Course detail

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Contents

• Introduction
• Prerequisites
  
• Course Level
  
• Topics
  
• Course Benefits
  
• Teaching Method
  
• Continuing Professional Education
  
• Venue
  
  

Introduction

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There are diverse accounting practices among companies in the worldwide extractive industry. The IASB has commissioned a research project to review accounting practices for extractive activities. A Discussion Paper was published in April 2010 and the IASB will decide whether to add this project to its active agenda. In the view of the IASB, however, an entity must comply with all of the International Standards in order to make an unreserved statement of compliance with IFRS.

To provide interim 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. The Standard applies to expenditures incurred in connection with the exploration and evaluation of mineral resources and was effective from 1 January 2006.

This three-day course summarizes the accounting and disclosure requirements of IFRS 6 and discusses the current status of the IASB’s work on accounting for extractive activities. Key accounting standards that affect the industry are also given in-depth coverage, such as IFRS rules on impairment of assets, recognition and measurement of assets, revaluations of certain qualifying assets, decommissioning and site restoration costs, accounting for reserves, disclosures, and hedge accounting. The program also provides guidance on accounting issues relating to joint ventures and production sharing agreements.

Joint ventures and production sharing agreements (PSAs) are extremely common in the international oil and gas industry and, while no two arrangements are the same, each has a number of common features and implications for the companies that participate in them. While IFRS and other comparable requirements prescribe the recognition, measurement and disclosure rules for external financial reporting, there are also a wide range of internal and intra-partner accounting issues to be determined and implemented. This course includes an explanation of the nature and form of joint ventures and PSAs and summarizes the requirements of IAS 31 Interests in Joint Ventures. The program also covers a number of issues such as the relationships between operators and non-operators, financial reporting, and internal accounting, amongst others. The presentation includes an overview of the Joint Arrangements exposure draft issued by the IASB in September 2007, for which a final standard is expected in the second quarter of 2010.

This comprehensive program also includes a comparative overview of US GAAP relevant to extractive industries.

The course 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 critical compliance issues relating to hedge accounting?

• When are options available for valuing tangible assets and what are the optional treatments?

• How are the recognition and measurement rules for impairment applied?

• In what manner are joint ventures structured in the oil and gas industry?

• What are the external financial reporting requirements for joint ventures?

• When and in what manner are IFRS accounting rules for joint venture arrangements anticipated to change?

• What issues typically arise regarding intra-partner relationships?

• Where can relevant accounting guidance for the extractive industry be found under IFRS, US GAAP?

Prerequisites

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Knowledge of basic accounting for assets.
No advance preparation is required for this course.

Course Level

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Overview

Topics

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• Features of the Oil and Gas Industry
• Non renewable reserves
• Scale of capital investment
• Pattern of cash flows
• Risks
• Variety of business structures
• Accounting Issues in the Oil and Gas Industry
• Challenge of representing the oil and gas industry in a context of historical cost accounting
• Disparity between cost and value
• Exploration: capitalization vs. expense
• Full cost vs. successful efforts
• Fixed assets
• Capitalized costs
• Impairment
• Decommissioning and site restoration
• Joint ventures
• Production sharing agreements
• Reserves and other disclosures
• Hedge accounting
• IASB's Discussion Paper on Extractive Activities
• Objectives
• Recommendations
• Role of the Framework for the Preparation and Presentation of Financial Statements
• Exploration and Evaluation
• IFRS 6 Exploration for and Evaluation of Mineral Resources
• Recognition and measurement
• Reclassification
• Impairment
• Disclosures
• Full cost accounting
• Successful efforts accounting
• Property, Plant and Equipment
• IAS 16 summary
• Asset categories
• Directly capitalized vs. transfer from exploration and evaluation
• Depreciation, depletion and amortization
• Composite asset accounting
• Capitalization of borrowing costs – IAS 23
• Cost model vs. revaluation model
• Worked example
• Disclosures
• Impairment
• IAS 36 summary
• Why is impairment an issue for the oil and gas industry?
• General rules for impairment testing
• Cash generating units
• Recognition and measurement of impairment losses
• Reversal of impairment losses
• Worked examples
• Disclosures
• Decommissioning Costs and Site Restoration
• IAS 37 summary
• Nature and extent of requirement
• Recognition of cost
• Recognition of liability
• Amortization of cost
• Accretion of liability
• Changes to decommissioning liabilities – IFRIC 1
• Worked example
• Disclosures
• Joint Ventures
• Reasons for joint ventures
• Relationship between operator and non-operator
• IAS 31 summary
• Proportionate consolidation
• Equity accounting
• Internal accounting procedures
• Joint venture audits
• Disclosures
• Production Sharing Agreements (PSAs)
• Nature of PSAs
• Structure of PSAs
• Production sharing – worked example
• Financial reporting issues
• Ownership of assets
• Recoverability of capitalized costs
• Impairment
• Overlift and underlift
• Reserve disclosure
• Internal accounting and reporting issues
• Reconciliation issues
• Reserves and Other Disclosures
• Reserve definitions and disclosures
• Use of reserves in accounting
• Other disclosures
• ASC 932-235-55/FAS 69
• IFRS
• Examples of published disclosures
• Hedge Accounting
• IAS 39 summary
• Risk management in the oil and gas industry
• Hedge accounting under IAS 39
• Practical issues
• Published disclosures
• Selecting and Amending Accounting Policies
• Selecting accounting policies in the oil and gas industry
• IAS 8 summary
• IFRS 1 summary
• Retrospective vs. prospective application
• Successful efforts vs. full cost under IFRS
• Reasons for changing accounting policies
• Strategy for changing accounting policies
• Published disclosures
• Comparison between IFRS and other national GAAP
• Comparison with US GAAP

Course Benefits

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• Understand and apply the accounting and disclosure requirements of IFRS 6 Exploration for and Evaluation of Mineral Resources
• Appreciate the diversity in accounting practices in the extractive industry and the IASB’s project to review those practices
• Apply hedge accounting
• Recognize the relevant accounting guidance for the extractive industry under US GAAP
• Understand the options available for valuing tangible assets
• Interpret the complex rules on evaluating assets for impairment
• Complete a smooth transition to IFRS
• Understand the nature and structure of joint ventures in the oil and gas industry
• Learn the external financial reporting requirements for joint ventures
• Comprehend the mechanisms of financing and reporting the operations of joint ventures
• Appreciate the issues regarding intra-partner relationships, including cost allocation and audits
• Become familiar with the IASB changes to joint venture accounting

Teaching Method

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• Live group instruction
• Explanation and demonstration of the accounting rules relating to expenditures for the exploration for and evaluation of mineral resources
• Explanation and demonstration of the accounting issues relating to joint venture arrangements
• Presentation of the rules for impairment of assets, with practical examples
• Explanation and demonstration of the asset measurement and revaluation options
• Explanation and pertinent examples of hedge accounting
• Discussion of US GAAP relevant to the extractive industry
• Presentation and discussion of worked examples, model financial statements and disclosures
• Group discussion and interactive participation is encouraged
• All participants receive a comprehensive binder containing copies of the presentation slides, handouts and other course materials

Continuing Professional Education (CPE)

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24 hours

Venue

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All of our Calgary 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.