Oil and Gas Accounting Standards

A provision of the Energy Policy and Conservation Act requires that the Securities and Exchange Commission (SEC), with the involvement of the Financial Accounting Standards Board (FASB), develop accounting practices to be followed by oil and gas producers in reporting information to the Department of Energy. SEC is seeking to determine whether a formal statement (Statement No. 19) issued by FASB on December 5, l977, is appropriate for meeting the reporting requirements under the act and whether it should be followed for filing financial statements with SEC. There is a need for comparability in financial reporting by oil and gas producers which requires development of a uniform accounting standard. SEC should select the most appropriate method to be used for preparing financial statements and should determine whether Standard No. 19 is appropriate. Concerns have been expressed about potential economic impacts of the statement such as effects on energy supply development and on competition within the industry. Although these impacts should be considered, the SEC primary responsibility in developing the standards under securities laws is to provide information on which informed investment decisions can be made and that will facilitate the compilation of comparable and reliable information for policymaking.