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There are diverse accounting practices among companies in the upstream oil and gas industry and many commercial and contracting arrangements which are unique to it.
To provide guidance and a transition for entities in the extractive industry that are adopting IFRS, the IASB issued IFRS 6 Exploration for and Evaluation of Mineral Resources, in December 2004. Since then no further authoritative guidance specific to oil and gas has been released and no date given for when work on the extractive industry project might recommence.
This two-day course summarizes the main accounting and disclosure requirements for upstream exploration, development and production (for a full discussion of these areas see our complimentary course 1600) before looking at the application of other key IFRS’s to the unique and diverse contracting arrangements of the industry. We will see how IFRS applies to presentation of financial statements, in particular presentation of income statement; revenue recognition including revenue recognition points, under and over lift and revenue sharing under production sharing agreements; how IAS 12 taxation applies to tax holidays, taxes paid on behalf of and deferred tax on asset retirement obligations; how to account for rehabilitation funds, identifying and accounting for leases “hidden” within service contracts; determining functional currency use of and accounting for financial instruments; joint arrangements and accounting by operators to non-operators and for asset exchanges and conveyances.
An overview of US GAAP treatments relevant to IFRS adopters is also presented. The program answers questions such as:
- What are the accounting and disclosure requirements of IFRS 6 Exploration for and Evaluation of Mineral Resources?
- How does the diversity in accounting practices in the extractive industry affect financial reporting and what is the IASB’s response?
- What are the main revenue recognition issues faced by the industry?
- How are Productions Sharing Contracts reflected in the financial statements?
- How does the investor in a joint venture account for its interest and how does the operator account to its partners?
- What does IFRS have to say about asset exchanges and conveyances of oil and gas interests?
- How to account for rehabilitation funds under IFRS
- How are financial instruments used by upstream oil and gas and what are the accounting implications?
- Where can relevant accounting guidance for the extractive industry be found under both IFRS and
Knowledge of basic accounting under national standards.
It would be advisable to have an understanding of the main principles of accounting for exploration, development and production under IFRS, US GAAP or other national standards or to have previously attended our Course 1600
No advance preparation is required for this course.
- Types of oil and gas contracts and typical features – leases, concessions and PSA’s and technical service agreements
- Recap of IFRS 6 Exploration for and Evaluation of Mineral Resources and how it interacts with IAS 16 Property, Plant and Equipment, IAS 38 Intangible Assets and IAS 36 Impairment of Assets (for a full discussion of the treatments reviewed here please see course 1600)
- Application of IAS 1 Presentation of Financial Statements; contrasting different formats used for the performance statements, treatment of write offs and classifications of oil and gas assets in the balance sheet
- Specific issues posed by Production Sharing Agreements including control and de-recognition of assets, cost recovery treatments and reserves estimation
- Application of IAS 18 Revenue Recognition; when is revenue recognised by upstream companies, how are under and over lift balances treated, how is revenue calculated and shared following cost recovery methods in PSA’s?
- Overview of IAS 37 provisions as it relates to asset retirement obligations with application of IFRIC 5 Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds
- Application of IAS 12 Income Taxes; distinguishing between sales type and income taxes, treatment of tax oil in PSA’s, treatment of tax holidays and taxes paid on behalf of, deferred taxes arising on asset retirement obligations
- Application of IAS 17 leases and specifically IFRIC 4 Determining whether an Arrangement contains a Lease and update on the IASB leasing project
- Application of IAS 21 Foreign Currency, in particular to the identification of functional currency
- Application of IAS 39 / IFRS 9 to management of financial risks in upstream oil and gas, use of derivatives and hedging
- Application of IAS 28 and IFRS 11 to joint ventures and arrangements, including accounting by operators to non-operators
- Accounting for asset exchanges and conveyances
- Understand and apply IFRS to the upstream oil and gas industry.
- Appreciate the diversity in accounting practices in the extractive industry and the IASB’s project to review those practices
- Apply hedge accounting as it relates to the oil and gas industry
- Recognize the relevant accounting guidance for the extractive industry under US/Canadian GAAP
- Understand the options available for valuing tangible assets
- Comprehend the complex rules on evaluating assets for impairment o Complete a smooth transition to IFRS
- Live group instruction with interactive participation encouraged
- Explanation and demonstration of the accounting rules relating to expenditures for the exploration for and evaluation of mineral resources
- Presentation of the rules for impairment of assets, with practical examples
- Explanation and demonstration of the measurement and revaluation option for tangible and intangible assets
- Discussion of US GAAP relevant to IFRS reporters in the extractive industry
- Explanation and pertinent examples of hedge accounting
- Presentation and discussion of model financial statements and disclosures
- All participants receive a comprehensive binder containing copies of the presentation slides, handouts and other course materials
Bring This Course In House
To bring this course in-house please contact us and we will be pleased to assist.
Continuing Professional Education (CPE)
All of our Dubai seminars take place in 4 star professional conference facilities, usually in city-centre downtown hotels like the Marriott, Sheraton or Hilton brands.
Detailed Joining Instructions are sent to all registered delegates by email approximately one month before the event. The Joining Instructions will confirm exact venue details and nearby (or onsite) hotel recommendations with bedroom rates where available.
Coffee and lunch will be provided..
This two-day course focuses on the application of IFRS accounting and reporting requirements for upstream extractive industries (Oil & Gas).
Topics, presented through the use of practical examples and illustrative financial statements, include: Overview of Exploration, Development and Production IFRS 6, IAS 16, IAS 36 and IAS 38 Application of IAS 1 presentation, Accounting issues arising from Production Sharing Agreements Application of IAS 18 revenue recognition, Application of IAS 12 taxation, Application of IAS 37 and IFRIC 5 to rehabilitation funds, Application of IAS 17 and IFRIC 4 leasing arrangements, Application of IAS 21 foreign currency Application of IAS 39 / IFRS 9 financial instruments, Application of IFRS 11 and IAS 28 joint ventures and joint arrangements Accounting for conveyances.
Update on the IASB’s project on extractive activities Overview of US GAAP guidance for extractive industries Practical examples and illustrative financial statements.