International Oil Gas Accounting/Financial Management Immersion Workshop 2015

Topics

• IFRS fundamentals
  • Selection of accounting policies (IAS 8)
  • The conceptual framework
  • Overview of successful efforts vs. full cost methods
• Fundamental Concepts of Oil and Gas Accounting Methods
  • Scale of operations
  • The Characteristic Features of the Oil and Gas Industry
  • Risks
  • Nature and timing of cash flows
  • The impact of different contracting and commercial arrangements on financial reporting
  • Determination of success
  • Interaction between IFRS and national oil and gas reporting practices as developed by US and other countries
  • Definitions of reserves and resources
• Accounting for exploration and evaluation
  • Accounting for pre-exploration expenditures
  • IFRS definitions of tangible and intangible assets (IAS 16 and IAS 38) and scope exclusions
  • The role of financial professionals in supporting economic appraisal and methods used
  • Review of purpose and nature of IFRS 6
  • Full cost methods of accounting during the exploration and evaluation stage, comparing US GAAP treatments to those permitted under IFRS 6
  • Planning and budgeting for exploration and evaluation
  • Treatment of non-drilling exploration activities, dry holes, appraisal activities, impairment reviews of unproved property and upon completion of evaluation
  • Successful efforts methods during exploration and evaluation, comparing US GAAP treatments to those permitted under IFRS 6
  • Comparison of benchmark methods to other treatments found under IFRS
• Presentation of financial statements by IFRS reporters
  • Influence on presentation of past practices and regulatory listing requirements
  • Application of IAS 1 presentation, and IAS 7 cash flows and IFRS 8 segment reporting
  • Nature of oil and gas operations and setting up an appropriate chart of accounts
  • Introduction to reporting of oil and gas operations, properties and reserves
• Borrowing costs
  • When to commence and cease capitalization
  • Application of IAS 23, capitalization of borrowing costs to exploration and development
  • What rate to use
• Accounting for development
  • Planning and budgeting during the development phase
  • Distinguishing between development activities and exploration or production activities
  • Application of impairment methods under IAS 36
  • Treatment of dry holes and unanticipated expenditures
  • Cost allocation methods
  • Application of IAS 38 and IAS 16 to development phase activities
• Production
  • Workovers and recompletions
  • Stores and warehouse inventory
  • Asset impairment during the production phase
  • Methods of depreciation, depletion, and amortization; defining the cost centre, which reserves to use, how to adjust the numerator, shared production, depreciating common facilities
• Retirement obligations / decommissioning
  • Application to environmental damage
  • Review of provision principles in IAS 37
  • Creation of rehabilitation funds (IFRIC5)
  • 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
• Revenue recognition
  • Application of IAS 18 to recognition (production, lifting, production inventory (IAS 2))
  • Review of IAS 18 Revenue Recognition (or its replacement IFRS when issued and effective)
• Application of other relevant IFRS`s to expenditures during exploration, development and production
  • Use of contractors and leased property and equipment (application of IAS 17 and IFRIC 4)
  • Identification of functional currency and treatment of foreign currency transactions (application of IAS 21)
  • Wages, salaries and other benefits, including pensions and repatriations costs (overview of IAS 19)
• Reporting of reserves
  • Best practices from other IFRS reporters
  • Supplementary disclosure requirements relating to oil and gas producing activities required by SEC and other regulators including COGEH
  • Where to find key data relating to firms` exploration and production activities
  • SEC Oil & Gas Modernization Act
  • Costs incurred for property acquisition, exploration & development activities
  • Proved oil and gas reserve quantities
  • Update on the IASB`s Project for Extractive Industries Financial Reporting
  • The standardized measure of discounted future net cash flows (`PV10`)
• Management accounting
  • Identifying the audience(s) for management accounting information
  • Selection of management accounting policies
  • Selecting cost centres
  • Creating a chart of accounts
  • Expenditure reporting vs. commitment reporting
  • Selecting cost elements
  • Reporting capital expenditures
  • Reporting expenses
  • Detail of reporting
  • Management Accounting Procedures
  • Overhead allocation
  • Frequency of reporting
  • Responsibility accounting
• Taxation of oil and gas
  • Distinguishing between revenue bases taxes and income based taxes
  • Typical tax regimes
  • Accounting for taxation under IAS 12, including super taxes
  • Accounting for and presentation of revenue based taxes
  • Application of IAS 12 to oil and gas assets and decommissioning liabilities
• Performance metrics
  • Computation of metrics using published property, reserves and operational information
  • Review of typical metrics used by analysts (internal and external)
• Production sharing agreements (PSA/PSC)
  • What are the typical provisions within a PSA and how do they differ
  • What are PSA`s and where are they found?
  • Cost oil and profit oil and revenue share
  • Running the economics of a PSA, impact on reserves, production
  • Accounting and reporting procedures including reconciliations and audit
  • Pre and post-tax arrangements including tax barrels and pay on behalf of regimes
  • Treatment of activities outside the scope of PSA
  • Understanding the differences between IFRS treatments and PSA treatments of capex, opex, recoverable and unrecoverable costs
  • Comparison with treatments under other contractual arrangements (risk sharing and technical service agreements)
  • IFRS treatment of oil and gas assets, reporting of reserves and calculating DDA in PSAs
• Joint operations and joint ventures
  • Nature of joint venture and joint operations
  • Reasons for joint arrangements in the industry
  • Best practices in accounting procedures
  • Accounting procedures between operators and partners in the contracting group including application of IFRS 11, and cash calls, billing statements and cut back entries
  • Under and over lift and methods of diverse methods of accounting for it
  • Accounting for contributions by the venturers
  • Identification of joint ventures (entities) and accounting for them under IAS 28 in the economic entity and separate financial statements
• Accounting for acquisitions, asset exchanges and conveyances
  • Identification of asset acquisitions from business combinations (application of IFRS 3) and impact upon accounting
  • Typical types of acquisition, exchange and conveyances within the industry
  • Asset exchanges in the exploration phase, relevance of US GAAP treatments in an IFRS environment
  • Recognition and measurement of goodwill arising from business combinations
  • Asset exchanges involving cash consideration and partial and full disposals of properties
  • Treatments of pooling of interests, unitizations and farm-in, farm-out arrangements, comparing US GAAP treatments to treatments emerging under IFRS
• Financial instruments
  • Classification and measurement under IAS 39 and IFRS 9
  • Nature of financial instruments found in upstream companies
  • Hedging of oil and gas prices and FX risk
  • Use of derivatives
• First time adoption issues
  • Understanding the key exemptions
  • Review of main principles in IFRS 1
  • Specific exemptions available to oil and gas reporters

Who should Attend

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