Comprehensive Guide to Oil and Gas Accounting Practices

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Oil and gas companies need to adhere to specific regulatory and tax reporting requirements, and virtual accountant their financial reporting has to comply with industry standards and guidelines. These requirements vary widely from state to state, and it’s important to have a system that can support these requirements and make compliance a breeze. Some energy investments meet the strict requirements for so-called real property that would be eligible for a 1031 exchange — even if the original asset is an apartment building. Of course, careful legal counsel about the right structure for the transaction will ensure the highest possible savings. We specialize in serving companies in the real estate, construction, manufacturing, oil & gas, and professional services industries.

Cost Management and Analysis

The three major oil and gas accounting fields are upstream, midstream, retained earnings balance sheet and downstream. Reserves are estimated quantities of oil and gas that can be economically recovered from known reservoirs under existing economic conditions and operating methods. Companies in the oil and gas industry need to account for their proven reserves.

Accounting standards codification update

It’s important to identify a course of action when planning for the oil and gas accounting future—whether you’re negotiating challenging market conditions, remedying financial or operational threats, or preparing for a major transaction. Oil and gas companies and their management teams are frequent targets of cyberattacks, with opportunities for cybercriminals to infiltrate your system and cause costly breaches increasing. Testing your current systems can evaluate your safety levels and identify controls you need for further preventive measures. Make stronger, more informed decisions and validate your position ahead of a transaction with an asset valuation. Achieve your goals by uncovering risks and issues early so you can strengthen your transaction strategy.

• All oil and gas companies are expected to stay current with the latest accounting standards to ensure compliance with U.S.
• At EAG Inc., we think of “best practices” as the set of techniques and procedures that allow you to produce the most efficient results with the least number of resources.
• The process of calculating DD&A involves several steps, starting with the estimation of the total recoverable reserves for depletion purposes.
• When people sign on with us, they immediately get access to the right tools for their company.
• Dive deeper into industry hot topics to help your business stay ahead of change and plan for what’s next with our complimentary webcasts, available to view on demand.

Risk & Financial Advisory

It is VERY important that you understand the process — because the last thing anyone wants is the Department of Treasury coming after them! “Energy has designed itself very well to take advantage of these tax arbitrages,” Iak said. “It used to be a very tax-driven industry that wasn’t always as economically driven, and I think that paradigm has shifted as a whole in the last five to seven years.” ​The FASB and IASB are nearing the end of their journey toward enhancing lease accounting.

Revenue Recognition

• Efficient cost management is crucial for oil and gas companies to remain competitive.
• Typically, there is a correlation between the amount of G&A spent and the amount of attainable detail.
• Energy Development Corporation, which invests in, operates and drills wells.
• This involves estimating the future costs of dismantling and restoration, which are then discounted to their present value.
• Advanced software tools like SAP S/4HANA and Oracle’s Oil and Gas Accounting solutions are often employed to manage these complexities, providing real-time data and analytics to support accurate revenue recognition.
• Our professionals have a comprehensive understanding of the industry’s challenges because we’ve confronted them ourselves, with many previously holding prominent positions with influential oil and gas companies.
• Our oil and gas accounting team helps all types of energy companies, from drilling and exploration to pipelines and production.

To implement cost reductions that last, consider a different approach focused on adding value to your business processes. When there are conflicts between different accounting principles or methods, a hierarchy exists to guide the selection of the most appropriate principle. The hierarchy includes authoritative guidance from standard-setting bodies. Assets are generally recorded at their original cost, which is the amount paid to acquire them. The historical cost principle emphasizes reliability and verifiability in financial reporting.