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Oil and gas accounting, financial reporting, and tax update
This annual publication provides an update on accounting, tax, and regulatory matters relevant to the oil and gas industry. The update discusses matters critical to oil and gas entities, including updates to SEC, FASB, and tax guidance with a specialized focus on the oil and gas industry.
- Industry hot topics
- Accounting standards
- Impairment and valuation
- New revenue model
- New leases model
Industry hot topics
The decline in oil and natural gas prices is likely to have operation and accounting impacts on many oil and gas companies, and it can be expected to have an impact on non-oil and gas companies that participate in the industry. US Oil & Gas Leader, Paul Horak, provides a view into the future trends for the year ahead including:
- Changes for upstream, midstream, and oilfield service companies
- Expected merger and acquisition (M&A) activity
- Mexico energy reform
Accounting standards codification update
The FASB has issued amendments and changes to standard accounting practices. This section of the article details the changes in standards for the following:
- Reporting of discontinued operations
- Going concern
- Pushdown accounting
- Financial instruments, recognition, and measurement
- Financial instruments, impairment
- Financial instruments, hedging
- Liabilities and equity, targeted improvements
- Accounting for goodwill
- Clarifying the definition of business
- Clarification of certain cash receipts and payments
- Disclosure framework
- Simplification initiatives
Impairment and valuation considerations
This article details the differences between successful-efforts and full-cost reporting methods as it pertains to oil and gas entities engaging in exploration and production. Additionally, the article highlights, explains, and provides suggestions to accepting one of three valuation approaches: income approach, market approach, and asset approach.
Implications of the new revenue model
On May 28, 2014, the FASB and IASB issued their final standard on revenue from contracts with customers. The standard outlines a single comprehensive model for entities to use in accounting for revenue. This section dives into the changes in the key accounting issues due to the new revenue recognition standard.
Overview of the new leases model
The FASB and IASB are nearing the end of their journey toward enhancing lease accounting. On January 13, 2016, the IASB issued its final standard. One of the primary objectives of leases project is to address the current-off-balance-sheet financing concerns related to a lessee’s operating leases. This section of the article guides readers through the key provisions of the new standard.
This portion of the publication provides an overview of the following SEC actions and mandates:
- Activities related to requirements under the Dodd-Frank Act
- The Jumpstart Our Business Startups Act
- The Fixing America’s Surface Transportation Act
- International Financial Reporting Standards
- SEC staff comments
Carve-out financial statements
In response to various market factors, oil and gas entities may seek to dispose of a portion of their operations or spin off portions of their business into a separate entity. Deregulation in certain jurisdictions, recent energy efficiency programs, and stagnant demand have led companies to divest or carve-out undervalued operations. This section of the article explores the following accounting and financial considerations pertaining to carve-outs:
- Internal control considerations
- Judgements and allocations
- Tax considerations
- Reporting considerations
Income tax update
This section summarizes recently enacted federal legislation affecting the financial reporting of income taxes and new and proposed FASB guidance on accounting for income taxes.