IFRS for the Upstream Oil and Gas Sector

The programme

Programme overview

Ratomac IFRS for the Upstream Oil and Gas Sector course provides a detailed review of significant IFRS requirements for the upstream oil and gas sector, including regulatory reporting and the diverse accounting practices that arise from the many commercial and contracting arrangements which are unique to it. It includes coverage of IFRSs, hands-on case studies, examples, exercises, and benefits from the interactive participation of the attendees. The program includes the latest pronouncements, and participants are brought up-to-date on all topics. In addition, participants are provided with information to assist them in researching accounting issues and monitoring future changes.

This IFRS for the Upstream Oil and Gas Sector course looks in depth at accounting practices permitted by IFRS 6 within the exploration and development phase by reviewing these against benchmark treatments in US GAAP. It goes on to consider how IFRS is applied in the development and production phases. In doing so it looks at the unique features posed by joint venture operations and contracting arrangements, in particular Production Sharing Agreements. Detailed treatments of revenues, costs, accounting for taxation arrangements and conveyances will also be considered. In addition, the application of IFRS best practices in management reporting will be considered including chart of accounts, reporting by operators to partners and key financial and reserves reporting metrics used by the industry.

This IFRS for the Upstream Oil and Gas Sector course is ideal for individuals with financial responsibilities who are new to the oil and gas industry or to accountants operating in the industry. It will review accounting requirements from pre-exploration to production for reporting internally, externally and to partners under the unique contractual arrangements common to this industry.

This IFRS for the Upstream Oil and Gas Sector course answers questions such as:

• How to understand and apply IFRS to oil and gas exploration, development and production activities?
• When to capitalise and when to expense under IFRS during exploration and development and how does the diversity in accounting practices in the extractive industry affect financial reporting?
• How do IFRS reporting requirements interact with reporting between venturers and the State?
• What are the characteristics of Production Sharing Agreements and how are these reflected in the financial statements?
• What methods of units of production calculation are permitted and what is best practice?
• When and how to assess unproved and proved properties for impairment?
• What are the main revenue recognition issues faced by the industry?
• How do different tax regimes impact upon financial reporting?
• How to calculate and interpret financial and operational metrics used to analyse the costs, profitability, efficiency, and value added by a firm’s exploration and production activities?
• How do oil and gas companies present their financial statements when reporting under IFRS?
• What are the implications for the oil and gas industry of the IASB’s project on extractive industries and of other current IFRS developments?
• How does the investor in a joint venture account for its interest and how does the operator account to its partners?
• How does an oil and gas company establish its chart of accounts?
• What are the management accounting and reporting requirements internally and between venturers?
• What does IFRS have to say about asset exchanges and conveyances of oil and gas interests?
• How to account for decommissioning costs and rehabilitation funds under IFRS?

Who should attend

Who is this programme for?

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

Learning outcomes

What you will learn

At the end of the IFRS for the Upstream Oil and Gas Sector training the delegates are expected to understand:

• Apply IFRS to oil and gas exploration, development and production activities
• Judge when to capitalise and when to expense under IFRS during exploration and development
• Identify the differences in treatment between accounts prepared under IFRS and those prepared under PSAs
• Evaluate the impact of using different units of production methods to calculate DD&A
• Describe the principal assumptions needed to conduct impairment reviews and to establish decommissioning provisions under IFRS
• When and how to assess unproved and proved properties for impairment
• Calculate and interpret financial and operational metrics used to analyse costs, profitability, efficiency, and value added by a firm’s exploration and production activities
• Prepare cash call requests, joint billing statements and cut back entries
• Develop the key components of an oil and gas chart of accounts
• Evaluate the impact of acquisitions, disposals and exchanges of oil and gas properties on the financial statements

Explore the programme

Detailed programme outline

• Fundamental Concepts of Oil and Gas Accounting MethodsCharacteristic Features of the Oil and Gas IndustryScale of operationsNature and timing of cash flowsRisks
• IFRS fundamentalsThe conceptual frameworkSelection of accounting policies (IAS 8)Overview of successful efforts vs. full cost methods
• Concepts of oil and gas accountingLife cycle if operationsInteraction between IFRS and national oil and gas reporting practices as developed by the USA and other countries
• Presentation of financial statements by IFRS reportersApplication of IAS 1 Presentation, and IAS 7 Statement of cash flows and IFRS 8 Operating segmentsInfluence on presentation of past practices and regulatory listing requirementsIntroduction to reporting of oil and gas operations, properties and reserves
• Accounting for exploration and evaluationIFRS definitions of tangible and intangible assets (IAS 16 and IAS 38) and scope exclusionsAccounting for pre-exploration expendituresReview of purpose and nature of IFRS 6Full cost methods of accounting during the exploration and evaluation stage, comparing US GAAP treatments to those permitted under IFRS 6Successful efforts methods during exploration and evaluation, comparing US GAAP treatments to those permitted under IFRS 6Treatment of non-drilling exploration activities, dry holes, appraisal activities, impairment reviews of unproved property and upon completion of evaluationComparison of benchmark methods to other treatments found under IFRS
• Accounting for developmentDistinguishing between development activities and exploration or production activitiesTreatment of dry holes and unanticipated expendituresApplication of impairment methods under IAS 36Application of IAS 38 and IAS 16 to development phase activities
• Borrowing costsApplication of IAS 23, capitalization of borrowing costs to exploration and developmentWhen to commence and cease capitalizationWhat rate to use
• Retirement obligations / decommissioningReview of provision principles in IAS 37Application to environmental damageApplication to asset retirement obligations, when to commence recognition, how to estimate the liability, what discount rate to use, how to account for changes in estimatesAccounting for rehabilitation funds (IFRIC 5)
• ProductionStores and warehouse inventoryWorkovers and recompletionsMethods of depreciation, depletion, and amortization; defining the cost centre, which reserves to use, how to adjust the numerator, shared production, depreciating common facilitiesAsset impairment during the production phase
• Revenue recognitionRevenue recognition under IFRS 15Application to recognition (production, lifting, production inventory (IAS 2))
• Reporting of reservesSupplementary disclosure requirements relating to oil and gas producing activities required by SEC and other regulators including COGEHBest practices from other IFRS reportersSEC Oil & Gas Modernization ActWhere to find key data relating to firms’ exploration and production activitiesProved oil and gas reserve quantitiesCosts incurred for property acquisition, exploration & development activitiesThe standardized measure of discounted future net cash flows (‘PV10’)Update on the IASB’s project for Extractive Industries Financial Reporting
• Performance metricsReview of typical metrics used by analysts (internal and external)Computation of metrics using published property, reserves and operational information
• Taxation of oil and gasTypical tax regimesDistinguishing between revenue bases taxes and income based taxesAccounting for and presentation of revenue based taxesAccounting for taxation under IAS 12, including super taxesApplication of IAS 12 to oil and gas assets and decommissioning liabilities
• Joint operations and joint venturesReasons for joint arrangements in the industryNature of joint venture and joint operationsAccounting for contributions by the venturersUnder and over lift and methods of diverse methods of accounting for itIdentification of joint ventures (entities) and accounting for them under IAS 28 in the economic entity and separate financial statements
• Production sharing agreements (PSA/PSC)What are PSA’s and where are they found?What are the typical provisions within a PSARunning the economics of a PSA, impact on reserves, productionCost oil and profit oil and revenue sharePre and post-tax arrangements including tax barrels and pay on behalf of regimesUnderstanding the differences between IFRS treatments and PSA treatments of capex, opex, recoverable and unrecoverable costsIFRS treatment of oil and gas assets, reporting of reserves and calculating DDA in PSAsComparison with treatments under other contractual arrangements (risk sharing and technical service agreements)
• Accounting for acquisitions, asset exchanges and conveyancesTypical types of acquisition, exchange and conveyances within the industryIdentification of asset acquisitions from business combinations (application of IFRS 3) and impact upon accountingRecognition and measurement of goodwill arising from business combinationsAsset exchanges in the exploration phase, relevance of US GAAP treatments in an IFRS environmentTreatments of pooling of interests, unitizations and farm-in, farm-out arrangements, comparing US GAAP treatments to treatments emerging under IFRSAsset exchanges involving cash consideration and partial and full disposals of properties

Prerequisites

Knowledge of basic accounting under any national standards. No advance preparation is required for this course.

Learning approach

How you will learn

Our diverse instructional approaches ensure effective learning:

– Lectures & Presentations: Engage with expert-driven, stimulating content.– Course Material: Access well-crafted supporting resources.– Group Work: Collaborate on discussions and case studies for practical insights.– Workshops & Role-Play: Participate in immersive, scenario-based activities.– Practical Application: Focus on applying theoretical knowledge in real situations.– Post-Training Support: Receive extensive support after training for skill implementation.

Discuss your requirements

Dates, duration & arrangements

Contact Ratomac to confirm dates, duration, delivery format, entry requirements and any applicable assessment or certification before booking.