International Oil and Gas Accounting and Financial Management Immersion Workshop (8 days)

Introduction

This eight-day dual-instructor workshop provides a detailed review of all significant IFRS requirements for the upstream oil and gas sector, including regulatory reporting and the diverse accounting practices that arise from the many commercial and contracting arrangements which are unique to it. It includes coverage of IFRSs, hands-on case studies, examples, exercises, and benefits from the interactive participation of the attendees. The program includes the latest pronouncements, and participants are brought up-to-date on all topics. In addition, participants are provided with information to assist them in researching accounting issues and monitoring future changes.

This course looks in depth at diverse accounting practices permitted by IFRS 6 within the exploration and development phase by reviewing these against benchmark treatments in US GAAP. It goes on to consider how IFRS is applied in the development and production phases. In doing so it looks at the unique features posed by joint venture operations and contracting arrangements, in particular Production Sharing Agreements. Detailed treatments of revenues, costs, accounting for taxation arrangements, conveyances and financial instruments used by the industry are considered. In addition, the detailed application of IFRS best practices in management reporting will be considered including chart of accounts, reporting by operators to partners and key financial and reserves reporting metrics used by the industry.

This course is ideal for individuals with financial responsibilities who are new to the oil and gas industry or to accountants operating in the industry that will be adopting IFRS. It will review accounting requirements from pre-exploration to production for reporting internally, externally and to partners under the unique contractual arrangements common to this industry.

Presented by two experienced instructors with both oil and gas and IFRS expertise, this program gives participants the benefit of decades of IFRS experience. Delegates receive the benefit of more than one view of IFRS and the opportunity to ask questions, receiving thorough answers to their individual questions from the presenters’ past experiences. Our specialist instructors explain the principles clearly and simply and provide real-world examples, including the practicalities of implementing IFRS.

This course answers questions such as:

• How to understand and apply IFRS to oil and gas exploration, development and production activities?
• When to capitalise and when to expense under IFRS during exploration and development and how does the diversity in accounting practices in the extractive industry affect financial reporting?
• How do IFRS reporting requirements interact with reporting between venturers and to the State?
• What are the characteristics of Production Sharing Agreements and how are these reflected in the financial statements?
• What methods of units of production calculation are permitted and what is best practice?
• When and how to assess unproved and proved properties for impairment?
• What are the main revenue recognition issues faced by the industry?
• How do different tax regimes impact upon financial reporting?
• How to calculate and interpret financial and operational metrics used to analyse the costs, profitability, efficiency, and value added by a firm's exploration and production activities?
• How do oil and gas companies present their financial statements when reporting under IFRS?
• The implications for the oil and gas industry of the IASB's project on extractive industries and of other current IFRS developments
• How does the investor in a joint venture account for its interest and how does the operator account to its partners?
• How does an oil and gas company establish its chart of accounts?
• What are the management accounting and reporting requirements internally and between venturers?
• What does IFRS have to say about asset exchanges and conveyances of oil and gas interests?
• How to account for decommissioning costs and rehabilitation funds under IFRS?
• How are financial instruments used by upstream oil and gas and what are the accounting implications when applying hedge accounting as it relates to the oil and gas industry?

Registration fee for this unique event includes:

• 8 days of formal tuition by some of our most senior instructors.
• Full set of course materials (including case studies, illustrations and examples).
• An iPad Mini which you can use for research during and after the course.
• A local sightseeing tour.
• Lunch and refreshments on every teaching day.
• Farewell dinner and class photographs.

Learning Objectives

• Apply IFRS to oil and gas exploration, development and production activities
• Judge when to capitalise and when to expense under IFRS during exploration and development
• Identify the differences in treatment between financial statements prepared under IFRS and those prepared for cost recovery under PSAs
• Evaluate the impact of using different units of production methods to calculate DD&A
• Describe the principal assumptions needed to conduct impairment reviews and to establish decommissioning provisions under IFRS
• When and how to assess unproved and proved properties for impairment
• Calculate and interpret financial and operational metrics used to analyse costs, profitability, efficiency, and value added by a firm's exploration and production activities
• Prepare cash call requests, joint billing statements and cut back entries
• Develop the key components of an oil and gas chart of accounts
• Evaluate the impact of acquisitions, disposals and exchanges of oil and gas properties on the financial statements
• All participants receive an iPad Mini to be used for technical research during and after the course
• City tour and graduation dinner, arranged and paid by IASeminars

Who Should Attend

• Financial accountants in the oil and gas industry
• Management accountants of IOC’s and NOC’s
• Internal and external auditors of oil and gas companies reporting under IFRS
• Staff of revenue authorities and NOC’s working with IOC’s

Topics

• Fundamental Concepts of Oil and Gas Accounting Methods
  • The Characteristic Features of the Oil and Gas Industry
  • Scale of operations
  • Nature and timing of cash flows
  • Risks
  • Determination of success
  • The impact of different contracting and commercial arrangements on financial reporting
  • Definitions of reserves and resources
  • Interaction between IFRS and national oil and gas reporting practices as developed by the USA and other countries
• IFRS fundamentals
  • IASB’s Conceptual Framework
  • Selection of accounting policies (IAS 8)
  • Overview of successful efforts vs. full cost methods
• Presentation of financial statements
  • Application of IAS 1 Presentation, and IAS 7 Statement of cash flows and IFRS 8 Operating segments
  • Influence on presentation of past practices and regulatory listing requirements
  • Introduction to reporting of oil and gas operations, properties and reserves
  • Nature of oil and gas operations and setting up an appropriate chart of accounts
• Accounting for exploration and evaluation
  • IFRS definitions of tangible and intangible assets (IAS 16 and IAS 38) and scope exclusions
  • Accounting for pre-exploration expenditures
  • Review of purpose and nature of IFRS 6
  • The role of financial professionals in supporting economic appraisal and methods used
  • Planning and budgeting for exploration and evaluation
  • Full cost methods of accounting during the exploration and evaluation stage, comparing US GAAP treatments to those permitted under IFRS 6
  • Successful efforts methods during exploration and evaluation, comparing US GAAP treatments to those permitted under IFRS 6
  • Treatment of non-drilling exploration activities, dry holes, appraisal activities, impairment reviews of unproved property and upon completion of evaluation
  • Comparison of benchmark methods to other treatments found under IFRS
• Accounting for development
  • Distinguishing between development activities and exploration or production activities
  • Planning and budgeting during the development phase
  • Treatment of dry holes and unanticipated expenditures
  • Application of impairment methods under IAS 36
  • Application of IAS 38 and IAS 16 to development phase activities
  • Cost allocation methods
• Borrowing costs
  • Application of IAS 23, capitalization of borrowing costs to exploration and development
  • When to commence and cease capitalization
  • What rate to use
• Retirement obligations / decommissioning
  • Review of provision principles in IAS 37
  • Application to environmental damage
  • Application to asset retirement obligations, when to commence recognition, how to estimate the liability, what discount rate to use, how to account for changes in estimates
  • Accounting for rehabilitation funds (IFRIC 5)
• Production
  • Stores and warehouse inventory
  • Workovers and recompletions
  • Methods of depreciation, depletion, and amortization; defining the cost centre, which reserves to use, how to adjust the numerator, shared production, depreciating common facilities
  • Asset impairment during the production phase
• Application of other relevant IFRS’s to expenditures during exploration, development and production
  • Identification of functional currency and treatment of foreign currency transactions (application of IAS 21)
  • Use of contractors’ and leased property and equipment (application of IAS 17 and IFRIC 4). Impact of IFRS 16 Leases (replacement standard for 2019)
  • Wages, salaries and other employee benefits, including pensions and repatriation costs (IAS 19)
• Revenue recognition
  • IAS 18 Revenue and the impact of its replacement from 2018, IFRS 15 Revenue from contracts with customers
  • Application to recognition (production, lifting, production inventory (IAS 2))
• Management accounting
  • Selection of management accounting policies
  • Identifying the audience(s) for management accounting information
  • Creating a chart of accounts
  • Selecting cost centres
  • Selecting cost elements
  • Expenditure reporting vs. commitment reporting
  • Reporting expenses
  • Reporting capital expenditures
  • Management accounting procedures
  • Detail of reporting
  • Frequency of reporting
  • Overhead allocation
  • Responsibility accounting
• Reporting of reserves
  • Supplementary disclosure requirements relating to oil and gas producing activities required by SEC and other regulators including COGEH
  • Best practices from other IFRS reporters
  • SEC Oil & Gas Modernization Act
  • Where to find key data relating to firms' exploration and production activities
  • Proved oil and gas reserve quantities
  • Costs incurred for property acquisition, exploration & development activities
  • The standardized measure of discounted future net cash flows ('PV10')
  • Update on the IASB's Project for Extractive Industries Financial Reporting
• Performance metrics
  • Review of typical metrics used by analysts (internal and external)
  • Computation of metrics using published property, reserves and operational information
• Accounting for taxation of oil and gas
  • Typical tax regimes
  • Distinguishing between revenue based taxes and income based taxes
  • Accounting for and presentation of revenue based taxes
  • Accounting for taxation under IAS 12, including super taxes
  • Application of IAS 12 to oil and gas assets and decommissioning liabilities
• Joint operations and joint ventures
  • Reasons for joint arrangements in the industry
  • Nature of joint ventures and joint operations
  • Accounting procedures between operators and partners in the contracting group including application of IFRS 11, cash calls, billing statements and cut back entries
  • Best practices in accounting procedures
  • Accounting for contributions by the venturers
  • Under and over lift and methods of diverse methods of accounting for it
  • Identification of joint ventures (entities) and accounting for them under IAS 28 in the economic entity and separate financial statements
• Production sharing agreements (PSA/PSC)
  • What are PSA’s and where are they found?
  • What are the typical provisions within a PSA and how do they differ
  • Running the economics of a PSA, impact on reserves, production
  • Cost oil and profit oil and revenue share
  • Pre and post-tax arrangements including tax barrels and pay on behalf of regimes
  • Accounting and reporting procedures including reconciliations and audit
  • Understanding the differences between IFRS treatments and PSA treatments of capex, opex, recoverable and unrecoverable costs
  • Treatment of activities outside the scope of PSA
  • IFRS treatment of oil and gas assets, reporting of reserves and calculating DDA in PSAs
  • Comparison with treatments under other contractual arrangements (risk sharing and technical service agreements)
• Financial instruments
  • Nature of financial instruments found in upstream companies
  • Classification and measurement under IAS 39 and IFRS 9
  • Use of derivatives
  • Hedging of oil and gas prices and FX risk
• Accounting for acquisitions, asset exchanges and conveyances
  • Typical types of acquisition, exchange and conveyances within the industry
  • Identification of asset acquisitions from business combinations (application of IFRS 3) and impact upon accounting
  • Recognition and measurement of goodwill arising from business combinations
  • Asset exchanges in the exploration phase, relevance of US GAAP treatments in an IFRS environment
  • Acquisitions of interests in joint ventures and contributions of assets into joint ventures
  • Treatments of pooling of interests, unitizations and farm-in, farm-out arrangements, comparing US GAAP treatments to treatments emerging under IFRS
  • Asset exchanges involving cash consideration and partial and full disposals of properties
• First time adoption issues
  • Review of main principles in IFRS 1
  • Understanding the key exemptions
  • Specific exemptions available to oil and gas reporters

Teaching Method

• The workshop will consist of eight days of instruction and participation, separated by a weekend break. Note the working week in the following locations:
  • Europe & USA: Monday-Friday
  • UAE: Sunday-Thursday
• Group live instruction in an interactive workshop format, using cases, examples, group work, open discussions etc.
• Review of the rationale, objective and scope of IFRS as applied by oil and gas
• Description and explanation of IFRS and joint venture requirements in clear and simple language
• Use of case studies and real-world examples to illustrate practical application of the standards
• Interactive participation will be encouraged
• All participants receive a comprehensive binder containing copies of the presentation slides, handouts and other course materials (examples, illustrations etc.)

Instructors

Venue

CPE/CPD Accreditation

IASeminars is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website: www.nasbaregistry.org.

 

Field of study: Accounting

Prerequisites

Participants should either have basic understanding of IFRS accounting principles or experience of the oil and gas industry. No other advance preparation is required for this course.