The purpose of reserves reporting is to make

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Unformatted text preview: nt discussion and analysis section of the annual report Oil and gas reserve estimates are critical information in the evaluation of oil and gas companies, and reserves disclosure is an important component of annual reports in the sector. The purpose of reserves reporting is to make available information about the oil and gas reserves controlled by companies in the sector. This is vital in assessing their current performance and future prospects. Despite their importance to both the company and the financial statements, there are no explicit requirements for the disclosure of reserve information in IFRS. Disclosures In the absence of specific guidance, oil and gas companies tend to refer to other requirements, such as those in the US, Canada, Australia and the UK. The nature of reserves estimates is such that, even if all companies provided disclosure based on a single classification, meaningful comparison between companies would be difficult without in-depth analysis of the many assumptions inherent in the core disclosures. The US Securities and Exchange Commission's rules require any issuer providing disclosure under ASC 932-235 Extractive Activities Oil and Gas Notes to Financial Statements to continue to provide that disclosure even if the issuer is preparing financial statements in accordance with IFRS. Impact of reserve estimates on financial statement balances While the reporting of reserves data is important in its own right, reserves measures are also used in deriving a number of accounting estimates. In our experience, DD&A calculations usually are based on the unit-ofproduction method and the volume of reserves used in the calculation affects the calculation of the associated DD&A charge. Reserves estimates are a key factor in determining the economic life of an oil field and therefore impact on the calculation of decommissioning and environmental rehabilitation provisions. Impairment calculations include assumptions for reserves. Downward revisions in reserve estimates often represent an indicator of impairment. Reserves are a ke...
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This note was uploaded on 12/03/2012 for the course ACCOUNTING 102-1132 taught by Professor Accountinggroup during the Fall '11 term at Al-Quds University.

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