EY has released a report on the latest developments in financial reporting for the oil and gas industry.
The Financial Accounting Standards Board (FSAB) and the International Accounting Standards Board (IASB) has issued a standard that will supersede virtually all of the revenue recognition guidance in US General Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS).
The FASB has set an effective date of fiscal years beginning after 15 December 2016 for public entities and 15 December 2017 for non-public entities. However, public entities that choose full retrospective application will need to apply the standard to amount that they report for 2015 and 2016 on the face of their 2017 financial statements.
Entities will also have to apply the standard to earlier periods to produce the five year selected financial data table unless the Securities and Exchange Commission (SEC) staff provides relief from this requirement. One surprise for certain entities that have previously been considered private is that they will have to follow the public entity effective date if they meet the FASB’s new definition of a public business entity. Some employee benefit plans will also have to use the earlier effective date.
EY advises that companies should begin assessing whether information systems need to be changed to collect the data necessary to implement the standard, and whether internal controls need to be changed to address alterations in accounting resulting from the new standard. While some oil and gas entities will be able to implement the standard with limited effort, other may find implementation to be a significant undertaking, which is why making an early assessment of the standard’s impact is so important.
Adapted from a report by Emma McAleavey.
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