Question

please write 2-3 paragraphs(essay) about: please explain income tax of Oil&Gas producing industries according to the STATEMNT Number# 9 (ACCOUNTING FOR INCOME-TAXES: OIL&Gas PRODUCIING COMPANIES-AN AMENDMENT OF APB OPINIONS NUMBER 11&23. If possible with an example. Thank you

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STATEMENT NO. 9-Summary

This Statement addresses allocation of income taxes related to intangible drilling and development costs (IDC) that are deductible in determination of taxable income, but are capitalized and amortized in the determination of pretax accounting income. This Statement requires companies to allocate the tax effect of IDC that enters into the determination of taxable income and pretax accounting income in different periods. The Statement also provides guidance for companies that elect to include excess statutory depletion in a computation of interperiod tax allocation.

Answer 1

The statement number #9 (Accounting for Income Taxes: Oil & Gas Producing Companies-An amendment of APB opinion number 11 & 23) addresses allocation of income taxes related to intangible drilling and development costs (IDC) that are deductible in determination of taxable income. APB Opinion number 11 has not required interperiod income tax allocation with respect to intangible development cost incurred by oil and gas producing companies. APB Opinion number 23 states that the board continues to defer conclusions on intangible development costs in the oil and gas industries.

An oil and gas producing company that has not allocated income taxes related to IDC financial accounting /tax differences shall begin allocating income taxes on the difference between (i) IDC financial accounting/tax differences originating in the period and (ii) the reversal of similar differences during the period. While computation of deferred income tax expenses an oil and gas producing company with excess statutory depletion may elect, but is not required to recognize interaction with percentage depletion. if this election is made income taxes will be deferred on the amount by which originating timing differences exceeds reversal during the period. If at the end of the period the sum of (i) excess statutory depletion and (ii) cumulative IDC financial accounting/tax differences with respect to which income tax have been allocated is equal to or greater than cumulative IDC financial accounting/tax differences , income taxes shall not be allocated on the amount by which originating timing differences exceeds reversal during the period. The provision of this statement need not be applied to immaterial items.