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DOCUMENT RESUME
02783 - [ A1993062]
[Survey of Accounting Practices Used by the Petroleum Industry].
EMD-77-53; B-178726. Jujy 11, 1977. 6 pp. * 2 enclosures (33
pp.).
Report to Rep. Farlay 0. Staggers, Chairman, House Committee on
Interstate and Foreign Commerce; Rep. John E. Moss, Chairman,
House Committee on Interstate and Foreign Commerce: Oversight
and Investigations Subcommittee; by Elmer B, Staats, Comptroller
General.
Issue Area: Energy (1600) ; Accounting and Financial Reporting
(2800).
Contact: Energy and Minerals Div.
Budget Funct.or: Natural Resources, Environment, and Energy:
Energy (305).
Organization Concerned: Houston Oil and Minerals Corp.; Shell
Oil Co.
Congressional Relevance: House Committee on Interstate and
Foreign Commerce; House Cormittee on Ihterstate and Foreign
Commerce: Oversight and Investigations Subcommittee.
Current accounting ii the oil and natural gas industry
is characterized by the use of two btsic accounting concepts
known as the successful efforts concept and the full-cost
conceDt. The accounting practices used by the Shell Oil Company,
which as ,s the successful efforts concept, and by the Houston
Oil and Minerals Corporation, which uses full-cost accounting,
were exami~ed. Findings/Conclusions: Shell records revenue
separately for each product produced at the fe-lhead. Shell does
not segregate costs for wellhead products. Direct costs are
added to the allocated costs attributed to crude oil to
establish a corporate crude oil inventory value. A study
conducted by Shell indicated that the use of a full-cost
accounting system would reflect increases in net income with
corresponding decreases in expenses as wel. as decreases in the
rate of return on stocknolders' equity and increases in net
capital assets. Pouston Oil and Minerals Corporation records
revenues separately for oil, gas, and natural gas liquids
produced dt the wellhead, but does not allocate costs to
wellhead products. Expenses other than those in the cost pools
appear as period costs on the income statement. No attempt is
made to allocate costs to corporate irventory. A change to
successful efforts accounting %ould be expected to decrease
Houston Oil and Minerals' net income. The exploration and
production costs bea:; no relationship to the prices charged by
either company for oil or gas. (SC)](ViewImageLocal?handle=hein.gao/gaobaaclh0001&div=1&collection=&method=preview&ext=.png&size=3)