Accounting activity in the oil
and gas industry

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”.