# ASC 835-932: Interest — Extractive Activities—Oil and Gas Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/835/932/) 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): 2026-09-10T01:50:54.044Z to 2026-09-10T01:51:06.744Z Record version: sha256:37dd30dcdac6d34899f7fe3fac3e58cb092394eed495cbf572d2d783777b1aab Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 835-932: Interest — Extractive Activities—Oil and Gas ### Machine-generated study aids ```json { "summary": "This subtopic applies the general interest capitalization rules of Subtopic 835-20 to oil- and gas-producing operations that use the full cost method. Costs already being depreciated, depleted, or amortized are treated as assets in use and do not qualify for interest capitalization, while unusually significant unproved properties and major development projects not yet being amortized and on which exploration or development is in progress do qualify. It also addresses pipeline advances made to encourage exploration, which fall within the imputation-of-interest exclusion in 835-30-15-3(b) unless the advance is in a Topic 606 contract with a customer.", "key_points": [ "Under the full cost method, assets whose costs are currently being depreciated, depleted, or amortized are assets in use in the earning activities of the entity and are not qualifying assets for interest capitalization under paragraph 835-20-15-5 (835-932-25-1).", "Unusually significant investments in unproved properties and major development projects that are not currently being depreciated, depleted, or amortized, and on which exploration or development activities are in progress, are qualifying assets for interest capitalization (835-932-25-1).", "In a cost center with no production, significant properties and projects on which exploration or development activities are in progress are qualifying assets for interest capitalization (835-932-25-1).", "Pipeline entity advances to encourage exploration, satisfied by delivery of future production but with a definite obligation to repay by a definite date if production is insufficient, are covered by the imputed-interest exclusion in paragraph 835-30-15-3(b) (835-932-25-2).", "If such an advance is in a contract with a customer within the scope of Topic 606, the guidance in Topic 606 shall be applied instead (835-932-25-2).", "The scope of this Subtopic follows Section 932-10-15 (835-932-15-1)." ], "categories": [ "Initial measurement", "Industry-specific", "Inventory and PP&E", "Revenue" ], "audience_level": "intermediate", "student_note": "The trap is assuming all full cost pool assets qualify for interest capitalization: once costs enter the amortization base they are \"in use\" and no longer qualifying, so only significant unproved properties and major development projects still under exploration or development (or any active project in a non-producing cost center) support capitalized interest.", "related_topics": [ "835-20", "835-30", "932-10", "932-360", "606" ], "key_concepts": [ "full cost method", "capitalized interest", "qualifying assets", "unproved properties", "major development projects", "cost center", "pipeline advances", "imputation of interest" ] } ``` Source downloaded (UTC): 2026-09-10T01:50:54.044Z to 2026-09-10T01:50:54.044Z Record version: sha256:e7633d72eda56c683260bfdb3a22c25995a1e61334a87c1d074d991c2d221619 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 835-932-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/835/932/#00-status) SEC content: no ##### [835-932-00-1](https://asc.understandingaccounting.org/asc/835/932/#835-932-00-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:50:54.044Z to 2026-09-10T01:50:54.044Z Record version: sha256:f726010ede73f2c711f47128d740c0a8a9180167fae40b3dc543fa70d8f65806 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
ContractAddedAccounting Standards Update No. 2014-0905/28/2014
CustomerAddedAccounting Standards Update No. 2014-0905/28/2014
ProductionAmendedAccounting Standards Update No. 2010-0301/06/2010
PropertiesAmendedAccounting Standards Update No. 2010-0301/06/2010
RevenueAddedAccounting Standards Update No. 2014-0905/28/2014
932-835-25-2AmendedAccounting Standards Update No. 2014-0905/28/2014
Source downloaded (UTC): 2026-09-10T01:50:56.472Z to 2026-09-10T01:50:56.472Z Record version: sha256:941e6ff37d86dc6465682ed21509e80f2d2c0b472156992d0cdae5884a58602a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 835-932-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/835/932/#05-overview-and-background) SEC content: no ##### [835-932-05-1](https://asc.understandingaccounting.org/asc/835/932/#835-932-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:50:56.472Z to 2026-09-10T01:50:56.472Z Record version: sha256:88cf7237e1e55cc17247f0a65af0a897d3b5a84b4c656ef432a8678e2252cc57 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic addresses interest capitalization under the full cost method of accounting in the oil and gas industry. Source downloaded (UTC): 2026-09-10T01:50:58.535Z to 2026-09-10T01:50:58.535Z Record version: sha256:55d23220a007e8ae58998dd92347c8202ea03ac7f090f3ad1dcdb919bc54c598 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 835-932-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/835/932/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [835-932-15-1](https://asc.understandingaccounting.org/asc/835/932/#835-932-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:50:58.535Z to 2026-09-10T01:50:58.535Z Record version: sha256:c4da5f6637c8f8053d512bb41561850e21025ad9ce3d0f40d60d1c165f05eff1 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): 2026-09-10T01:51:04.953Z to 2026-09-10T01:51:04.953Z Record version: sha256:ae2ba662655d8f241a5058a06b02e491423617c45f13ca8f92150239f1a690b8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 835-932-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/835/932/#25-recognition) SEC content: no #### Assets Qualifying for Interest Capitalization ##### [835-932-25-1](https://asc.understandingaccounting.org/asc/835/932/#835-932-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:51:04.953Z to 2026-09-10T01:51:04.953Z Record version: sha256:bbec8b4fae35792e632478438d375c7e3d7f2c8c11a170eb93fe218b98269a0d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For purposes of applying interest capitalization (see Subtopic 835-20) to oil- and gas-producing operations accounted for by the full cost method, assets whose costs are being currently depreciated, depleted, or amortized are assets in use in the earning activities of the entity and are not assets qualifying for capitalization of interest cost as defined in paragraph [835-20-15-5](https://asc.understandingaccounting.org/asc/835/20/#835-20-15-5). Unusually significant investments in [unproved properties](https://asc.understandingaccounting.org/glossary/u/#unproved-properties "Unproved properties are properties with no proved reserves.") and major development projects that are not being currently depreciated, depleted, or amortized and on which [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.") or development activities are in progress are assets qualifying for capitalization of interest cost. Similarly, in a cost center with no [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."), significant [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.") and projects on which exploration or development activities are in progress are assets qualifying for capitalization of interest cost. #### Advances Satisfied by Delivery of Future Production ##### [835-932-25-2](https://asc.understandingaccounting.org/asc/835/932/#835-932-25-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:51:04.953Z to 2026-09-10T01:51:04.953Z Record version: sha256:3f9b3c63e3145f8e62a4df00884d2a55ed8ce9e6118c31aa2b3aac14e58c4d95 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In certain transactions, pipeline entities make advances to encourage exploration. These advances are satisfied by delivery of future production, but there is also a definite obligation to repay if the future production is insufficient to discharge the obligation by a definite date. The advance is covered by the exclusion in paragraph [835-30-15-3(b)](https://asc.understandingaccounting.org/asc/835/30/#835-30-15-3) even though there may be an obligation to repay should the future production prove insufficient to discharge the obligation. However, if the advance is in a [contract](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") with a [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") within the scope of Topic 606 on [revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.") from contracts with customers, the guidance in Topic 606shall be applied.