This preview shows page 1. Sign up to view the full content.
Unformatted text preview: erve estimates should be calculated or approximated. Consequently, practice varies as to which reserves base is used in the calculation of DD&A. depreciation/amortisation of E&E assets should commence. Commence depreciation/amortisation when the whole field is ready to commence operations, since, in effect, it is from this point that economic benefits will be realised. Commence depreciation/ amortisation during the E&E phase as the assets are available for use when considered on a stand-alone basis; however such depreciation/ amortisation is capitalised to the extent that the assets are used in the development of other assets. Commencement of depreciation/amortisation
Available for use Depreciation or amortisation starts when an asset is available for use. For assets in the development stage there may be pilot testing phases prior to the start of full production. Whether incidental production arising during any such phases triggers depreciation depends on the assessment of whether the asset is available for use. Some E&E assets (e.g. a drilling rig) may be available for use immediately and so could be depreciated/amortised during the E&E phase. Other assets will not be available for use until the whole field is ready to commence operations. In our view, there are two reasonable approaches to determining when 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. Impact of IFRS: Oil and Gas 9 Discussion Paper Extractive Activities
The scope of the discussion paper did not specifically include DD&A The discussion paper did not propose to change the basis for calculating depreciation, although it highlighted some issues related to the application of the unit-of-production method. One issue is whether such a method should be based on r...
View Full Document