PETROLEUM

INDUSTRY

Presented by: Jaycel P. Ongy

Misbahuddin A. Kamensa

Nurfatmah M. Pagagao
P E T R O L E U M C O M PA N Y
• The petroleum industry, also known as the oil
industry or the oil patch, includes the global
processes of exploration, extraction, refining,
transportation, and marketing of petroleum products.
The largest volume products of the industry are fuel
oil and gasoline
1 . W H AT M A K E S T H E S E I N D U S T RY
SPECIALIZED?

• is that the petroleum industry is likely to have particular

financial reporting standards that apply to it, or separate
accounting rules that have been developed to account for
specialized transactions and balances that are based on
commonly used financial reporting standards.
 2. SITE ANY SPECIFIC FINANCIAL
R E P O RT I N G S TA N D A R D S A P P L I C A B L E T O
YOUR SELECTED INDUSTRIES.
IFRS 6/PFRS 6

• The objective of this standard is to specify the financial reporting for exploration and evaluation of mineral
resources.

• Mineral resouces include minerals, oil, natural gas and similar nonregenerative resources.

• Exploration for and evaluation of mineral resources means the search for mineral resources, including minerals, oil,
natural gas and similar non-regenerative resources after the entity has obtained legal rights to explore in a specific
area, as well as the determination of the technical feasibility and commercial viability of extracting the mineral
resource.

• Exploration and evaluation expenditures are expenditures incurred in connection with the exploration and evaluation
of mineral resources before the technical feasibility and commercial viability of extracting a mineral resource is
demonstrable.
ACCOUNTING POLICIES FOR
E X P L O R A T I O N A N D E VA L U A T I O N

• IFRS 6 permits an entity to develop its own accounting policy for recognition of exploration
and evaluation expenditures as assets without specifically considering the requirements of
paragraphs 11 and 12 of IAS 8 Accounting Policies, Changes in Accounting Estimates and
Errors. Thus, an entity adopting IFRS 6 may continue to use the accounting policies applied
immediately before adopting the IFRS. This includes continuing to use recognition and
measurement practices that are part of those accounting policies.
M E A S U R E M E N T A N D C L A S S I F I C AT I O N

• Exploration and evaluation asset shall be measured initially at cost.

• After initial recognition, an entity shall apply either the cost model or the
revaluation model.
• Exploration and evaluation asset is classified either as tangible or
intangible asset.
P R E S E N TAT I O N A N D D I S C L O S U R E

• An entity treats exploration and evaluation assets as a separate class of assets and make the
disclosures required by either IAS 16 Property, Plant and Equipment or IAS 38 Intangible Assets
consistent with how the assets are classified.

• IFRS 6 requires disclosure of information that identifies and explains the amounts recognised in
its financial statements arising from the exploration for and evaluation of mineral resources,
including:

(a) its accounting policies for exploration and evaluation expenditures including the recognition of
exploration and evaluation assets.

(b) the amounts of assets, liabilities, income and expense and operating and investing cash flows
arising from the exploration for and evaluation of mineral resources.
PFRS 15/IFRS 15

• An entity applies Recognition from Contracts with Customers to account for revenue from contracts with
customers.

• Represents a significant change to revenue recognition. For the oil and gas industry, characterized by long-
term contracts, complex pricing mechanisms, and unique arrangements, the new standard raises specific
considerations. This article explores the implications of IFRS 15 for the oil and gas industry and provides
guidance for managing these changes.

• Entity should recognized revenue in a mannner that depicts the pattern of transfer of good or service to a
customer.

• The amount recognized as revenue should reflect the consideration to which the entity expects to be entitled
in exchange for good and service.
 Depending on whether certain criteria are met, revenue is recognized:
(a) At point in time or at particular date when control of the good or service is transferred to the
customer.
(b) Over time or over a certain period in a manner that depicts the entity’s performance.
FIVE-STEP MODEL
• In the context of the oil and gas industry, this may involve:

Step 1 Identifying the Contract: Oil and gas contracts may include exploration and production contracts, sales
contracts, or service contracts.

Step 2 Identifying Performance Obligations: These might include delivering oil or gas, conducting
exploration or production activities, or providing related services.

Step 3 Determining the Transaction Price: This could involve the agreed price per barrel or MMBtu,
potentially adjusted based on market indices or other pricing mechanisms.

Step 4 Allocating the Transaction Price: The transaction price must be allocated to each separate
performance obligation based on their relative standalone selling prices.

Step 5 Recognizing Revenue: Revenue is recognized as each performance obligation is satisfied, which
could be at a point in time (such as the delivery of oil or gas) or over time (such as the performance of exploration or
production services).
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