IMPAIRMENT OF ASSETS: A STUDY IN GLOBAL CRUDE-OIL COMPANIES

Oil and gas exploration and production (E&P) is a typically capital-intensive activity, involves high risks and long investment maturity terms. These characteristics entail high asset values and difficulties to recover these capitalized values. Hence, the impairment test to check the possibility...

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Bibliographic Details
Published inRevista de educação e pesquisa em contabilidade Vol. 6; no. 4 English; pp. 329 - 343
Main Authors Carlos Roberto Godoy, João Carlos de Aguiar Domingues
Format Journal Article
LanguageEnglish
Published Conselho Federal de Contabilidade (CFC) 01.11.2012
Subjects
Accounting for the crude-oil sector
IAS 36
Impairment
Oil and Gas
SFAS 144
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Summary:Oil and gas exploration and production (E&P) is a typically capital-intensive activity, involves high risks and long investment maturity terms. These characteristics entail high asset values and difficulties to recover these capitalized values. Hence, the impairment test to check the possibility to recover these asset values is very important for this sector. In that context, the aim of this study was to undertake an analysis in order to identify how oil price and proven reserve variations are related to the impairment expenses attributed to oil E&P activities. An inverse relation was found between the impairment expenses attributed to E&P activities and the volume of discoveries and the net balance of reserve purchases and sales. The study did not confirm, however, that an inverse relation exists between the price and reserve volume and impairment expenses. The direct relation between production and impairment loss was not confirmed either.
ISSN:1981-8610
1981-8610