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Impact-of-IFRS-oil-and-gas - ENERGY NATURAL RESOURCES...

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ENERGY & NATURAL RESOURCES Impact of IFRS: Oil and Gas kpmg.com/ifrs KPMG International
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Contents Overview of the IFRS conversion process 2 Accounting and reporting issues 3 1. Exploration and evaluation (E&E) assets 5 2. Depletion, depreciation and amortisation (DD&A) 8 3. Impairment of non-financial assets 10 4. Decommissioning and environmental provisions 12 5. Joint arrangements 14 6. Revenue recognition 16 7. Reserves reporting 18 8. Financial instruments 20 Information technology and systems considerations 22 From accounting gaps to information sources 22 How to identify the impact on information systems 23 Oil and gas accounting differences and respective system issues 24 Parallel reporting: Timing the changeover from local GAAP to IFRS reporting 26 Harmonisation of internal and external reporting 28 People: Knowledge transfer and change management 29 Business and reporting 30 Stakeholder analysis and communications 30 Audit Committee and Board of Directors considerations 30 Monitoring peer group 30 Other areas of IFRS risks to mitigate 30 Benefits of IFRS 31 KPMG: An Experienced Team, a Global Network 32 Contact us IBC © 2011 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
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1 Impact of IFRS: Oil and Gas Foreword Accounting for oil and gas activities presents many difficulties. Significant upfront investment, uncertainty over prospects and long project lives have led to a variety of approaches being developed by companies, and a range of country-specific guidance for the sector. As countries around the world adopt IFRS, accounting approaches for affected companies may need to be reassessed. Many countries converted to IFRS in 2005 and conversions are imminent for other countries such as Canada and South Korea in 2011 and Mexico in 2012. Japan has permitted the early adoption of IFRS by listed companies from years ending on or after 31 March 2010 and is expected to announce a final decision on whether to mandate adoption in 2012. The US will likely announce later in 2011 or 2012 its plan as to how IFRS might be incorporated into the financial reporting requirements for US domestic issuers. As countries adopt a single set of high quality, global accounting and financial reporting standards, there should be greater global consistency and transparency. However, it is recognised that extractive activities is an area in which there is little IFRS guidance. There is also variation in practice between companies applying IFRS, which was highlighted in KPMG’s survey The Application of IFRS: Oil and Gas published in October 2008. This publication looks at some of the main accounting issues across oil and gas companies. It considers currently effective standards and notes future developments that could impact accounting in the sector.
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