Accounting Essay

1212 Words Aug 2nd, 2012 5 Pages
Accounting is a common thread which unites even the smallest neighborhood business with an organization identified as a Fortune 500 company. Every company, regardless of size or mode of operation, needs to support this function. If accounting is so universal, then, how do companies involved in diverse industries with unique processes prepare their books in the same manner? Well, there exist a common set of standards for entities to follow, but there are also standards specific to organizations in certain industries. One particular sector which has its own considerations encompasses those organizations which operate within the oil and gas industry.
With that said, one particular area worth discussing relates to how outlays are
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The costs in question can be classified as pertaining to one of the following groupings: acquisition, exploration, development, or production. Expenses realized in the acquisition aspect include those to obtain the site where oil and gas may be present whether through lease or outright ownership. It is important to note that no difference in treatment exists between the two accounting methods with these costs as they are capitalized under both. Exploration addresses those expenditures necessary to evaluate the locale itself. If drilling then occurs, both tangible and intangible costs become relevant. To be considered tangible, the expenses arise from the drilling itself. The nature of the term intangible implies that they are not of actual substance. In this case, the expression is used to identify the costs associated with those activities which predate the actual drilling process. In either case, costs labeled tangible are capitalized. The issue arises with intangibles, which are also capitalized under the full cost method but are expensed in accordance with the successful efforts method. The next step in the process, once reserves have been identified, is the work that goes into readying the area so those resources can be made available. The costs experienced during this time are considered to be development costs and are treated as capitalized figures in either case. Lastly are

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