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Unformatted text preview: ual framework because the information obtained may not have any future economic benefit due to uncertainty in the exploration process. Respondents urged the IASB to consider asset recognition further. Respondents who disagreed with the asset recognition model made the following suggestions of alternative approaches. Recognise a mining/oil and gas property asset on the same basis as other assets (e.g. in accordance with IAS 38 Intangible Assets, IAS 16 Property, Plant and Equipment and/or the IFRS conceptual framework) (42%). Respondents who supported this approach to asset recognition typically also recommended that the scope of a future project should extend beyond extractive activities. Use existing accounting methods such as successful efforts accounting (19%). The range of responses and the concerns raised underline the difficulties in accounting for E&E assets and the divergence of practice. Measurement at historical cost preferred Almost all respondents agreed with the proposal to measure assets at historical cost because it is a measure that is verifiable, can be prepared in a timely manner and can be used to assess financial performance and stewardship. These respondents explained that they did not support fair value because it would introduce excessive subjectivity and short-term volatility to the financial statements. It was also thought that the use of fair value would impose significant preparation and audit costs that are not justified because users are not interested in that information. The research conducted by the project team indicated that analysts, lenders and venture capitalists would make only limited use of an estimate of fair value due to the subjectivity and degree of estimation involved. 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. 2011 KPMG IFRG Limited, a UK company, limited by guarantee. All rights reserved. 8 Impact of IFRS: Oil and Gas 2 Depletion, depreciation and amortisation (DD&A) A move from group depreciation methods or depreciation pools under previous GAAP to component depreciation under IFRS could require significant effort Component accounting
Significant judgement may be required in determining components, and systems needs to be capable of tracking components separately Companies need to al...
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