Question

Accounting E&P can be a confusing topic. Describe the process and its importance. (You may provide an example if it will assist in your description.)

Answer 1

ACCOUNTING RELATED TO EXPLORATION AND PRODUCTION BASICALLY DEALS WITH WHAT CONSTITUTES OIL AND GAS ASSETS AND HOW TO ACCOUNT THEM IN MONETARY TERMSBASICALLY ONCE THE ASSETS ARE IDENTIFIED THEN INITIALLY IT IS ACCOUNTED BASED ON ACQUISITION COSTS WHICH COVERS ALL COSTS RELATED TO PURCHASE OR LEASE COST IN CASE OF LEASE.ALL THE DIRECTLY ATTRIBUTABLE EXPENDITURE ARE ACCOUNTED AS THE CAPITALISED VALUE OF ASSET.AND ACCORDINGLY DEPRICIATION IS CHARGED ON SUCH ASSETS THROUGH UNIT PRODUCTION METHOD.FURTHER IMPAIRMENT TESTING IS ALSO TO BE DONE DURING THE TENURE OF THE EXPLORATION PHASE IF CASES FOR IMPAIRMENT ARISES.

THE ACCOUNTING FOR EXPLORATION AND PRODUCTION IS AN IMPORTANT PHENOMENON BECAUSE IT IS LITTLE COMPLEX TO IDENTIFY AND ACCOUNT FOR EXPLORATION AND PRODUCTION ASSETS.THEREFORE IT BECOMES IMPORTANT TO KNOW THE ACCOUNTING PRINCIPLES RELATED TO IT.PROPER TREATMENT AND MEASUREMENT ALONG WITH APPROPRIATE DISCLOSURES ARE IMPORTANT TO ACCOUNT AND REPORT THESE ASSETS.