Oil Industry accounting: statements of recommended practice
Statements of Recommended Practice (SORP) set out current best accounting practice and aim to narrow the areas of difference and variety in the accounting treatment of the matters with which they deal and to enhance the usefulness of published accounting information.
Before approving and franking a SORP, the ASB will have reviewed the proposed statement and the procedures involved in its development.
The SORP’s are considered industry best practice, although they are not mandatory.
The SORP on Accounting for Oil and Gas Exploration, Development, Production and Decommissioning Activities has been issued by the Oil Industry Accounting Committee (OIAC). The present SORP was issued in January 2000 and updated on 7 June 2001. The SORP contains the statement that:
- “the ASB has concluded that the SORP has been developed in accordance with the ASB’s Code of Practice and does not appear to contain any fundamental points of principle that are unacceptable in the context of present accounting practice or to conflict with any accounting standard or the ASB’s plans for future standards”.
The SORP provides detailed guidance on the treatment of the particular accounting aspects of exploration, development, production and decommissioning activities that are unique to the oil and gas industries.
A copy of the SORP can be found on the Oil Industry Accounting Committee’s web site ().
Disclosure requirement FRS18
FRS18 requires entities within the scope of a SORP to disclose whether the SORP has been followed and to give details of, and explanations for, any departures.