Energy Accounting

1. Interest capitalization is based on average accumulated expenditures. t/f

2. Most companies do not have a policy that spells out the types of occurences that would trigger impairment consideration, such as changes in crude oil prices, the effects of inflation and technology improvements on operating expense, the outlook for global or regional market supply-and-demand and numerous other methods. t/f

3. E & P companies incurs retirment obligations for certain assets. The fair value of these obligations are recorded as liabilities on a doscounted basis, which is typically at the time the assets are installed. t/f

4. The enity does not have to establish an internal policy for when ot defines activities as commencing and completed. t/f

5. One of the more challenging issues in oil and gas revenue accounting is producer imbalances. t/f

6. The successful-efforts method requires entities to group their assets by type: proved and unproved properties. t/f

7. The Financial Accounting Standards Board (FASB) which is responsible for establishing and govering GAAP, and the Securities and Exchange Commission (SEC), which regulates the financial reporting format and content of publicly-traded companies, are divided over which is the correct method. t/f

8. Joint Interest audits, sometimes known as joint venture audits, ensure operator and non-operator partners that revenue and expenses are passed through correctly and in compliance with the joint operating agreement. t/f

9. Aquisition costs are costs incured in acquiring an econmic interest in the mineral rights by the lease or purchase. t/f

10. Oil reserves are estimated quanitites of crude oil that have a high degree of certainty, usually 90% exsistence and exploitability. In other words, they are estimated quanities of crude oil that oil companies believe exsist in a particular location and can be exploited. t/f