These included risk sharing agreements such as farm

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Unformatted text preview: n the scope of the discussion paper In commenting on the proposed scope of any future project by the IASB, some respondents requested that the IASB consider other issues that were not specifically covered in the discussion paper. These included risk-sharing agreements such as farm-in/ farm-outs, productionsharing agreements and carried interests. These issues are routinely encountered in the oil and gas sector. Some respondents indicated that they considered addressing these, and other additional areas, to be a high priority in the absence of specific guidance in IFRS. These comments underline the importance and accounting complexities of risk-sharing arrangements in the extractive industries. 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. 16 Impact of IFRS: Oil and Gas 6 Revenue recognition Oil and gas companies face challenges when applying the revenue recognition requirements under IFRS due to common industry arrangements that can give rise to complex revenue issues Oil and gas companies reporting under IFRS need to assess whether the risks and rewards of ownership have been transferred in order to determine when to recognise revenue. The determination of when this occurs can present challenges for oil and gas companies. The individual facts and circumstances will need careful consideration as they may vary between contracts. Timing of revenue recognition There is no industry standard as to the timing of the transfer of ownership in oil and gas transactions. The revenue arising from each transaction is recognised based on the terms of the underlying sales agreement. For most transactions involving the sale of physical oil and gas, the contractual terms for the transfer of ownership will be based on the delivery or lifting of production. For e...
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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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