Oil and Gas
OIL AND GAS ACCOUNTING: CRITICAL EXAMINATION OF THE APPLICATION OF THEORY TO PRACTICE IN NIGERIA
1.0 INTRODUCTION:
The natural resources of a nation, particularly the minerals, often constitute the lion's share of the nation's wealth. This is particularly true of the OPEC nations including Nigeria.
Prior to the development of accounting standards issued by the Nigerian Accounting Standards Board (NASB), the financial statements published by the oil and gas industry in Nigeria did not disclose adequate information about the investments held by the reporting enterprises. Also, there was a problem of incomparability of financial statement. This gave rise to the development of accounting standard to guide the preparation and presentation of the financial statement so as to provide a guide on accounting rules, procedures, and reporting formats to be followed by companies operating in the petroleum industry in Nigeria. Petroleum operation is divided into two broad areas namely upstream and downstream activities.
1.1 UPSTREAM ACTIVITIES:
Upstream activities involve the acquisition of mineral interest in properties, exploration
(including prospecting) and development of crude oil and gas.
1.2 DOWNSTREAM ACTIVITIES
This involves such activities as transporting, refining and marketing of oil, gas and its derivatives.
2.0 THEORITICAL FRAMEWORK
In a bid to harmonize the financial statement in the oil and gas industry, and to prepare financial statements that meet the information needs of the various users, various regulations were issued, such as, Petroleum Act (PA) of 1969, Companies and Allied Matters Act 1990 (CAMA as Amended), Petroleum Profit Tax Act (PPTA) 1959. This was backdated to take effect January1, 1958. The Memorandum of Understanding (MOU) which came effect in 1986. Statement of accounting standards 14 which deals with Accounting for petroleum in the Upstream, SAS 17 which deals with accounting for petroleum in the Downstream, SAS 1 which deals with
1.0 INTRODUCTION:
The natural resources of a nation, particularly the minerals, often constitute the lion's share of the nation's wealth. This is particularly true of the OPEC nations including Nigeria.
Prior to the development of accounting standards issued by the Nigerian Accounting Standards Board (NASB), the financial statements published by the oil and gas industry in Nigeria did not disclose adequate information about the investments held by the reporting enterprises. Also, there was a problem of incomparability of financial statement. This gave rise to the development of accounting standard to guide the preparation and presentation of the financial statement so as to provide a guide on accounting rules, procedures, and reporting formats to be followed by companies operating in the petroleum industry in Nigeria. Petroleum operation is divided into two broad areas namely upstream and downstream activities.
1.1 UPSTREAM ACTIVITIES:
Upstream activities involve the acquisition of mineral interest in properties, exploration
(including prospecting) and development of crude oil and gas.
1.2 DOWNSTREAM ACTIVITIES
This involves such activities as transporting, refining and marketing of oil, gas and its derivatives.
2.0 THEORITICAL FRAMEWORK
In a bid to harmonize the financial statement in the oil and gas industry, and to prepare financial statements that meet the information needs of the various users, various regulations were issued, such as, Petroleum Act (PA) of 1969, Companies and Allied Matters Act 1990 (CAMA as Amended), Petroleum Profit Tax Act (PPTA) 1959. This was backdated to take effect January1, 1958. The Memorandum of Understanding (MOU) which came effect in 1986. Statement of accounting standards 14 which deals with Accounting for petroleum in the Upstream, SAS 17 which deals with accounting for petroleum in the Downstream, SAS 1 which deals with
References: 1. ACA Practice kit, Intermediate business communication and research methodology, Wyse Publishing, 2000 Paper 7 2. Adegbite E., (2010) Accounting, accountability and national development, The Nigerian Accountant, January 2010, Vol 1, pp 45 – 64 5. Companies and Allied Matters 1990, The Federal Government Press, Nigeria 6. Daniel Johnston & Co Inc., Modern reserves disclosure,( 2005) Petroleum Accounting and Financial Management Journal, Summer, Vol 24, No 7. Department of Accounting, (2004), Petroleum Profits Tax in Nigeria: The 2000 Memorandum of Understanding Approach, (2004) Global Journal of Accounting; , Vol. 1, No. 1& 2 Department of Accounting, University of Lagos 8. Eno L 11. ICAN Study pack,(2006) PE 1 financial accounting, VI Publishing Limited 12. Kio-Lawson T 13. Kochanek, R.F.( 1974) Segment Financial Disclosure by diversified Firms and Security Prices, Accounting Review, April 1974, p. 258. 17. The Chartered Institute of Bankers of Nigeria. (2006) Oil and Gas Financing in Nigeria – Issues, Challenges and Prospects, CIBN, Nigeria pp 21-28 18. The World Bank