Oil & Gas Knowledge Center
Explore our verified library of Oil & Gas transactions. Every entry is reviewed for IFRS compliance and real-world accuracy by our technical accounting team.
How to Capitalize the Cost of a 3D Seismic Survey as an Exploration and Evaluation Asset Under IFRS 6
Capitalizing a 3D seismic survey conducted during the exploration phase as an E&E asset.
How to Capitalize Exploratory Drilling Costs as an E&E Asset Pending Reserve Determination
Capitalizing the cost of drilling an exploratory well to test the presence of hydrocarbons, pending commerciality assessment.
How to Write Off a Dry Hole Exploratory Well When No Commercial Reserves Are Found
Writing off the full cost of an exploratory well after it is determined to contain no commercially viable hydrocarbons.
How to Reclassify an E&E Asset to a Development Asset After Commercial Viability Is Confirmed
Reclassifying an exploratory well from an E&E asset to a development asset (PP&E) when technical and commercial viability is established.
How to Test and Record an E&E Asset Impairment When Indicators Arise Under IFRS 6
Writing down an E&E asset when facts and circumstances suggest the carrying amount may exceed the recoverable amount.
How to Capitalize Drilling and Completion Costs for a Development Well in a Proven Field
Capitalizing the full cost of drilling and completing a development well as part of the oil and gas property.
How to Calculate and Record Monthly Oil and Gas Asset Depletion Using the Units of Production Method
Recognizing monthly depletion of the oil and gas property based on barrels produced relative to total proved developed reserves.
How to Record Lease Operating Expenses and Lifting Costs for a Producing Oil Well
Expensing the day-to-day costs of extracting oil from a producing well as lease operating expenses in the period incurred.
How to Record the Government's Share of Production Under a Production Sharing Contract
Recognizing the government's entitlement to profit oil and separating the company's net revenue under a PSC fiscal regime.
How to Record Royalty Expense Payable to the Government or Mineral Rights Owner
Accruing royalties payable on gross production to the government or mineral rights owner as a period expense.
How to Record Crude Oil Extracted and Placed Into Storage as Inventory at Production Cost
Recognizing produced crude oil held in storage tanks as inventory at its cost of production before a sale is made.
How to Record Pipeline Tariff Income Earned from Third-Party Producers Using the Company's Pipeline
Recognizing fee-based tariff revenue as third-party volumes flow through the company's midstream pipeline infrastructure.
How to Initially Recognize an Asset Retirement Obligation for an Oil Platform or Well Decommissioning
Recording the present value of the estimated future decommissioning liability at the time production assets are installed.
How to Record Annual ARO Accretion Expense as the Decommissioning Liability Unwinds
Recognizing the annual unwinding of the discount on the Asset Retirement Obligation as a financing cost.
How to Record an ARO Revision When a New Engineering Study Increases the Decommissioning Cost Estimate
Increasing both the ARO liability and the oil property asset when updated engineering studies raise the decommissioning cost estimate.
How to Record Actual Decommissioning Costs and Settle the Asset Retirement Obligation
Recording the costs incurred to plug a well and restore the site at end of life, settling the ARO liability.
How to Record a Crude Oil Sale and Recognize Revenue When Control Passes to the Buyer
Recording oil revenue and inventory transfer at the point of loading or delivery when control passes to the buyer.
How to Record Monthly Natural Gas Sales Revenue Under a Long-Term Supply Agreement
Recognizing gas sales revenue monthly as gas is delivered under a long-term take-or-pay gas supply contract.
How to Record Take-or-Pay Contract Revenue When a Gas Buyer Fails to Take Contracted Volumes
Recognizing the minimum payment under a take-or-pay contract as deferred revenue when the buyer pays but does not take the gas.
How to Mark to Market an Oil Price Swap Hedge and Record the Gain in Other Comprehensive Income
Revaluing an oil price swap designated as a cash flow hedge of future oil production revenue at period-end.
How to Record an Oil Price Hedge Settlement and Recycle the OCI Gain Into Revenue
Receiving a hedge settlement payment when oil prices fell below the hedged price, and reclassifying the OCI gain into oil revenue.
How to Record an Underlift Position When a JV Partner Lifts Less Than Their Entitlement Share
Recognizing an underlift receivable and deferring revenue when a JV partner has not lifted their full share of produced crude.
How to Record a Joint Venture Cash Call Payment Made to the Operator for Development Drilling
Recording a cash call advance paid to the JV operator to fund agreed development drilling and operations.
How to Record JV Cash Calls Received by the Operator from Non-Operating Partners
Recording cash calls received from non-operating JV partners to fund joint venture operations and development.
How to Bill JV Partners for Their Share of Monthly Joint Venture Operating Costs
The operator allocates actual monthly JV costs to each partner and converts advances into partner billings.
How to Record a PSC Cost Recovery Entitlement as the Company Recovers Capital and Operating Costs from Production
Recognizing the company's entitlement to cost oil under a Production Sharing Contract as costs are recovered from gross production.
How to Record the Company's Share of Profit Oil After Cost Recovery Under a Production Sharing Contract
Recognizing the company's entitlement to its share of profit oil after cost recovery under the PSC agreed split formula.
How to Record a Farm-Out Transaction When the Company Sells a Partial Working Interest in an Exploration Licence
Recording the partial sale of a working interest in an exploration or development licence, recognizing the gain on disposal.
How to Accrue Petroleum Income Tax on Ring-Fenced Production Income in MENA Jurisdictions
Recognizing the special petroleum income tax applicable to oil and gas production income in GCC and MENA producing countries.
How to Recognize a Deferred Tax Liability on Capitalized E&E Assets That Are Immediately Tax-Deductible
Recording the deferred tax liability arising when E&E costs are capitalized for IFRS but immediately expensed for petroleum tax purposes.
How to Record a Royalty Expense and the Associated Deferred Tax Asset from Timing Differences
Recording the royalty expense and the deferred tax asset arising when the tax deduction occurs later than the accounting expense.
How to Accrue a Resource Rent Tax That Applies Once a Project Achieves a Threshold Rate of Return
Recognizing a profit-based resource rent tax triggered when the project's cumulative return exceeds the specified uplift threshold.
How to Apply Ring-Fencing to Calculate Separate Petroleum Tax for Each Licence Area
Maintaining separate taxable income calculations per licence area to prevent cross-subsidy between profitable producing fields and exploration losses.
How to Expense Pre-Licence Geological and Geophysical Studies Before an Exploration Licence Is Secured
Expensing G&G studies and regional basin analysis costs incurred before an exploration licence is acquired.
How to Capitalize the Signature Bonus and Legal Costs Paid to Acquire an Exploration Licence
Capitalizing the upfront licence acquisition payment and associated transaction costs as an E&E asset from the licence grant date.
How to Capitalize Annual Exploration Licence Rental Payments to Maintain the Permit in Good Standing
Treating annual rental payments to the host government as a capitalized cost of maintaining the exploration right.
How to Keep a Suspended Exploratory Well Capitalized While Commerciality Is Being Assessed
Maintaining capitalized E&E costs for a suspended exploratory well while the company actively assesses whether reserves are commercial.
How to Write Off a Suspended Exploratory Well After Management Decides Not to Develop
Immediately writing off a previously suspended exploratory well once a decision is made not to pursue development.
How to Expense a Stratigraphic Test Well Drilled Purely for Geological Data Collection
Expensing the cost of a well drilled solely to obtain subsurface geological data with no production intent.
How to Allocate Directly Attributable Exploration Department Overhead to E&E Assets
Capitalizing the portion of exploration staff salaries and overhead that is directly attributable to specific E&E activities.
How to Record a Pre-Discovery Farm-Out When a Partial Exploration Interest Is Sold Before Any Hydrocarbon Find
Selling a working interest in an exploration block before any discovery, recognizing the gain on the proportional E&E asset disposed.
How to Capitalize Offshore Platform and Production Facility Construction Costs Under Assets Under Construction
Accumulating offshore production platform construction costs in Assets Under Construction until the facility is commissioned.
How to Capitalize Subsea Pipeline, Wellhead, and Manifold Infrastructure as Development Assets
Capitalizing the cost of subsea infrastructure connecting wells to the production platform as part of the field development.
How to Capitalize a Gas Treatment and Compression Plant Construction as a Development Asset
Capitalizing the full EPC cost of a gas processing plant as a long-lived development asset.
How to Capitalize a Water or Gas Injection Well Drilled for Reservoir Pressure Maintenance
Capitalizing the drilling and completion cost of an injection well designed to maintain reservoir pressure and maximize production.
How to Capitalize Borrowing Costs on Project Finance Funding a Qualifying Development Asset Under IAS 23
Capitalizing interest on a project finance facility used exclusively to fund a qualifying offshore development asset.
How to Capitalize a Major Planned Maintenance Turnaround on a Production Facility as a PPE Component
Capitalizing the cost of a planned major maintenance turnaround as a separate component under IAS 16 component accounting.
How to Capitalize Enhanced Oil Recovery Program Costs When They Demonstrably Increase Reserves
Capitalizing EOR injection program costs when the program increases total recoverable reserves above what primary recovery would achieve.
How to Calculate and Record Monthly DD&A for All Production Facilities Using the Units of Production Method
Recognizing monthly Depletion, Depreciation and Amortization on all producing assets using the UOP method tied to monthly production volumes.
How to Prospectively Revise the DD&A Rate After an Upward or Downward Reserve Estimate Change
Recalculating the UOP depletion rate going forward after a reserve estimate revision, without restating prior periods.
How to Depreciate a Gas Processing Plant on a Straight-Line Basis Over Its Economic Life
Applying straight-line depreciation to a gas processing plant that serves multiple fields, where the plant's economic life exceeds any individual field's reserve life.
How to Perform an IAS 36 Impairment Test on a Producing Field CGU and Record the Impairment Charge
Testing and recording an impairment charge when the recoverable amount of a producing field falls below its book value.
How to Reverse a Prior Oil and Gas Asset Impairment After a Significant Reserve Upgrade
Restoring part of a previously impaired oil and gas property when recoverable amount increases due to a reserve upgrade or higher oil prices.
How to Record Gas Flaring Costs and Regulatory Penalties for Exceeding Flaring Limits
Expensing the cost of flaring associated gas and any regulatory fine for exceeding permitted flaring volumes.
How to Record Produced Water Treatment and Disposal Costs as Lease Operating Expense
Expensing the treatment and disposal of water co-produced with oil and gas as a direct operating cost.
How to Record a Crude Oil Quality Differential Discount Against the Brent Benchmark Price
Recognizing gross benchmark revenue and a quality differential discount when selling heavy or sour crude below benchmark.
How to Record Oil Stock Gains or Losses from Tank Calibration and Measurement Variances
Adjusting crude oil inventory when physical tank dip measurements differ from fiscal meter volumes.
How to Record LNG Liquefaction Processing Costs as a Direct Production Operating Expense
Expensing the energy, utilities, and contractor costs of liquefying natural gas at the LNG train.
How to Recognize Revenue from an LNG Cargo Sale When Control Passes to the Buyer
Recording LNG revenue and cost of sales when a cargo is sold to an Asian buyer under a long-term SPA.
How to Record Condensate Revenue as a Separate High-Value By-Product Stream from Gas Production
Recognizing revenue from condensate sales separately from gas revenue, with independent metering and pricing.
How to Record Natural Gas Liquids Extraction and Revenue from Individual NGL Products
Recording revenue from ethane, propane, and butane extracted from raw gas at a gas processing plant.
How to Record Crude Oil Tanker Hire as a Transportation Expense or Revenue Deduction Depending on Delivery Terms
Paying a tanker hire charge to transport crude from the loading terminal to the customer's port.
How to Record and Amortize an Annual Offshore Installation Insurance Premium
Capitalizing the annual offshore energy package insurance premium as a prepaid asset and releasing monthly.
How to Record a Retroactive Oil Price Adjustment When the Final Monthly Average Price Is Confirmed
Adjusting revenue and receivables when the final price under a monthly average pricing formula differs from the provisional invoice.
How to Recognize Revenue When Make-Up Gas Is Delivered to a Buyer Who Previously Paid Under Take-or-Pay
Releasing deferred take-or-pay revenue to earned revenue when previously paid make-up volumes are physically delivered.
How to Record Capacity Reservation Fee Revenue Earned Over a Pipeline or Processing Reservation Period
Recognizing stable, time-based revenue from a third party reserving pipeline or processing capacity.
How to Apply and Record an Annual CPI-Linked Tariff Escalation on a Long-Term Pipeline Agreement
Adjusting pipeline tariff revenue when the annual CPI-linked escalation clause takes effect on the contract anniversary.
How to Suspend and Reverse Oil Revenue Recognition During a Force Majeure Production Halt
Reversing previously accrued revenue during a force majeure event that suspends production and contractual obligations.
How to Record Crude Blending Revenue and the Blending Margin When Combining Heavy and Light Crudes
Recognizing revenue and cost of sales from selling a blended crude grade that commands a premium over its components.
How to Reclassify a JV Cash Call Advance to the Correct Development Asset Category on Receipt of the Billing Statement
Converting a non-operator's JV advance into specific PP&E or E&E asset categories based on the operator's monthly cost statement.
How to Record a Prior Period Cost Correction Found During the Annual JV Audit
Accounting for a prior period cost misallocation identified through the exercise of JV audit rights under the JOA.
How to Record the Non-Consent Penalty Income When a JV Partner Elects Out of a Well
Recognizing the contractual uplift income when a non-consenting JV partner forfeits their penalty for not participating in a development well.
How to Record a JV Carried Interest Where One Party Funds Another's Exploration Costs in Exchange for a Promoted Interest
Accounting for a carry arrangement where the carrier funds the carry party's exploration share and records a receivable.
How to Record a Technical Assistance Fee Paid to the JV Operator for Managing Joint Operations
Expensing the management or technical services fee charged by the operator to the JV partners.
How to Record the Return of Surplus JV Cash Call Funds After a Budget Underspend
Reducing the JV advance receivable when the operator returns excess cash call funds following an underspend.
How to Record the Recovery of a Farm-Out Carry Obligation from the Carry Partner's Production Entitlement
Reducing the carry receivable and recognizing revenue as the carry obligation is recovered from the carry party's production share.
How to Record a Crude Oil Feedstock Purchase for Refinery Processing as Inventory
Recording the purchase of crude oil as refinery feedstock, held in storage inventory until processed.
How to Transfer Refined Products from Refinery Work in Process to Finished Goods Inventory
Reclassifying gasoline and diesel from the refinery cost pool to finished goods inventory at production cost.
How to Record Monthly Refinery Operating Costs Including Energy, Catalysts, and Maintenance
Expensing monthly refinery operating costs (energy, catalysts, maintenance, labour) as production expenses flowing through WIP.
How to Record Refined Product Sales and Measure the Refining Margin Against Crude Feedstock Costs
Recognizing revenue from gasoline and diesel sales and calculating the refining margin (crack spread).
How to Record Pipeline Ship-or-Pay Minimum Revenue When a Shipper Fails to Use Booked Capacity
Recognizing minimum ship-or-pay revenue as earned or deferred depending on whether the shipper has make-up rights.
How to Record Terminal Storage Fee Income Earned from Third-Party Oil Product Storage
Recognizing monthly storage fees from third parties storing oil products in the terminal's tank farm.
How to Record LPG Bottling and Last-Mile Distribution Costs in a Downstream Retail Operation
Expensing the bottling, cylinder management, and retail distribution costs for LPG sold to household customers.
How to Recognize an IAS 37 Environmental Remediation Provision for Contaminated Soil at an Onshore Site
Establishing a provision for the estimated cost of remediating contaminated soil at a production site where a legal or constructive obligation exists.
How to Record Actual Environmental Remediation Spending Against the Previously Established Provision
Drawing down the environmental remediation provision as actual cleanup spending is incurred.
How to Record the Purchase of Carbon Credits as Intangible Assets for Emissions Offsetting
Capitalizing purchased carbon credits (voluntary or compliance) as intangible assets to be held for surrender against emissions obligations.
How to Record the Surrender of Carbon Credits Against a Regulatory or Voluntary Emissions Obligation
Derecognizing carbon credit intangible assets when surrendered to discharge an emissions obligation provision.
How to Record Mandatory HSE Training and Safety Compliance Program Costs as Operating Expenses
Expensing health, safety, and environment training costs as mandatory regulatory compliance operating expenses.
How to Record Mandatory Community Investment and Social Obligation Spending Under a Concession Agreement
Expensing mandatory or voluntary community investment spending required as a condition of the oil and gas concession.
How to Record Emergency Oil Spill Cleanup Costs and the Corresponding Insurance Recovery
Expensing emergency response and cleanup costs from a pipeline oil spill and recognizing the insurance recovery separately.
How to Record Expatriate Technical Staff Payroll for Drilling Engineers, Geologists, and Production Operators
Recording monthly gross salaries and allowances for expatriate staff working in oil and gas operations.
How to Record Local Staff Payroll and Employer SSC Contributions for Jordanian Nationals in Oil Operations
Recording monthly payroll and the 14.25% employer SSC contribution for Jordanian national employees in oil and gas.
How to Accrue Monthly EOSB Provision for Jordanian Oil and Gas Employees
Building the statutory end-of-service gratuity provision for Jordanian employees in oil operations, allocated to LOE or capex based on role.
How to Record Expatriate Staff Housing and One-Time Relocation Costs
Expensing or partially capitalizing accommodation and relocation costs for expatriate oil and gas staff.
How to Record Monthly Camp and Accommodation Running Costs for a Remote Onshore Oil Field
Expensing the monthly cost of running accommodation, catering, and welfare facilities for workers at a remote field.
How to Record Helicopter and Supply Vessel Costs for Offshore Crew Changes and Logistics
Expensing monthly helicopter crew change flights and supply vessel logistics as major offshore LOE items.
How to Record a Reserve-Based Lending Facility Drawdown to Fund Development Drilling
Drawing down a reserve-based lending (RBL) facility secured against the NPV of proved oil and gas reserves.
How to Record a Mandatory Partial RBL Repayment After a Downward Borrowing Base Redetermination
Making a mandatory repayment when a reserve downgrade reduces the RBL borrowing base below the outstanding balance.
How to Record an Oil Price Collar Put Option Premium as a Derivative Asset for Revenue Protection
Paying the upfront premium for a put option that protects against oil prices falling below a floor price.
How to Mark to Market an Oil Price Collar Hedge and Record the Fair Value Change in OCI
Revaluing the oil price collar at month-end as oil prices move, with the effective gain or loss recorded in OCI.
How to Record Foreign Exchange Losses When Local Currency Weakens Against the USD on Operating Cost Payables
Recognizing FX losses when the local currency weakens between the invoice date and payment date for USD-priced oil services.
How to Record a Project Finance Equity Bridge Loan Drawn to Fund Construction Before Long-Term Financing Closes
Recording an equity bridge loan as short-term borrowings to fund the equity component of a large development project.
How to Record an E&P Subsidiary Dividend Declaration and Payment to the Parent Holding Company
Recording the declaration and payment of a dividend from an oil-producing subsidiary to its parent company.
How to Record Quarterly Petroleum Income Tax Installment Payments as a Prepaid Tax Asset
Making quarterly advance petroleum income tax payments based on estimated annual profits.
How to Recognize a Deferred Tax Asset on the ARO Liability Where Decommissioning Is Tax-Deductible Only When Incurred
Recording a deferred tax asset on the ARO balance where the tax deduction arises only when decommissioning actually occurs.
How to Record a Deferred Tax Liability When Accelerated Tax Depreciation Exceeds Accounting DD&A on Development Assets
Recognizing the deferred tax liability arising from 100% first-year capital allowances on development spending that exceeds the accounting UOP depletion rate.
How to Recognize a Deferred Tax Asset on Exploration Phase Tax Losses Expected to Offset Future Production Profits
Recording a DTA for ring-fenced tax losses incurred during exploration and development, recoverable against future production income.
How to Withhold and Remit Tax on Payments to Foreign Oilfield Service Companies
Deducting withholding tax from payments to foreign drilling and oilfield service contractors and remitting to the tax authority.
How to Capitalize Customs Duties on Imported Drilling Equipment as Part of the Asset Cost
Adding import duties and customs costs on a drilling rig or oilfield equipment to its capitalized cost under IAS 16.
How to Reclaim VAT Input Tax Paid on Exploration Goods and Services as a Refund Receivable
Filing a VAT refund claim for input tax paid on goods and services used in petroleum exploration activities.
How to Record a Government Royalty in Kind When the Government Takes Physical Oil Barrels Instead of Cash
Reducing crude oil inventory and recording the royalty expense at fair value when the government elects to take royalty barrels.
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