IASB standard relating to the Upstream Oil and Gas Industry – IFRS 6 issued in 2004 is an interim standard and it does not address the entire upstream activities. Over a decade after the release of IFRS 6, the board is still struggling with developing a uniform and comprehensive accounting standard for the oil and gas industry.
The aim of the research is to understand the factors causing the delay in setting a uniform and comprehensive accounting standard for the oil and gas industry, which has been elusive to date (2015).
1. To discuss the uniqueness of the Oil & Gas industry and review standard setting process for the industry which has caused the delay in developing a comprehensive IAS specifically for the industry.
2. To critically review and analyse the efforts made so far by the IASB in developing and setting a uniform and comprehensive IAS for the industry.
3. To review and analyse stakeholders comments and opinions in setting a unified IAS for the industry.
4. To make recommendations for a uniform and standardised reporting for the industry so as to enhance comparability of financial reports within the industry.
The research will be based on the comments on questions 8 and 9 of the Discussion Paper issued by IASB in April 2010.
Discussion Paper Questions
Question 8 – Disclosure Objectives
In Chapter 5 the project team proposes that the disclosure objectives for extractive activities are to enable users of financial reports to evaluate:
(a) the value attributable to an entityâ€Ÿs minerals or oil and gas properties;
(b) the contribution of those assets to current period financial performance; and
(c) the nature and extent of risks and uncertainties associated with those assets.
Do you agree with those objectives for disclosure? If not, what should be the disclosure objectives for an IFRS for extractive activities and why?
Question 9 – Types of Disclosure That Would Meet the Disclosure Objectives
Also in Chapter 5, the project team proposes that the types of information that should be disclosed include:
(a) quantities of proved reserves and proved plus probable reserves, with the disclosure of reserve quantities presented separately by commodity and by material geographical areas;
(b) the main assumptions used in estimating reserves quantities and a sensitivity analysis;
(c) a reconciliation of changes in the estimate of reserves quantities from year to year;
(d) a current value measurement that corresponds to reserves quantities disclosed with a reconciliation of changes in the current value measurement from year to year;
(e) separate identification of production revenues by commodity; and
(f) separate identification of the exploration, development and production cash flows for the current period and as a time series over a defined period (such as five years).
Would disclosure of this information be relevant and sufficient for users? Are there any other types of information that should be disclosed? Should this information be required to be disclosed as part of a complete set of financial statements?