Oil and Gas Tax Reporting UpdateTax Professionals Resource
June 6, 2012 — 1,254 views
The Financial Accounting Standards Boards (FASB) is traditionally viewed as a source of authority for accounting professionals in nongovernment organizations. The FASB produces the Accounting Standards Codification (ASC) to outline generally accepted accounting principles (GAAP). The organization created an amendment to address the complex details of oil and gas tax reporting that was recently revised.
The update aligns oil and gas reserve estimation and disclosure requirements and all mandates of extractive activities with the edict of the Securities and Exchange Commission’s final rule that was released in December 2008.
All entities involved with oil and gas producing activities are subject to follow the amendments made to Topic 932 as of December 31, 2009. The new provisions include expanding the definition of oil and gas production to include the mining of hydrocarbons or any other nonrenewable resources in any form with the intent to sell. In addition, all groups are now required to disclose reserve quantities and financial statements for specified regions that represent 15 percent or more of available resources. The new reporting mandates ensure the protection of stable resource pricing to allow a more balanced and transparent investment process for all involved.
Due to the complexity of the industry and required reporting, accounting professionals responsible for handling oil and gas tax issues must remain diligent. According to KPMG’s report titled "Energy and Natural Resources Impact of IPRS: Oil and Gas," accounting for oil and gas production poses a great number of challenges.
Appropriate resources and financial accounting for tax purposes require accurate reporting on resource and reserve inventory, all significant expenditures, legal procedures and potential tax breaks. Depending on the organization, complications may be pervasive across all resource management sectors. It is not the accounting department’s responsibility to collect data on the evaluated value assigned to assets. However, the group is required to use material reporting documents to figure the applicable tax scenarios.
Topic 932 supplies accounting professionals with the guidance necessary to accurately report and file information to various government and non-government parties. The FASB made sure to include amendments covering topics such as segment reporting, revenue recognition, debt and even derivatives and hedging. The group provides a full copy of the guidelines on its website.