters, and Bankruptcy.

A continuing column which provides summaries of updates in the area of financial accounting. This issue's column includes: Full Cost Ceiling Test.

A continuing column which provides summaries of updates in the area of financial accounting. This issue's column includes: COPAS, State of Texas, AICPA Oil and Gas Audit Guide, Impact of Price Decline on Full Cost Ceiling.

Negotiating exploration contracts with foreign government representatives is a dynamic experience. Government personnel find the experience equally fascinating, but the dynamics are different. Unfortunately some of the dynamics are adverse and created by personnel making what they consider to be innocent statements.