Financial reporting in the oil and gas industry*

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International Financial Reporting Standards

National standards in other countries are being converged with IFRS. The global trend towards IFRS has gained significant further momentum with the US Securities and Exchange Commission's (SEC) commitment to the standards, beginning with its decision to drop the requirement for foreignlisted companies in the US to reconcile to US GAAP.

The development of IFRS offers considerable long-term advantages for global companies but, along the way, it brings considerable challenges. The oil & gas industry is one of the world’s most global industries, characterised by the need for big upfront investment, often with great uncertainty about outcomes over a long-term time horizon. Its geopolitical, environmental, energy and natural resource supply and trading challenges, combined with often complex stakeholder and business relationships, has meant that the transition to IFRS has required some complex judgements about how to implement the new standards.

This edition of   'Financial reporting in the oil & gas industry' describes the financial reporting implications of IFRS across a number of areas selected for their particular relevance to oil & gas companies. It provides insights into how companies are responding to the various challenges and includes examples of accounting policies and other disclosures from published financial statements. It examines key developments in the evolution of IFRS in the industry. The International Accounting Standards Board (IASB), for example, has formed an Extractive Activities working group. However, formal guidance on many issues facing companies is unlikely to be available for some years. Another key development, of course, is convergence with US GAAP and the implications of the latest signals from the SEC for the oil & gas industry.

What is the focus of this publication?
This publication considers the major accounting practices adopted by the oil and gas industry under International Financial Reporting Standards (IFRS).
The need for this publication has arisen due to:

• the absence of an extractive industries standard under IFRS;
• the adoption of IFRS by oil and gas entities across a number of jurisdictions, with overwhelming acceptance that applying IFRS in this industry will be a continual challenge;
• ongoing transition projects in a number of other jurisdictions, for which companies can draw on the existing interpretations of the industry.

Who should use this publication?
This publication is intended for:

• executives and financial managers in the oil and gas industry, who are often faced with alternative accounting practices;
• investors and other users of oil and gas industry financial statements, so they can identify some of the accounting practices adopted to reflect unusual features unique to the industry; and
• accounting bodies, standard-setting agencies and governments throughout the world interested in accounting and reporting practices and responsible for establishing financial reporting requirements.

What is included?
Included in this publication are issues that we believe are of financial reporting interest due to:

• their particular relevance to oil and gas entities;

  and/or

• historical varying international practice.

This publication has a number of chapters designed to cover the main issues raised.