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90 Cards in this Set
- Front
- Back
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Generally, what condition(s) must be met in order to justify the recognition of revenues?
a. The earnings process must be complete or virtually complete b. The amounts must be realized or realizable c. Cash must be collected d. a and b only |
D
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In the U.S., initially who frequently owns the mineral rights?
a. Individuals b. Corporations c. Partnerships d. The government |
A
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In other countries outside of the U.S., who typically owns the mineral rights?
a. Individuals b. Corporations c. Partnerships d. The government |
D
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Internationally, under the recording revenue net of royalty approach,
a. The producer’s revenue includes the gross proceeds from sales, including the value of the minerals transferred or cash paid to the royalty owner. b. The producer excludes the royalty from its own revenue c. Gross revenue is reported on the income statement of the producer d. Royalty is reflected as a reduction in revenue or as an expense |
B
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Internationally, under the revenue gross approach,
a. The producer’s revenue includes the gross proceeds from sales, including the value of minerals transferred or cash paid to the royalty owner b. The producer excludes the royalty from its own revenue c. The royalty owner’s share of production does not appear on the income statement of the producer d. None of the above |
A
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Generally, under U.S. GAAP, producers account for royalties by recording revenue
a. at its gross amount b. net of royalty c. either gross or net of royalty d. none of the above |
B
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The most straightforward type of contract in which the right to explore, develop, and produced minerals is a
a. U.S. domestic lease agreement b. Concession agreement c. Risk service agreement d. Joint operating agreement |
A
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This type of contract allows the contractor companies to recoup certain agreed-upon costs and earn a profit by sharing in production-
a. US domestic lease agreement b. Concession agreement c. Production sharing contract d. Risk service agreement |
C
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This feature, found in many production sharing contracts, requires that the contractor sell a portion of its profit oil in the local market.
a. Cost recovery b. Profit Oil c. Foreign market obligation d. Domestic market obligation |
D
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The amount of gross production that is not committed to payment of royalties, taxes, or cost oil is referred to as
a. Recovery oil b. Profit Oil c. Foreign market obligation d. Domestic market obligation |
B
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The contractor provides services such as exploration, development, and production and in return receives payment from the government in the form of a fee in a
a. Production sharing contract b. Joint operating agreement c. Risk service agreement d. Unitization contract |
C
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When a unitization occurs,
a. Only the working interests in the properties being unitized are redetermined. b. Only the non working interests in the properties being unitized are redetermined. c. Both the working interests and the nonworking interests in the properties being unitized are redetermined d. Interests cannot be redetermined |
C
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In unitizations, sharing factors are typically based on factors such as
a. Amount of acreage or square kilometers contributed b. The reservoir volume attributed to each party’s interest c. The estimated net recoverable barrels of oil-in-place contributed d. All of the above |
D
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Situations where a company takes or sells more than its share of production is referred to as
a. Overlift b. Underlift c. Undertake d. None of the above |
A
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Situations where a company takes or sells less than its share of production is referred to as
a. Overlift b. Overtake c. Underlift d. None of the above |
C
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Lifting imbalances may be settled by
a. Cash balancing b. Production offsetting c. Production balancing d. All of the above |
D
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Under this procedure the working interest owner(s) in the overlift position agree to make a cash payment to the partner(s) who is in the underlift position
a. Cash balancing b. Production offsetting c. Production balancing d. Contract balancing |
A
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The practice of offsetting the overlifting on one property against underlifting on another property is referred to as
a. Cash balancing b. Production offsetting c. Production balancing d. Contract balancing |
B
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Under the sales method,
a. Each party’s revenue reflects the actual amount of production that is sold, regardless of the amount of production that it was entitled to. b. Each working interest owner records revenue based on the share of production to which it is entitled, regardless of the amount actually sold. c. The company books a liability when actual sales during the period exceed the company’s entitlement share of production from the property d. Recognition of a receivable is booked when actual sales during a period are less than the company’s entitlement share of production from the property |
A
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Under the entitlements method,
a. Each party’s revenue reflects the actual amount of production that is sold, regardless of the amount of production that it was entitled to. b. Each working interest owner records revenue based on the share of production to which it is entitled, regardless of the amount actually sold. c. Revenue reported by the company reflects the actual sales made during the period. d. No receivable or other asset is recorded for undertaken production. |
B
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Facility imbalances are typically settled by
a. Having the produces adjust future production and sales to settle the imbalance b. The producers agreeing to cash balance on a regular basis c. Either A and B d. None of the above |
C
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Generally, commercial production is deemed to have commenced at a point when
a. Production is at or near the expected production level b. Production has reached a predetermined percentage of design capacity c. Production has become continuous d. All of the above |
D
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For financial accounting purposes, it is important that injected gas
a. Always be included in revenue each time it is reproduced b. Not be included in revenue each time it is reproduced c. Be included in revenue every other time it is reproduced d. Be included in revenue 75% of the time it is reproduced |
B
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Under SFAS 144, for impairment, oil and gas wells, equipment, and facilities are typically grouped at the
a. Production level b. Field level c. Individual Well level d. Company level |
B
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Impairment occurs when
a. The book value or carrying value of an asset is greater than its fair value b. The book value or carrying value of an asset is less than its fair value c. The book value or carrying value of an asset is equal to its fair value d. None of the above |
A
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Which event(s) indicate that the asset’s carrying value may not be recoverable
a. A significant decrease in the market price of a long-lived asset b. A significant adverse change in the physical condition of a long lived asset c. Significant adverse change in the legal or business environment in which the long-lived asset is operated d. All of the above |
D
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Under SFAS 144, in oil and gas operations, a temporary decline in the price of oil would
a. Be sufficient to require testing for impairment. b. Not be sufficient to require testing for impairment c. Indicate a need to reverse an impairment loss d. Require recognition of an impairment loss |
B
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Under SFAS 144, a hostile or unfavorable action by the government of a country where a company is operating would
a. Indicate the need to assess the properties in that country for impairment b. Not indicate the need to assess the properties in that country for impairment c. Indicate the need to reverse an impairment loss d. Require recognition of an impairment loss |
A
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When a long-lived asset is classified as being held for sale,
a. Depreciation on the asset does not cease b. Depreciation on the asset should cease, even if the asset continues in use c. The asset should be valued at the higher of its carrying value or its fair value less estimated selling costs d. None of the above |
B
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Information from external sources that indication potential impairment include
a. Evidence of obsolescence or physical damage to an asset b. Significant changes in the extent to which an asset is used resulting in an adverse effect on the company during the period c. Evidence from internal reporting indication that economic performance of an asset is worse than expected d. A decline in the asset’s market value that exceeds the normal expectation of a decline as a result of the passage of time or normal use. |
D
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Internal indications that impairment has occurred include
a. A decline in the asset’s market value that exceeds the normal expectation of a decline as a result of the passage of time or normal use b. Significant changes in the market in which the enterprise operations c. An increase in market interest rates and those increases are likely to affect the discount rate used in calculating the asset’s value d. Evidence of obsolescence or physical damage to an asset |
D
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Under SFAS No. 144, impairment is recognized as
a. An additional depreciation charge b. As an expense on the prior period income statement c. As a loss in current period income statement d. As a deferred liability on the current period balance sheet |
C
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Under SFAS No. 144, can booked impairment be reversed in future periods?
a. Yes (always) b. Yes, except for assets held for sale c. No (never) d. No, except for assets held for sale |
D
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How is loss measured under SFAS No.144?
a. Carrying value minus fair value b. Carrying value minus recoverable amount c. Carrying value minus present value of future cash flows d. Greater of net selling price or value in use |
A
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Retirement of tangible long-lived assets includes
a. Sale , abandonment or other disposal b. Temporary idling c. Maintenance d. Replacement |
A
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Upon initial recognition of a liability for retirement obligations, a company should
a. capitalize the same amount as part of the cost basis of the related long-lived asset b. allocate it to expense over the useful life of the asset c. both A and B d. None of the above |
C
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Changes due solely to the passage of time are referred to as
a. Accretion of the discounted liability b. Asset retirement obligation c. Remediation liability d. Promissory estoppel |
A
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Legally enforceable obligations can result from
a. A government action, such as law, statute, or ordinance b. An agreement between entities, such as a written or oral contract c. A promise conveyed to a third party that imposes a reasonable expectation of performance upon the promissory under the doctrine of promissory estoppel d. All of the above |
D
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Examples of asset retirement obligations (AROs) where the company is normally legally obligated include
a. Removal of pipelines b. Closure and post closer of refineries c. Removal of underground storage tanks d. All of the above |
D
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In assessing whether a legal obligation exists, a company
a. Is permitted to forecast changes in law or changes in the interpretation of existing laws and regulations b. Is not permitted to forecast changes in law or changes in the interpretation of existing laws and regulations c. Must evaluate future facts and circumstances d. Must evaluate both current and future and circumstances |
B
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The initial measurement of an asset retirement obligation (ARO) liability is to be at
a. Current fair value b. Best estimate of amount the company would pay to settle obligation at balance sheet date c. Undiscounted estimated expenditures d. None of the above |
A
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If a reasonable estimate of fair value cannot be made in the period the ARO is incurred
a. No liability should be recognized in that period b. Disclosure of the existence of the ARP is required c. Recognition of the ARO should be delayed until the period in which a reasonable estimate of fair value can be made d. All of the above |
D
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The best evidence of fair value and should be used as the basis for measurement, if available, is
a. Quoted market prices in active markets b. Prices for similar liabilities c. Results of present value d. Management estimates |
A
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Under U.S. GAAP when the asset retirement obligation liability is initially recognized,
a. The offsetting amount is recorded in a separate asset account b. The entire asset retirement obligation is expensed immediately c. The corresponding increase in the carrying value of the related long-loved asset is to be recognized in a related asset account d. The historical cost of the asset is written off |
C
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Using the traditional approach (present value technique) to measure liabilities,
a. The risk is reflected in the cash flows b. Multiple cash flow scenarios reflect the range of possible outcomes c. A credit adjusted risk free rate is used d. A single set of estimated cash flows and a single interest rate are used |
D
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Using the expected cash flow approach (present value technique) to measure liabilities,
a. A single set of estimated cash flows and a single interest rate are used b. The associated risk is reflected in the discount rate c. Multiple cash flow scenarios reflect the range of possible outcomes d. None of the above |
C
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FASB assumes that this approach will be used to estimate the fair value of most asset retirement obligations
a. Traditional approach b. Expected cash flow approach c. Related asset approach d. Adjusted approach |
A
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The price that a third party would demand and could expect to receive for bearing the uncertainties and unforeseeable circumstances inherent in an obligation is known as the
a. Market risk premium b. Market risk discount c. Cost risk premium d. Cost risk discount |
A
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The FASB has indicated that all offsetting cash inflows, including expected salvage values,
a. Should be included in computation of asset retirement obligations and in the computation of the depreciable of the depreciable base of the assets b. Should be excluded from both the computation of asset retirement obligations and the computation of the depreciable of the depreciable base of the assets c. Should be excluded from the computation of asset retirement obligations and instead be included the computation of the depreciable of the depreciable base of the assets d. Should be included in the computation of asset retirement obligations and excluded from the computation of the depreciable of the depreciable base of the assets |
C
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Companies are to recognize period to period changes in the liability for the asset retirement obligation resulting
a. From the passage of time (accretion) b. Revisions to either the timing or the amount of the original estimated future cash flows c. Both A and B d. None of the above |
C
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Changes in the asset retirement obligation resulting from the passage of time,
a. Should be recognized as a decrease in the carrying value of the liability b. Should be recognized as an increase in the carrying value of the liability c. Should be considered interest cost qualifying for capitalization d. Should not be charged to accretion expense |
B
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According to SFAS No. 143, which of the following actions would relieve a firm of the required asset retirement recognition?
a. Providing assurance that the firm will be able to satisfy its asset retirement obligation b. Creating a fund to satisfy the asset retirement obligation c. Dedicating assets to satisfy the asset retirement obligation d. None of the above |
D
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According to SFAS No 143, a company that reports a liability for its asset retirement obligations (ARO) is require to disclose
a. A general description of the AROs and the associated long-lived assets b. The fair value of assets that are legally restricted for purposes of settling AROs c. A reconciliation of beginning and ending aggregate carrying value of AROs d. All of the above |
D
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SFAS No. 69, as updated by SFAS No. 131, defines significant oil and gas producing activities as being
a. 10% or more of the company’s total operating activities b. 50% or more of the company’s total operating activities c. 75% or more of the company’s total operating activities d. 100% of the company’s total operating activities |
A
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SFAS No. 69, which requires all companies to disclose the method of accounting being used to account for their exploration and production activities, applies to
a. Successful efforts companies only b. Full cost companies only c. Both successful efforts and full cost companies d. Neither successful efforts nor full cost companies |
C
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The financial-type disclosure(s) required by SFAS No, 69 include
a. Capitalized costs relating to oil and gas producing activities b. Costs incurred for property, acquisition, exploration, and development activities c. Results of operations for oil and gas producing activities d. All of the above |
D
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An enterprise would be regarded as having significant oil and gas producing activities if the identifiable assets of oil and gas producing activities are
a. 10% or more assets of the enterprise, excluding assets exclusively for general corporate purposes b. 50% or more of the assets of the enterprise, excluding assets exclusively for general corporate purposes c. 75% or more of the assets of the enterprise, excluding assets exclusively for general corporate purposes d. 100% of the assets of the enterprise, excluding assets exclusively for general corporate purposes |
A
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The value of reserves
a. Is reflected in a historical cost financial statement as an asset b. Is reflected in a historical cost financial statement as a liability c. Is reflected in a historical cost financial statement as a component of stockholder’s equity d. Is not reflected in a historical cost financial statement |
D
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Reserve disclosures include
a. Non value based information b. Value based information c. Both A and B d. None of the above |
C
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All six of the SFAS No. 69 disclosures must be presented on a
a. Citywide basis b. Statewide basis c. Country wide basis d. Worldwide basis |
D
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The company’s share of the investee’s relevant items must be separately disclosed in each disclosure if the company’s financial statements include an investment that is accounted for by the
a. Cost method b. Equity method c. Pooling of interests method d. Push down method |
B
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Which disclosure(s) must be presented for each geographical area where the company has significant oil and gas quantities
a. Proved oil and gas reserve quantities b. Costs incurred for property acquisition, exploration, and development activities c. Results of operations for oil and gas producing activities d. All of the above |
D
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If significant costs have been incurred to acquire proved properties with proved reserves, those costs
a. Must be disclosed together with costs of acquiring unproved properties b. Must be disclosed separately from the costs of acquiring unproved properties c. May be disclosed together or separately from the costs of acquiring unproved properties d. Are not disclosed |
B
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Which of the following type(s) of cost(s) for the year shall be disclosed
a. Property acquisition costs b. Exploration costs c. Development costs d. All of the above |
D
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Costs incurred for property acquisition, exploration, and development activities are included in disclosure reports
a. only if the costs were capitalized b. only if the costs were capitalized c. regardless of whether the costs were capitalized or charged to expense d. only if the costs were neither capitalized nor charged to expense |
C
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Revenue disclosure information should include sales to
a. Unaffiliated enterprises b. The enterprise’s other operations c. Both A and B d. None of the above |
C
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Sales or transfers to the enterprise’s other operations shall be based on market prices equivalent to those that could be obtained
a. In an arm’s length transaction b. In a related party transaction c. Using any management assumptions d. Any of the above |
A
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Production or severance taxes shall
a. Be deducted in determining gross revenues b. Not be deducted in determining gross revenues c. Not be included as part of production costs d. Be capitalized and depreciated over a 10 year period |
B
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Changes resulting from which of the following should be disclosed separately with appropriate explanation of significant changes
a. Revisions of previous estimates b. Improved recovery c. Purchase of minerals in place d. All of the above |
D
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If significant, changes in reserve estimates resulting from application of improved recovery techniques
a. Shall be shown disclosed separately b. Shall be included in revisions of previous estimates c. Shall not be disclosed d. Should be shown as a liability on the balance sheet |
A
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If not significant, changes in reserve estimates resulting from application of improved recovery techniques
a. Shall be shown disclosed separately b. Shall be included in revisions of previous estimates c. Shall not be disclosed d. Should be shown as a liability on the balance sheet |
B
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If the enterprise issues consolidated financial statements, 100 percent of the net reserve quantities attributable to the parent company and
a. 1% of the net reserve quantities attributable to its consolidated subsidiaries shall be included b. 10% of the net reserve quantities attributable to its consolidated subsidiaries shall be included c. 50% of the net reserve quantities attributable to its consolidated subsidiaries shall be included d. 100% of the net reserve quantities attributable to its consolidated subsidiaries shall be included |
D
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In reporting reserve quantities and changes in them, oil reserves and natural gas reserves are generally stated in
a. Barrels b. Cubic feet c. Pounds d. Tons |
A
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In reporting reserve quantities and changes in them, gas reserves shall be stated in
a. Barrels b. Cubic feet c. Pounds d. Tons |
B
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The International Joint Venture is a way companies share the risk and significant cost of finding oil.
a. True b. False |
A
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The Joint Venture accounting procedure clearly states that the operator shall neither gain nor lose in its role as the operator.
a. True b. False |
A
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If a party to the joint venture is charged a cost in error, then he must always find it under audit and ask for credit.
a. True b. False |
B
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A foreign government oil company can also be a joint venture partner with the group conducting a contract in the foreign country.
a. True b. False |
A
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The operator of a joint venture can use a sliding scale overhead recovery method.
A. True B. False |
A
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The Oil & Gas Reserves to be used in the Depletion Formula is Proved Developed.
a. True b. False |
A
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An auditor from the Government Oil Company under a PSA Contract is most likely auditing the costs for tax purposes.
a. True b. False |
B
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Accounting and record keeping costs related to maintaining unproved properties should be
a. Capitalized b. Expensed c. Deferred d. None of the above |
B
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An appropriate time to accrue development bonuses is
a. When it becomes more likely than not that production levels will reach the requisite levels as agreed in the contract b. When it becomes likely that production levels will not reach the requisite levels as agreed in the contract c. Before the discovery of commercial reserves d. After the discovery of commercial reserves |
D
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All of the working interest owners must have the opportunity to approve the project whenever a well is being planned or any other major expenditure is being considered
a. True b. False |
A
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After the decision has been made that commercial reserves exist and that the property should be developed, the operation will enter the Production phase.
a. True b. False |
B
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A well drilled in a Development Area but to a unknown formation (zone) and found to be a dry hole would be capitalized because it was drilled in a Development Area.
a. True b. False |
B
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Including National Oil Companies Exxon is the World’s largest Oil & Gas Company based on reserves.
a. True b. False |
B
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Oil & Gas resources are generally owned by governments.
a. True b. False |
A
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The U.S. government does not own reserves because all reserves in the U.S. are owned by individuals and companies.
a. True b. False |
B
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The cost of buying a land owner lunch while discussing an oil lease contract is considered a pre-acquisition cost and therefore should be capitalized under successful efforts accounting.
a. True b. False |
B
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