# ASC 720-932: Other Expenses — Extractive Activities—Oil and Gas Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/720/932/) Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-10T01:10:32.559Z to 2026-09-10T01:10:47.285Z Record version: sha256:4cf6d01e282a0297fc37c6cc070f6f7b444a15eb0c5ecc7080e149eee8cfcfff Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-932: Other Expenses — Extractive Activities—Oil and Gas ### Machine-generated study aids ```json { "summary": "This Subtopic identifies costs unique to oil- and gas-producing activities that do not result in acquisition of an asset and therefore must be charged to expense as incurred. Under the successful efforts framework, geological and geophysical (G&G) costs, costs of carrying and retaining undeveloped properties, dry hole and bottom hole contributions, and the costs of exploratory wells (and exploratory-type stratigraphic test wells) that do not find proved reserves are expensed immediately. It also notes the customary practice of accumulating an in-house exploration department's costs and allocating them to exploration activities using standardized charges.", "key_points": [ "Costs incurred in oil- and gas-producing activities that do not result in acquisition of an asset shall be charged to expense (720-932-25-1).", "Examples of immediately expensed costs are geological and geophysical costs, costs of carrying and retaining undeveloped properties, and costs of drilling exploratory wells and exploratory-type stratigraphic test wells that do not find proved reserves (720-932-25-1).", "Geological and geophysical costs, carrying and retaining costs of undeveloped properties, and dry hole and bottom hole contributions are charged to expense when incurred (720-932-25-1).", "Carrying costs are expensed because they are incurred to maintain, not acquire, the entity's rights and do not enhance the properties' potential to contain reserves or the future benefits from the entity's assets (720-932-25-1).", "Where an entity maintains its own exploration department, its costs are customarily accumulated and allocated to exploration activities and projects using standardized charges (e.g., cost per day for a crew, cost per shot-point for seismic work, hourly rates for engineers) (720-932-30-1).", "Employment contracts with geologists or geophysicists frequently provide the employee ownership interests in leases acquired as a result of exploration (720-932-30-1).", "The scope follows that of the Overall Subtopic in Section 932-10-15 (720-932-15-1)." ], "categories": [ "Recognition", "Industry-specific", "Initial measurement" ], "audience_level": "intermediate", "student_note": "This is the expense side of the successful efforts method: the key test is whether the cost acquired an asset (proved reserves or property rights) or merely maintained/searched. Students often wrongly assume all exploration outlays can be capitalized pending outcome — G&G and carrying costs are expensed immediately regardless of later drilling success.", "related_topics": [ "932-10", "932-360", "932-235", "930-720" ], "key_concepts": [ "geological and geophysical costs", "carrying and retaining undeveloped properties", "exploratory wells", "stratigraphic test wells", "dry hole and bottom hole contributions", "successful efforts method", "expense as incurred", "exploration department cost allocation" ] } ``` Source downloaded (UTC): 2026-09-10T01:10:32.559Z to 2026-09-10T01:10:32.559Z Record version: sha256:9446fbc12ef8fab9d442d5ebfb1911db36b4751a4a4d76058d57992c84bf3599 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-932-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/720/932/#00-status) SEC content: no ##### [720-932-00-1](https://asc.understandingaccounting.org/asc/720/932/#720-932-00-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:10:32.559Z to 2026-09-10T01:10:32.559Z Record version: sha256:4d05d67df3b57ec14b0cab0a5e880460e85f82a1e706353899486273675a8ada Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
Exploratory WellAmendedAccounting Standards Update No. 2010-0301/06/2010
ProductionAmendedAccounting Standards Update No. 2010-0301/06/2010
PropertiesAmendedAccounting Standards Update No. 2010-0301/06/2010
Stratigraphic Test WellAmendedAccounting Standards Update No. 2010-0301/06/2010
Source downloaded (UTC): 2026-09-10T01:10:36.576Z to 2026-09-10T01:10:36.576Z Record version: sha256:2fecd39c49fd882ba08f2572f3e0ccb6f9c0cf5a14cf28a69e16cde9cd10697e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-932-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/720/932/#05-overview-and-background) SEC content: no ##### [720-932-05-1](https://asc.understandingaccounting.org/asc/720/932/#720-932-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:10:36.576Z to 2026-09-10T01:10:36.576Z Record version: sha256:64092eb63692f53a5d800964e63244d5d24f58194e2a89e52bc65ae873ca40d5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic addresses costs unique to the oil and gas industry that are to be expensed immediately. Source downloaded (UTC): 2026-09-10T01:10:40.202Z to 2026-09-10T01:10:40.202Z Record version: sha256:26a9e3a02071307d0e5ed2a591f245bd739c5a1d4d0314d271fbe752b9d62a44 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-932-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/720/932/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [720-932-15-1](https://asc.understandingaccounting.org/asc/720/932/#720-932-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:10:40.202Z to 2026-09-10T01:10:40.202Z Record version: sha256:6681e946692c242b5abef4118463934912afb764f5347eb08f116128c0d45c3b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 932-10-15. Source downloaded (UTC): 2026-09-10T01:10:45.467Z to 2026-09-10T01:10:45.467Z Record version: sha256:0eee9222af5824a6db684e7e56e4ec2d6bcd03fed77a201a74a1203b1437f70c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-932-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/720/932/#25-recognition) SEC content: no ##### [720-932-25-1](https://asc.understandingaccounting.org/asc/720/932/#720-932-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:10:45.467Z to 2026-09-10T01:10:45.467Z Record version: sha256:cae56b6aea73bdc019a0c6989c1622d6b8ec8ed59ae86b519ab5bc05fa562c92 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Some costs incurred in an entity's oil- and gas-producing activities do not result in acquisition of an asset and, therefore, shall be charged to expense. Examples include: 1. a Geological and geophysical costs 2. b The costs of carrying and retaining undeveloped [properties](https://asc.understandingaccounting.org/glossary/p/#properties "Mineral interests in properties (hereinafter referred to as properties), which include all of the following: Fee ownership or a lease Concession Other interest representing the legal right to produce or a revenue interest in the production of oil or gas subject to such terms as may be imposed by the conveyance of that interest. Properties also include: Royalty interests Production payments payable in oil or gas Other nonoperating interests in properties operated by others. Properties include those agreements with foreign governments or authorities under which an entity participates in the operation of the related properties or otherwise serves as producer of the underlying reserves (see paragraph 932-235-50-7); but properties do not include other supply agreements or contracts that represent the right to purchase (as opposed to extract) oil and gas. Properties are classified as proved properties or unproved properties.") 3. c The costs of drilling those [exploratory wells](https://asc.understandingaccounting.org/glossary/e/#exploratory-well "An exploratory well is a well drilled to find a new field or to find a new reservoir in a field previously found to be productive of oil or gas in another reservoir. Generally, an exploratory well is any well that is not a development well, a service well , or a stratigraphic test well.") and exploratory-type [stratigraphic test wells](https://asc.understandingaccounting.org/glossary/s/#stratigraphic-test-well "A stratigraphic test is a drilling effort, geologically directed, to obtain information pertaining to a specific geologic condition. Such wells customarily are drilled without the intention of being completed for hydrocarbon production. This classification also includes tests identified as core tests and all types of expendable holes related to hydrocarbon exploration. Stratigraphic tests are classified as exploratory-type if not drilled in a proved area or development-type if drilled in a proved area.") that do not find proved reserves. Geological and geophysical costs, costs of carrying and retaining undeveloped properties, and dry hole and bottom hole contributions shall be charged to expense when incurred. Costs of carrying and retaining undeveloped properties do not increase the potential of those properties to contain oil and gas reserves. Carrying costs are incurred to maintain an entity's rights, not to acquire those rights. In a sense, they are penalties for having delayed drilling and development activities and, thereby, having delayed potential [production](https://asc.understandingaccounting.org/glossary/p/#production "Production involves lifting the crude oil and natural gas to the surface, extracting saleable hydrocarbons, in the solid, liquid, or gaseous state from oil sands, shale, coalbeds, or other nonrenewable natural resources that are intended to be upgraded into synthetic oil or gas, gathering, treating, field processing (as in the case of processing gas to extract liquid hydrocarbons), and field storage. The oil and gas production function shall be regarded as ending at a terminal point, which is the outlet valve on the lease or field storage tank. If unusual physical or operational circumstances exist, it may be appropriate to regard the terminal point for the production function as: The first point at which oil, gas, or gas liquids, natural or synthetic, are delivered to a main pipeline, a common carrier, a refinery, or a marine terminal In the case of natural resources that are intended to be upgraded into synthetic oil or gas, if those natural resources are delivered to a purchaser before upgrading, the first point at which the natural resources are delivered to a main pipeline, a common carrier, a refinery, a marine terminal, or a facility that upgrades such natural resources into synthetic oil or gas.") of oil and gas. Because carrying costs do not enhance the future benefits from the entity's properties and other assets, they are charged to expense when incurred. Source downloaded (UTC): 2026-09-10T01:10:47.285Z to 2026-09-10T01:10:47.285Z Record version: sha256:a756ec30cb74733974eb2a4131569bb6f6fb8a1f597e64f93606cb9a57f6b572 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-932-30: 30 Initial Measurement [Read section](https://asc.understandingaccounting.org/asc/720/932/#30-initial-measurement) SEC content: no ##### [720-932-30-1](https://asc.understandingaccounting.org/asc/720/932/#720-932-30-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:10:47.285Z to 2026-09-10T01:10:47.285Z Record version: sha256:af2ce9243bce4db7d2828b29857a6cbb1c36de6ecc6142e8d11b3e0bd40414cd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When the operating entity maintains its own [exploration](https://asc.understandingaccounting.org/glossary/e/#exploration "Exploration involves both of the following: Identifying areas that may warrant examination Examining specific areas that are considered to have prospects of containing oil and gas reserves, including drilling exploratory wells and exploratory-type stratigraphic test wells.") department, it is customary for costs of that department to be accumulated and allocated to exploration activities and projects. The allocation is based on standardized charges, such as cost per day for a crew, costs per shot-point for seismic work, hourly basis for engineers, and the like. Frequently, employment contracts with geologists or geophysicists call for the employee to receive ownership interests in leases acquired as the result of exploration.