# ASC 323-932: Investments—Equity Method and Joint Ventures — Extractive Activities—Oil and Gas

Source: FASB Accounting Standards Codification, Basic View

[Read online](https://asc.understandingaccounting.org/asc/323/932/)

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## ASC 323-932: Investments—Equity Method and Joint Ventures — Extractive Activities—Oil and Gas

### Machine-generated study aids

```json
{
  "summary": "This Subtopic applies equity method and joint venture accounting to the oil and gas industry. Its core point is that joint interest (joint venture) operations, in which working interest owners retain an undivided interest in a jointly operated property run by a designated operator, are usually reflected by including the investor's proportional share of the revenues, expenses, and assets directly in its financial statements rather than by a one-line equity method presentation.",
  "key_points": [
    "The Subtopic addresses the equity method and joint ventures in the oil and gas industry (323-932-05-1) and uses the same scope as Section 932-10-15 (323-932-15-1).",
    "Joint interest operations arise from an agreement among two or more working interest owners under which one party is designated operator for development and operation of the jointly owned property (323-932-25-1).",
    "Each working interest owner retains an undivided interest in the jointly operated property, and this direct ownership is usually reflected by direct inclusion of the investor's proportional share of expenses, revenues, and assets (323-932-25-1).",
    "Joint interest operations are designed to share risk, obtain capital, maximize efficiency of development and operations, and enhance recovery of reserves (323-932-25-1).",
    "Proportional consolidation guidance is in Subtopic 932-810 (323-932-25-2), and industry practice allows proportional accounting for investments in unincorporated legal entities (323-932-45-1; see 810-10-45-14).",
    "Disclosure requirements for oil and gas equity method investments are in paragraph 932-235-50-28 (323-932-50-1)."
  ],
  "categories": [
    "Industry-specific",
    "Consolidation",
    "Presentation",
    "Disclosure"
  ],
  "audience_level": "intermediate",
  "student_note": "Oil and gas joint interests are one of the few settings where proportional (pro rata) presentation is accepted instead of the equity method; the common mistake is assuming every jointly controlled venture must be a one-line equity method investment, when an undivided interest in an unincorporated arrangement is typically shown line-by-line.",
  "related_topics": [
    "932-810",
    "932-10",
    "932-235",
    "810-10",
    "323-10"
  ],
  "key_concepts": [
    "joint interest operations",
    "working interest owner",
    "undivided interest",
    "proportional consolidation",
    "operator designation",
    "unincorporated legal entity",
    "equity method investment",
    "oil and gas industry"
  ]
}
```

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## ASC 323-932-05: 05 Overview and Background

[Read section](https://asc.understandingaccounting.org/asc/323/932/#05-overview-and-background)

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##### [323-932-05-1](https://asc.understandingaccounting.org/asc/323/932/#323-932-05-1)

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This Subtopic addresses the equity method and joint ventures in the oil and gas industry.

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## ASC 323-932-15: 15 Scope and Scope Exceptions

[Read section](https://asc.understandingaccounting.org/asc/323/932/#15-scope-and-scope-exceptions)

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#### Overall Guidance

##### [323-932-15-1](https://asc.understandingaccounting.org/asc/323/932/#323-932-15-1)

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This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 932-10-15.

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## ASC 323-932-25: 25 Recognition

[Read section](https://asc.understandingaccounting.org/asc/323/932/#25-recognition)

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##### [323-932-25-1](https://asc.understandingaccounting.org/asc/323/932/#323-932-25-1)

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Joint interest (also referred to as joint venture) operations result from an agreement among two or more working interest owners whereby one party is designated as the operator for the development and operation of the jointly owned property included in the joint venture. In joint interest operations, each working interest owner retains an undivided interest in the jointly operated property. This direct ownership is usually included in the financial statements of the investor through direct inclusion of its proportional share of the expenses, revenues, and assets. Joint interest operations are designed to accomplish the objectives of sharing risk, obtaining capital, maximizing efficiency of development and operations, and enhancing the recovery of reserves.

##### [323-932-25-2](https://asc.understandingaccounting.org/asc/323/932/#323-932-25-2)

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See Subtopic 932-810 for proportional consolidation.

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## ASC 323-932-45: 45 Other Presentation Matters

[Read section](https://asc.understandingaccounting.org/asc/323/932/#45-other-presentation-matters)

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##### [323-932-45-1](https://asc.understandingaccounting.org/asc/323/932/#323-932-45-1)

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Industry practice allows investors to account for investments in unincorporated legal entities on a proportional basis (see paragraph [810-10-45-14](https://asc.understandingaccounting.org/asc/810/10/#810-10-45-14)).

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## ASC 323-932-50: 50 Disclosure

[Read section](https://asc.understandingaccounting.org/asc/323/932/#50-disclosure)

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##### [323-932-50-1](https://asc.understandingaccounting.org/asc/323/932/#323-932-50-1)

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See paragraph [932-235-50-28](https://asc.understandingaccounting.org/asc/235/932/#235-932-50-28) for various disclosure requirements for oil and gas equity method investments.