Access the financial statements of BHP Billiton plc for the company’s year ended June 30, 2012. Access the financial statements of Newfield Exploration Company for the company's year ended
December 31, 2011. These are available at the companies' websites. Review the information that is provided and answer the following questions about the companies.
Instructions
(a) What business is BHP Billiton pic in? What business is Newfield Exploration Co. in?
(b) How does BHP Billiton account for exploration, evaluation, and development expenditures
related to its mineral reserves and resources? 'What specific costs are included?
(c) How does Newfield account for exploration, evaluation, and development expenditures related to its mineral reserves and resources? 'What specific costs are included?
(d) Using the two companies as examples, discuss the similarities and differences between the successful efforts method and the full cost method.
(e) One method for reporting these assets that is being contemplated by IFRS is the fair value
method. What assumptions would be required to determine the fair value of mineral or oil and gas reserves? What are some drawbacks to using the fair value method to value these types of
assets?
(f) From a user's perspective, which method(s) discussed above would provide the most faithful
presentation and/or relevant information?