There have been a number of accounting developments in the oil and gas industry recently. Deloitte Middle East, for example, has announced the expansion of its practice (see “Deloitte Middle East rides energy boom”).
PricewaterhouseCoopers US (PwC) teamed up with the Professional Development Institute of the University of North Texas to publish the sixth edition of Petroleum Accounting: Principles, Procedures, & Issues, which provides an overview of the oil and gas industry’s operations in relation to US GAAP.
The main authors of the publication are PwC partners Martha Carnes and Randol Justice and certified public accountant Horace Brock, who is a distinguished professor emeritus at the University of North Texas. More than 40 others contributed. Brock said the updated edition was necessary due to “the myriad of new rules, regulations, standards and statements impacting the petroleum industry over the past six years, along with various interpretations, clarifications and explanations of existing pronouncements”.
Brock said revisions have been made to reflect current operating techniques, business and economic developments and recent changes from the US Securities and Exchange Commission (SEC), Financial Accounting Standards Board (FASB) Emerging Issues Task Force, Internal Revenue Service and the American Institute of Certified Public Accountants.
“Specific examples of the update include the growth of directional and horizontal drilling in sands and shales, which have led to increased emphasis on the topic in the sixth edition,” Brock said.“The impacts of SEC and FASB rules of accounting for asset retirement have resulted in a revision of the chapter on retirement obligations, and the concerns over accounting for business combinations have resulted in a new chapter on combinations. Similarly, the impact of Sarbanes-Oxley on operations and accounting is emphasised in several chapters.”
Jim Taylor, a partner of CPAmerica member firm Tullius, Taylor, Sartain and Sartain (TTSS), specialises in accounting for the oil and gas industry. TTSS provides services to the middle market and small oil and gas companies, most of them in exploration and production. Taylor said the number of clients the firm had within that industry has doubled in the past three years.
He told IAB that there are “a lot of new companies that are starting up” and a lot of private equity funding available to support people with experience in the industry.
He said the main challenge with accounting for the oil and gas industry is the depth of specialist knowledge required. “You really have to understand the issues of revenue accounting, for example, that’s different than it is in manufacturing or different than it is in the bank,” he said. Taylor said that although specialist knowledge is important in any industry, in oil and gas “it’s harder to learn because it’s more involved”.