International accounting for oil & gas

The commercial and operational practices of the upstream oil and gas industry pose unique challenges to accountants who need to operate under multiple reporting frameworks with conflicting accounting methods and with unique contractual arrangements such as production sharing contracts and joint venture arrangements. This course considers the IFRS accounting practices that are applied in relation to exploration, development and production.

  • Describe the international accounting frameworks that influence how upstream oil and gas is accounted for and reported
  • Discuss the differing types of contractual arrangements, including tax and royalty, production sharing contracts and joint ventures
  • Determine appropriate accounting policies consistent with IFRS, in particular those applied during exploration, development and production
  • Apply accepted capitalisation rules and depreciation methods
  • Account for the impact of asset impairments
  • Account for oil and gas revenues
  • Consider the accounting treatment of inventories, leases and foreign currency transactions
  • Analyse and interpret the result of E&P businesses including the use of accepted oil and gas reserves-based ratios
    • International accounting frameworks – IFRS and the influence of US GAAP
    • Accounting issues posed by oil and gas contracting arrangements
    • Accounting for exploration and development – successful efforts and full cost capitalisation methods of accounting
    • Impairment of unproved and proved and producing properties
    • Application of units of product depreciation methods
    • Accounting for rehabilitation and remediation
    • Revenue recognition issues
    • Accounting for inventory
    • Cost allocations
    • Accounting for taxation
    • Foreign currency transactions
    • Analysis of reserves disclosures

    Day 1

    1. Overview of oil and gas accounting issues

    • Nature of oil and gas entities and commercial arrangements
    • Types of accounts required by upstream oil and gas entities
    • Overview of traditional financial reporting methods; full cost accounting vs. successful efforts
    • Influence, authority and relevance of US accounting treatments for IFRS preparers

    2. Prospecting, exploration and evaluation

    • Review of full cost vs successful efforts
    • How IFRS modifies the full cost and successful effort methods
    • Use of framework and IFRS 6 to determine treatments
    • Acquisition of mineral interests
    • Use of cost centres
    • How to treat dry holes
    • Presentation and disclosures

    CASE STUDY – COMPARING SUCCESSFUL EFFORTS WITH FULL COST CAPITALISATION ACCOUNTING

    Day 2

    3. Asset impairment principles and application to unproved property

    • Overview of economic valuation methods including DCF model, IRR, NPV, market value and fair value
    • Impairment testing principles under IFRS
    • Impairment testing of exploration assets; indicators and methods
    • Cost centres for impairment testing; full cost vs. successful efforts
    • Impairment testing on completion of the project evaluation

    CASE STUDY – IMPAIRMENT TESTING UNPROVED PROPERTIES

    4. Accounting for development

    • Applying IAS 38 and the IASB framework
    • Treatment of intangible development costs
    • Capitalisation of borrowing costs (IAS 23)
    • Treatment of dry holes and inefficiencies
    • Impairment testing
    • Cost centres, direct and indirect cost allocation
    • Acquisitions of proved reserves

    CASE STUDY – CAPITALISING AND ALLOCATING DEVELOPMENT COSTS

    5. Provisions & asset retirement obligations (IAS 37 and IFRIC 1 and IFRIC 5)

    • Definitions, measurement and when to provide
    • Disclosures and treatment of un-utilised provisions
    • Capitalisation of asset retirement obligations
    • Accounting for environmental clean-up costs
    • Accounting for rehabilitation funds

    CASE STUDY – MEASUREMENT AND SUBSEQUENT REMEASUREMENT OF ASSET RETIREMENT OBLIGATIONS

    Day 3

    6. Accounting for production

    • General principles of accounting for property plant and equipment (IAS 16)
    • Application of IAS 16 PP&E to upstream
    • Cost centres and cash generating units in the upstream business
    • Units of production depreciation method
    • Impairment testing (application of IAS 36)
    • Treatment of direct production costs and overheads

    CASE STUDIES – DEPRECIATION AND IMPAIRMENT TESTING

    7. Leasing activities (IAS 17)

    • Types of leased equipment and leasing arrangements found in the industry
    • Accounting by the lessee for finance and operating type leases
    • Application of IFRIC 4 contracts containing leases
    • Update – overview of IFRS 16 and its impact

    CASE STUDY – ACCOUNTING TREATMENT OF FINANCE LEASES

    8. Foreign currency transactions (IAS 21)

    • Determining the functional currency of the operation
    • Measuring the foreign currency transaction at initial recognition
    • Identifying and remeasuring monetary items
    • Treatment of FX gains and losses

    CASE STUDY – ACCOUNTING FOR FX GAINS AND LOSSES

    Day 4

    9. Revenue recognition (IAS 18) and production inventories (IAS 2)

    • Revenue recognition and measurement issues for the oil and gas industry
    • Treatments of royalty taxes
    • Accounting for production inventory
    • Revenue update: overview of IFRS 15, revenue from contracts with customers and expected impact on the industry

    CASE STUDIES – REVENUE RECOGNITION POINTS AND REVENUE MEASUREMENT

    10. Tax accounting in the oil and gas industry (IAS 12)

    • Overview of general principles for accounting for taxation under IFRS
    • Current and deferred tax treatments
    • Overview of taxation arrangements in relation to oil and gas
    • Sales taxes and royalties vs. income taxes

    11. Oil and Gas reserves and their analysis

    • Adoption of alternative accounting guidance in the absence of IASB standards
    • Measuring and disclosing reserves; requirements of SEC / US GAAP
    • Illustrations from published disclosures
    • Review of IASB discussion paper on extractive industries

    CASE STUDY – ANALYSIS OF OIL AND GAS RESERVE DISCLOSURES

    12. Conclusions

    • Course summary and review

This training course uses both conventional and non-traditional techniques. It utilises small group and facilitated plenary discussions as well as instruction to explore key concepts, models, tools and techniques. Hands-on exercises and case studies are used to practice the application of knowledge and use of skills. Structured reviews provide the opportunity to consider how the learning can be applied to the delegates’ own work.

  • D.McKINSEY AND ASSOCIATES Ltd Certificate of Completion for individuals who attend and completes’ International accounting for oil & gas course.
  • Candidates who desire International Certifications shall be registered through our platform for such an examination.

4 DAY

D.Mckinsey is licensed to train and issue certificates by the following bodies;

–           Nigerian Council for Management Education, (CMD).

–           OGTAN (Oil and Gas Trainers Association of NIGERIA).

Kindly confirm space availability by calling +234 (0) 8023192104 or +234 (0) 9062386530 or send an email to info@dmckinseyandassociates.com, dmckinseytraining@gmail.com.   For In-House training programs / on request, please contact us using above contact details.

APR 21-23

JUN 10-13

JUL 8-11

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