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Petroleum Accounting Test 1 Exam Questions And Answers 2025
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Terms in this set (100) Q&APetroleum Accounting Test 1 Exam
Questions And Answers 2025
Accounting for Exploratory Drilling under the Successful Efforts Method - -
Initially, all exploratory well costs are capitalized in a wells-in-progress type
account (an asset account which is not subject to depreciation and
depletion).
- When the outcome of the drilling effort is known, reclassification of the
cost is necessary.
- If the well is classified as a successful well, the costs are moved to
another asset account wherein the amounts are subject to depreciation and
depletion.
,Terms in this set (100) Q&A
- Otherwise, the well is assumed to be impaired and the costs associated
with the exploratory well are to be written off to expense.
- All other exploratory wells that find oil and gas reserves can be deferred
no longer than one year pending determination of whether the reserves are
to be classified as proven.
- If after one year has passed and the reserves still cannot be classified as
proven, the costs are to be written off to expense.
- Regardless of the outcome of the drilling effort the cost of development
wells are to be capitalized.
- Once the well is finished the costs are transferred to an account which is
subject to depreciation
- In some cases, according to FASB ASC 932-360-35-18, an exploratory
well or an exploratory-type stratigraphic test well may have found reserves,
but those reserves cannot be classified as proved when drilling is
completed. Costs related to these wells are referred to as suspended well
costs.
- In those cases, FASB ASC 932-360-35-18 also states that the capitalized
drilling costs should continue to be (a) the well has found a sufficient
quantity of reserves to justify its completion as a producing well, and (b) the
entity is making sufficient progress assessing the reserves and the
economic and operating viability of the project.
The accounting treatment for costs associated with exploratory wells in
progress at the end of a reporting period is unique only under the
successful
Accounting for Pre Acquisition & Acquisition - - Prospecting/Non-drilling
Exploration Costs
- License Acquisition Costs
- Exploratory Drilling
, Terms in this set (100) Q&A
- Successful Efforts Accounting
Acquisition Cost - - Acquisition costs associated with the acquisition of
undeveloped properties are capitalized when incurred. These consist of
costs incurred in obtaining a mineral interest or right in a property, such as
a lease, concession, license, production sharing agreement, or other type
of agreement granting such rights.
- Signing, development and production bonuses are normally considered a
cost of the license. In addition, options to lease, brokers' fees, recording
fees, legal costs, and other similar costs related to activities in acquiring
property interests are capitalized
Attributes of Industry Affecting Accounting - - High Risks and High Costs
Generate Complex Joint Venture Agreements
- Long Time Lag Between Activity and Results
- Low Correlation Between Costs and Results
Attributes of Industry Affecting Accounting- IFRS - IFRS- Successful efforts
only
Attributes of Industry Affecting Accounting- SEC/FASB - - Two Recognized
Accounting Methods
- Full Cost Pool (FCP) - Full Cost
- Successful Efforts(SE)
Attributes of the oil and gas industry in the US - - Private Ownership of
Minerals
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