Distinguish the successful efforts and full cost methods and their effect on capitalised exploration costs.
Oil, Gas & Energy
Oil and Gas Accounting for Exploration, Evaluation and Decommissioning Costs
Apply IFRS 6, IAS 36 and IAS 37 to account for exploration and evaluation spend, impairment testing and decommissioning provisions across the oil and gas asset life cycle.
🗓️Duration5 training days
📚Content4 modules · 8 sessions
🎓On completionAccredited attendance certificate
About the programme
Course Overview
An exploration well that finds nothing, a discovery still being appraised, and a field approaching the end of its producing life all raise the same underlying accounting question: how much cost belongs on the balance sheet, and when does it have to come off. This course works through oil and gas accounting under the successful efforts and full cost methods, capitalisation and expensing of exploration and evaluation costs under IFRS 6, and the impairment testing that IAS 36 requires when a cash-generating unit's carrying value looks doubtful. Participants also build decommissioning provisions under IAS 37, including the discount rate and cost estimate judgements involved, and apply IFRIC 1 when a change in estimate or discount rate revises an existing decommissioning liability. Sessions cover unit-of-production depletion, joint arrangement accounting under IFRS 11 for non-operated interests, and how reserves reported under the SPE Petroleum Resources Management System feed depletion and impairment calculations. Teaching combines worked accounting entries, an impairment testing case and a decommissioning provision calculation exercise. Participants finish able to apply the relevant standards to exploration, evaluation and decommissioning transactions and to explain the judgements behind them to auditors and management.
Expected Learning Outcomes
Apply IFRS 6 recognition and classification requirements to exploration and evaluation expenditure.
Test cash-generating units for impairment under IAS 36 using reserves-based cash flow projections.
Build a decommissioning provision under IAS 37, including cost estimation and discount rate selection.
Apply IFRIC 1 to account for a change in estimate or discount rate affecting an existing decommissioning liability.
Calculate unit-of-production depletion using reserves reported under the SPE Petroleum Resources Management System.
Account for non-operated joint arrangement interests in accordance with IFRS 11.
Who Should Attend
Financial accountants and controllers preparing oil and gas company financial statements.
Joint venture accountants who process exploration, evaluation and decommissioning cost allocations.
External and internal auditors reviewing oil and gas impairment and decommissioning provision judgements.
Finance business partners supporting exploration and development teams with cost accounting questions.
Reserves and reporting engineers who provide the technical inputs behind depletion and impairment calculations.
Finance staff transitioning from another industry into oil and gas exploration and production accounting.
Course Modules
Select any module to see its sessions and points.
01Accounting Policy Choices for Exploration Costs
2 sessions · 8 points
Session 1Successful Efforts and Full Cost Methods
- Compare how the successful efforts and full cost methods treat the cost of an unsuccessful exploration well.
- Explain the effect of each accounting policy choice on reported earnings volatility and balance sheet carrying value.
- Apply the ceiling test required under the full cost method to limit capitalised costs to discounted future value.
- Assess the disclosure implications of an accounting policy choice for investors comparing oil and gas companies.
Session 2Applying IFRS 6 to Exploration and Evaluation Spend
- Classify expenditure as exploration and evaluation cost eligible for capitalisation under IFRS 6.
- Determine the point at which capitalised exploration and evaluation costs are reclassified as development assets.
- Apply IFRS 6 impairment indicators specific to exploration and evaluation assets before technical feasibility is confirmed.
- Document the judgements behind capitalisation and reclassification decisions for audit review.
02Impairment Testing and Reserves-Based Valuation
2 sessions · 8 points
Session 1Identifying and Testing Cash-Generating Units
- Define cash-generating units appropriate to an oil and gas asset portfolio for impairment testing purposes.
- Build discounted cash flow models using reserves and price assumptions to test carrying value under IAS 36.
- Identify impairment triggers specific to oil and gas assets, including reserves downgrades and price deterioration.
- Reconcile impairment test outputs with reserves reports prepared under the SPE Petroleum Resources Management System.
Session 2Recording Impairment and Reversal
- Record an impairment charge and allocate it across the assets within an affected cash-generating unit.
- Assess whether a subsequent improvement in reserves or price supports reversal of a previously recognised impairment.
- Apply unit-of-production depletion consistently with the reserves base used in the impairment test.
- Present impairment judgements and sensitivities in financial statement disclosures clearly enough for investors.
03Decommissioning Provisions
2 sessions · 8 points
Session 1Building the Provision under IAS 37
- Estimate future decommissioning costs using engineering input on abandonment scope and timing.
- Select a discount rate appropriate to the currency and risk profile of the decommissioning liability.
- Recognise a decommissioning provision and its corresponding asset at initial recognition of the related facility.
- Unwind the discount on a decommissioning provision through interest expense over the asset's life.
Session 2Revising Estimates under IFRIC 1
- Apply IFRIC 1 to account for a change in the estimated timing, cost or discount rate of a decommissioning liability.
- Distinguish changes to an existing liability from a new obligation requiring separate initial recognition.
- Adjust the related asset for a revised decommissioning estimate and reassess it for impairment where required.
- Document the basis for revised decommissioning estimates to support audit and regulatory review.
04Joint Arrangements and Reporting
2 sessions · 8 points
Session 1Accounting for Non-Operated Interests
- Classify an oil and gas arrangement as a joint operation under IFRS 11 based on the rights and obligations involved.
- Record a non-operator's share of exploration, evaluation and decommissioning costs from operator cash calls.
- Reconcile joint interest billing statements against the non-operator's own accounting records.
- Identify disclosure requirements specific to joint arrangements in oil and gas financial statements.
Session 2Reporting to Management and Auditors
- Prepare a management report that explains capitalised exploration costs, impairments and provisions for the period.
- Respond to auditor questions on the judgements behind capitalisation, impairment and decommissioning estimates.
- Coordinate with reserves engineers to keep depletion and impairment inputs consistent with the latest reserves report.
- Track changes in accounting standards affecting exploration, evaluation and decommissioning accounting over time.
What the participant receives
4 course modules
A structured syllabus
8 training sessions
across 5 days
32 detailed points
Applied, detailed content
Accredited attendance certificate
On completing the programme
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