Accounting for Extractive Industries: has the IFRS 6 harmonized accounting practices by extractive industries?

Abdo, Hafez

Abstract

Accounting for extractive industries has historically been practiced by one of a number of methods: successful efforts, full costing, area of interest, appropriation and reserve recognition accounting. The choice of method adopted leads to different accounting figures. The difference in the treatment of the costs leads to different accounting figures being reported in the financial statements of extractive companies. This makes the “tell it like it is” criteria of accounting functioning differently making it difficult for stakeholders to make like with like comparisons for decision making purposes. These difficulties culminated into the release IFRS 6: an international financial reporting standard for the extractive industries, to help harmonise the accounting practice.
This paper, through content analysis of 122 annual reports of upstream oil and gas companies from around the world, investigates the role of IFRS 6 in harmonising accounting practices by extractive industries.
Our analysis identifies 7 types of companies, these differ in their compliance with the IFRS 6. Hence, we conclude that the IFRS 6 has made some success in harmonising accounting treatments of exploration and evaluation expense. However this is a limited success and more needs to be done in order to achieve wider harmonisation for the extractive industries.

Citation

Abdo, H. (2016). Accounting for Extractive Industries: has the IFRS 6 harmonized accounting practices by extractive industries?. Australian Accounting Review, 26(24), 346-359. https://doi.org/10.1111/auar.12106

• Journal Article Type: Article
• Acceptance Date: Jun 9, 2015
• Online Publication Date: Sep 12, 2016
• Publication Date: 2016-12
• Deposit Date: Jan 23, 2020
• Publicly Available Date: Jan 24, 2020
• Print ISSN: 1035-6908
• Publisher: Wiley
• Peer Reviewed: Peer Reviewed
• Volume: 26
• Issue: 24
• Pages: 346-359
• DOI: https://doi.org/10.1111/auar.12106
• Public URL: https://nottingham-repository.worktribe.com/output/3786522
• Publisher URL: https://onlinelibrary.wiley.com/doi/full/10.1111/auar.12106
• Additional Information: This is the peer reviewed version of the following article: Abdo, H. (2016), Accounting for Extractive Industries: Has IFRS 6 Harmonised Accounting Practices by Extractive Industries?. Australian Accounting Review, 26: 346-359, which has been published in final form at https://doi.org/10.1111/auar.12106. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions.