Question

1) Oil, natural gas and other energy reserves are considered long-lived assets for accounting purposes. T/F   

Companies are required to perform impairment testing on a periodic basis or when events or changes in circumstances occur that indicate the carrying amount may not be recoverable. T/F

Most companies do not have a policy that spells out the types of occurrences that would trigger impairment consideration, such as changes in crude oil prices, the effects of inflation and technology improvements on operating expenses, the outlook for global or regional market supply-and-demand and numerous other matters. T/F

Under ASC Topic 932, companies can use one of two methods to account for their oil and operations: the successful-efforts method or the full-cost method. T/F

Most oil and gas companies utilize the successful-efforts method of accounting. T/F

Answer 1

Oil, natural gas and other energy reserves are considered long-lived assets for accounting purposes. T/F	TRUE	Oil and  gas companies assets  are expected to provide future economic benefits extending more than one year
Companies are required to perform impairment testing on a periodic basis or when events or changes in circumstances occur that indicate the carrying amount may not be recoverable. T/F	TRUE	Impairment tests for long-lived assets should follow a two-or three-step process like Assess Impairment Indicators Test for Recoverability Measure the Impairment
Most companies do not have a policy that spells out the types of occurrences that would trigger impairment consideration, such as changes in crude oil prices, the effects of inflation and technology improvements on operating expenses, the outlook for global or regional market supply-and-demand and numerous other matters. T/F	TRUE	For oil & gas companies because  of conditions such as extreme volatility of supply, demand, and sustained periods of low commodity prices  trigger  to necessitate interim impairment testing.
Under ASC Topic 932, companies can use one of two methods to account for their oil and operations: the successful-efforts method or the full-cost method. T/F	TRUE	Oil and  gas companies  can choose between two accounting approaches the successful-efforts  method and the full-cost method.
Most oil and gas companies utilize the successful-efforts method of accounting. T/F	TRUE	Successful-efforts method allows a company to capitalize on only those expenses associated with successfully locating new oil and natural gas reserves.