Energy Accounting

1. Accounting Standards Codification (ASC) 410-20 describes an asset retirement obligation (ARO) as unavoidable cost associated with retiring a long-lived asset that arises as a result of either the acquisition, construction, or development of an asset. T/F

2. The loss is allocated to proved properties on a pro-rata basis to the group of assets so long as the loss would not increase the carrying amount of an individual asset below the fair value, if the fair value for the individual asset is known or reasonably determinable. T/F

3. ASC 410-30 states, the appropriate rate of interest for the cash flows being measured shall be inferred from the observable rate of interest of some other liability , and to draw that inference, the characteristics of the cash flows shall be similar to those of the liability being measured. T/F

4. Although most companies use the market approach to determine their fair value, regulators and auditors may also look at the income approach in determining fair value of the oil and gas properties. T/F

5. In most cases, write-downs occur when oil and gas reserves cannot be extracted economically, such as on properties where drilling hasn't started or where properties were expected to be developed based on significantly lower oil prices than are currently estimated. T/F

6. Companies are required to perform impairment testing on a periodic basis or when events or changes in circumstances occur that indicate the carrying amount may be recoverable. T/F