# ASC Topic 932: Extractive Activities—Oil and Gas Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/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): 2026-09-10T02:12:30.356Z to 2026-09-10T02:13:16.025Z Record version: sha256:f67c9526c6c687c88530fe999babb43a4d309b93d65847841c6832c7a1df7af1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## Machine-generated topic summary ASC 93X covers extractive activities, split between Topic 932 (oil and gas) and Topic 930 (mining) (932-10-05-1). The Overall subtopic, ASC 932-10, defines the scope: it applies to all entities with oil- and gas-producing activities — the search for oil and gas, acquisition of property rights, and construction, drilling, and production activities (lifting, gathering, treating, field processing) needed to bring crude oil, natural gas, and synthetic-oil-source hydrocarbons from oil sands, shale, or coalbeds to the surface (932-10-15-2A) — while excluding transporting, refining, and marketing, processing by a nonproducer, other natural resources, geothermal steam, and interest capitalization under Topic 835 (932-10-15-3). The single most important idea is that this industry-specific guidance overrides the more general Codification Topics for the issues it addresses (932-10-05-3), though entities must still comply with other applicable guidance (932-10-15-1) and are not prohibited from using the full-cost method (932-10-15-4). Source downloaded (UTC): 2026-09-10T02:12:30.356Z to 2026-09-10T02:13:16.025Z Record version: sha256:e4e9ed091df8359cdd66ee57c79fda1c08bf05054338543d499ba3005012e5c1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 932-10: Extractive Activities—Oil and Gas — Overall ### Machine-generated study aids ```json { "summary": "ASC 932-10 is the Overall subtopic of the oil and gas extractive activities Topic; it identifies which entities and activities fall within the industry guidance and supplies common industry definitions. It applies to all entities with oil- and gas-producing activities — the search for, acquisition of rights to, and construction/drilling/production activities needed to bring crude oil, natural gas, and synthetic-oil-source hydrocarbons to the surface (932-10-15-2A). The industry-specific Subtopics override the more general Codification Topics for the issues they address (932-10-05-3), and the Topic does not prohibit use of the full-cost method (932-10-15-4).", "key_points": [ "The Codification splits extractive industries into two Topics: Topic 932 for oil and gas and Topic 930 for mining (932-10-05-1).", "Where a Topic 932 Subtopic addresses an issue, that industry guidance is applied rather than the more general guidance elsewhere in the Codification (932-10-05-3); entities must still comply with applicable guidance not included in this Topic (932-10-15-1).", "Oil- and gas-producing activities include exploration, acquisition of property rights, construction/drilling/production (lifting, gathering, treating, field processing), and extraction of saleable hydrocarbons from oil sands, shale, or coalbeds intended to be upgraded into synthetic oil or gas (932-10-15-2A).", "The Topic excludes transporting, refining, and marketing of oil and gas, processing by a nonproducer, production of non-oil-and-gas natural resources, geothermal steam production, and accounting for interest on borrowings financing oil and gas activities (see Topic 835) (932-10-15-3).", "The Topic does not prohibit an entity from applying the full-cost method of accounting (932-10-15-4).", "Topic 932 contains numerous Subtopics interacting with other Topics, including Notes to Financial Statements, Property, Plant, and Equipment, Income Taxes, and Derivatives and Hedging (932-10-05-3)." ], "categories": [ "Industry-specific", "Inventory and PP&E", "Disclosure" ], "audience_level": "introductory", "student_note": "This is the gateway scope section: the exam trap is assuming Topic 932 covers the whole oil and gas value chain — it stops at the wellhead-plus-field-processing stage and excludes transporting, refining, and marketing. Also remember 932 permits, but does not describe, the full-cost method.", "related_topics": [ "930", "932-235", "932-360", "835", "410", "820" ], "key_concepts": [ "oil- and gas-producing activities", "extractive activities", "full cost method", "successful efforts", "scope exclusions", "synthetic oil and gas", "industry-specific guidance" ] } ``` Source downloaded (UTC): 2026-09-10T02:12:30.356Z to 2026-09-10T02:12:30.356Z Record version: sha256:cabcd31cd828cb2f9f39db480121c3f2fb395f2a70bd0d6b823d105432d4a04f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 932-10-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/932/10/#00-status) SEC content: no ##### [932-10-00-1](https://asc.understandingaccounting.org/asc/932/10/#932-10-00-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:12:30.356Z to 2026-09-10T02:12:30.356Z Record version: sha256:733e7d261dafbb0b1686d92ca7ef0d87b3ff1cb5ab1c95e476809e47a8d3f7c6 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
CondensateAddedAccounting Standards Update No. 2010-0301/06/2010
Oil- and Gas-Producing ActivitiesAddedAccounting Standards Update No. 2010-0301/06/2010
ProductionAmendedAccounting Standards Update No. 2010-0301/06/2010
PropertiesAmendedAccounting Standards Update No. 2010-0301/06/2010
Saleable HydrocarbonsAddedAccounting Standards Update No. 2010-0301/06/2010
932-10-05-2SupersededAccounting Standards Update No. 2010-0301/06/2010
932-10-05-3AmendedAccounting Standards Update No. 2014-0905/28/2014
932-10-05-3AmendedAccounting Standards Update No. 2010-0301/06/2010
932-10-15-2AmendedAccounting Standards Update No. 2010-0301/06/2010
932-10-15-2AAddedAccounting Standards Update No. 2010-0301/06/2010
932-10-15-3AmendedAccounting Standards Update No. 2010-0301/06/2010
932-10-15-4AddedAccounting Standards Update No. 2010-0301/06/2010
932-10-65-1AddedAccounting Standards Update No. 2010-0301/06/2010
Source downloaded (UTC): 2026-09-10T02:12:34.199Z to 2026-09-10T02:12:34.199Z Record version: sha256:8d5ecc1bac7da5bf0523f8a803f862ac67e2c6d1df86f03fb5175aff1da6f538 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 932-10-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/932/10/#05-overview-and-background) SEC content: no ##### [932-10-05-1](https://asc.understandingaccounting.org/asc/932/10/#932-10-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:12:34.199Z to 2026-09-10T02:12:34.199Z Record version: sha256:c0c41041c7368e38a2460b9e06200de7949e8859f1ef91a15994912a9625b5b1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Codification contains two Topics for the extractive industry due to the differing accounting treatment for various subindustries. The Topics include: 1. a This Topic, Extractive Activities—Oil and Gas 2. b Topic 930, Extractive Activities—Mining. ##### [932-10-05-2](https://asc.understandingaccounting.org/asc/932/10/#932-10-05-2) Pending content: no Source downloaded (UTC): 2026-09-10T02:12:34.199Z to 2026-09-10T02:12:34.199Z Record version: sha256:64383c9d7d29612a6460994627971a666692117c8c648790e093561c679308bc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2010-03](https://asc.understandingaccounting.org/updates/asu-2010-03/). ##### [932-10-05-3](https://asc.understandingaccounting.org/asc/932/10/#932-10-05-3) Pending content: no Source downloaded (UTC): 2026-09-10T02:12:34.199Z to 2026-09-10T02:12:34.199Z Record version: sha256:6669a7f9a2416733036ad2b31aa339300ba17ce2bc970782f7631df20dd797c7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Topic provides guidance specific to [oil- and gas-producing activities](https://asc.understandingaccounting.org/glossary/o/#oil-and-gas-producing-activities "Paragraph 932-10-15-2A defines the term oil- and gas-producing activities."). It contains several Subtopics that interact with other Topics in the Codification. Guidance in these Subtopics rather than the more general guidance in the other Topics shall be applied to the specific issues addressed. These Subtopics are: 1. a Overall 2. b Income Statement 3. c Notes to Financial Statements 4. d Interim Reporting 5. e Segment Reporting 6. f Investments—Equity Method and Joint Ventures 7. g Inventory 8. h Intangibles—Goodwill and Other 9. i Property, Plant, and Equipment 10. j Debt 11. k [Subparagraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). 12. l Other Expenses 13. m Income Taxes 14. n Consolidation 15. o Derivatives and Hedging 16. p Interest. ##### [932-10-05-4](https://asc.understandingaccounting.org/asc/932/10/#932-10-05-4) Pending content: no Source downloaded (UTC): 2026-09-10T02:12:34.199Z to 2026-09-10T02:12:34.199Z Record version: sha256:ef3e0e2fa17060324bbb5ac4f4dec7af08fa4964099a7967367b6540d6aa4d0d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic provides overall guidance for extractive activities in the oil and gas industry, including identification of entities that fall within the scope of this Topic and common definitions of industry terms. The other Subtopics address unique requirements for the industry. Source downloaded (UTC): 2026-09-10T02:12:38.329Z to 2026-09-10T02:12:38.329Z Record version: sha256:d5bbea03091e50821053ad320f2632891d64e05a668d22d66a975bb2b7b67a57 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 932-10-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/932/10/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [932-10-15-1](https://asc.understandingaccounting.org/asc/932/10/#932-10-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:12:38.329Z to 2026-09-10T02:12:38.329Z Record version: sha256:8a1ee6678f3cc51e67b16ddd14887074c0c00ecaa93d5e66559f24fbfa681734 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Subtopics within the Extractive Activities—Oil and Gas Topic provide incremental industry-specific guidance for the entities defined in this Scope Section. Entities within the scope of this Topic shall also comply with the applicable guidance not included in this Topic. #### Entities ##### [932-10-15-2](https://asc.understandingaccounting.org/asc/932/10/#932-10-15-2) Pending content: no Source downloaded (UTC): 2026-09-10T02:12:38.329Z to 2026-09-10T02:12:38.329Z Record version: sha256:54407ce1c090daca1c1d33547bd438bb8f052ba9f612a2405f3d0d36fda976ab Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Topic applies to all entities with [oil- and gas-producing activities](https://asc.understandingaccounting.org/glossary/o/#oil-and-gas-producing-activities "Paragraph 932-10-15-2A defines the term oil- and gas-producing activities."). ##### [932-10-15-2A](https://asc.understandingaccounting.org/asc/932/10/#932-10-15-2A) Pending content: no Source downloaded (UTC): 2026-09-10T02:12:38.329Z to 2026-09-10T02:12:38.329Z Record version: sha256:b138a18fbd1389324914d37363d017f85ea93e6a592b471ef7d5e8c57c271d8c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Oil- and gas-producing activities include the following: 1. a The search for crude oil, including [condensate](https://asc.understandingaccounting.org/glossary/c/#condensate "Condensate is a mixture of hydrocarbons that exists in the gaseous phase at original reservoir temperature and pressure but that when produced is in the liquid phase at surface pressure and temperature.") and natural gas liquids, or natural gas in their natural states and original locations 2. b The acquisition of property rights or [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.") for the purpose of further [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 for the purpose of removing the oil or gas from such properties 3. c The construction, drilling, and [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.") activities necessary to retrieve oil and gas from their natural reservoirs, including the acquisition, construction, installation, and maintenance of field gathering and storage systems, such as: 1. 1 Lifting the oil and gas to the surface 2. 2 Gathering, treating, and field processing (as in the case of processing gas to extract liquid hydrocarbons). 4. d Extraction of [saleable hydrocarbons](https://asc.understandingaccounting.org/glossary/s/#saleable-hydrocarbons "Hydrocarbons that are saleable in the state in which the hydrocarbons are delivered."), 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, and activities undertaken with a view to such extraction. #### Transactions ##### [932-10-15-3](https://asc.understandingaccounting.org/asc/932/10/#932-10-15-3) Pending content: no Source downloaded (UTC): 2026-09-10T02:12:38.329Z to 2026-09-10T02:12:38.329Z Record version: sha256:e0bace86e34f425ac48846ef6b1e393682c35158ba599f6f35e267d823ef6b80 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Topic does not apply to the following transactions and activities: 1. a Transporting, refining, and marketing of oil and gas 2. b Processing of produced oil, gas, or natural resources that can be upgraded into synthetic oil or gas by an entity that does not serve as a producer of such natural resources 3. bb Activities relating to the production of natural resources other than oil, gas, or natural resources from which synthetic oil and gas can be extracted 4. c The production of geothermal steam 5. d [Subparagraph superseded by Accounting Standards Update No. 2010-03](https://asc.understandingaccounting.org/updates/asu-2010-03/). 6. e Accounting for interest on funds borrowed to finance an entity's oil- and gas-producing activities (for general guidance, see Topic 835). ##### [932-10-15-4](https://asc.understandingaccounting.org/asc/932/10/#932-10-15-4) Pending content: no Source downloaded (UTC): 2026-09-10T02:12:38.329Z to 2026-09-10T02:12:38.329Z Record version: sha256:0e659987e97a8bb5b5ec4f83f92060cb8cfddde037c7941517583b851ef1d431 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Topic does not prohibit an entity from applying the full-cost method of accounting. Source downloaded (UTC): 2026-09-10T02:12:44.164Z to 2026-09-10T02:12:44.164Z Record version: sha256:78e8b7f959f0c8e664ba21467196082834945d2cd9c6237dc4ba5809fe5c1526 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 932-10-65: 65 Transition and Open Effective Date Information [Read section](https://asc.understandingaccounting.org/asc/932/10/#65-transition-and-open-effective-date-information) SEC content: no ##### [932-10-65-1](https://asc.understandingaccounting.org/asc/932/10/#932-10-65-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:12:44.164Z to 2026-09-10T02:12:44.164Z Record version: sha256:f7720a4f5c063fffbcf708f1318e6d26015413249be9180290dd86852923f69c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph superseded on 07/14/2011 after the end of the transition period stated in Accounting Standards Update No. 2010-03, _Extractive Activities—Oil and Gas(Topic 932): Oil and Gas Reserve Estimation and Disclosures._ Source downloaded (UTC): 2026-09-10T02:12:51.644Z to 2026-09-10T02:12:51.644Z Record version: sha256:7f469594a946f5c2cc14669eb29ee745e2616ba3a59fe57f19d51130e886f93c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 932-10-S00: SEC 00 Status [Read section](https://asc.understandingaccounting.org/asc/932/10/#sec-00-status) SEC content: yes ##### [932-10-S00-1](https://asc.understandingaccounting.org/asc/932/10/#932-10-S00-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:12:51.644Z to 2026-09-10T02:12:51.644Z Record version: sha256:0fa4d8914358545b007f9bfeb3da74af8ad3bce23fdcb3b0aca06e72852ba011 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
Acquisition of PropertiesAmendedAccounting Standards Update No. 2010-1404/20/2010
Developed Oil and Gas ReservesAddedAccounting Standards Update No. 2010-1404/20/2010
Development CostsAmendedAccounting Standards Update No. 2010-1404/20/2010
Development WellSupersededMaintenance Update 2014-07 (PDF)03/17/2014
Development WellAmendedAccounting Standards Update No. 2010-1404/20/2010
Exploration CostsAmendedAccounting Standards Update No. 2010-1404/20/2010
Exploratory WellSupersededMaintenance Update 2014-07 (PDF)03/17/2014
Exploratory WellAmendedAccounting Standards Update No. 2010-1404/20/2010
FieldSupersededMaintenance Update 2014-07 (PDF)03/17/2014
FieldAmendedAccounting Standards Update No. 2010-1404/20/2010
Oil and Gas Producing ActivitiesSupersededMaintenance Update 2014-07 (PDF)03/17/2014
Oil and Gas Producing ActivitiesAmendedAccounting Standards Update No. 2010-1404/20/2010
Production CostsAmendedAccounting Standards Update No. 2010-1404/20/2010
Proved AreaSupersededMaintenance Update 2014-07 (PDF)03/17/2014
Proved AreaAmendedAccounting Standards Update No. 2010-1404/20/2010
Proved Developed Oil and Gas ReservesSupersededAccounting Standards Update No. 2010-1404/20/2010
Proved Oil and Gas ReservesSupersededMaintenance Update 2014-07 (PDF)03/17/2014
Proved Oil and Gas ReservesAmendedAccounting Standards Update No. 2010-1404/20/2010
Proved PropertiesSupersededMaintenance Update 2014-07 (PDF)03/17/2014
Proved PropertiesAmendedAccounting Standards Update No. 2010-1404/20/2010
Proved Undeveloped ReservesSupersededAccounting Standards Update No. 2010-1404/20/2010
ReservoirSupersededMaintenance Update 2014-07 (PDF)03/17/2014
ReservoirAmendedAccounting Standards Update No. 2010-1404/20/2010
Service WellSupersededMaintenance Update 2014-07 (PDF)03/17/2014
Service WellAmendedAccounting Standards Update No. 2010-1404/20/2010
Stratigraphic Test WellSupersededMaintenance Update 2014-07 (PDF)03/17/2014
Stratigraphic Test WellAmendedAccounting Standards Update No. 2010-1404/20/2010
Undeveloped Oil and Gas ReservesAddedAccounting Standards Update No. 2010-1404/20/2010
Unproved PropertiesSupersededMaintenance Update 2014-07 (PDF)03/17/2014
Unproved PropertiesAmendedAccounting Standards Update No. 2010-1404/20/2010
932-10-S25-1SupersededAccounting Standards Update No. 2016-1105/02/2016
932-10-S50-2SupersededAccounting Standards Update No. 2016-1105/02/2016
932-10-S99-1AmendedMaintenance Update 2021-01 (PDF)01/11/2021
932-10-S99-1AmendedAccounting Standards Update No. 2019-0707/26/2019
932-10-S99-1AmendedMaintenance Update 2014-07 (PDF)03/17/2014
932-10-S99-1AmendedAccounting Standards Update No. 2010-1404/20/2010
932-10-S99-2AmendedAccounting Standards Update No. 2012-0308/27/2012
932-10-S99-2AmendedAccounting Standards Update No. 2010-2208/19/2010
932-10-S99-5SupersededAccounting Standards Update No. 2016-1105/02/2016
932-10-S99-5AmendedAccounting Standards Update No. 2009-1109/18/2009
Source downloaded (UTC): 2026-09-10T02:12:54.482Z to 2026-09-10T02:12:54.482Z Record version: sha256:695bcbe95bf6f87952c52f2d7c4c8e6ed8e49d55a1d041ea5694faf6d43ff34b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 932-10-S15: SEC 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/932/10/#sec-15-scope-and-scope-exceptions) SEC content: yes #### Entities ##### [932-10-S15-1](https://asc.understandingaccounting.org/asc/932/10/#932-10-S15-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:12:54.482Z to 2026-09-10T02:12:54.482Z Record version: sha256:c77ed396ceeb430b10623aa29ffcfa3d0f34a6b4c9bee8f561fd97770e91921d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [932-10-S99-1](https://asc.understandingaccounting.org/asc/932/10/#932-10-S99-1), Regulation S-X Rule 4-10, for entities included within the scope of this Subtopic, which includes smaller reporting companies. Source downloaded (UTC): 2026-09-10T02:13:00.225Z to 2026-09-10T02:13:00.225Z Record version: sha256:d45dd55138ac7fe7aae0f1fa48f239eb621c7746b46be5855914767098d490c0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 932-10-S25: SEC 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/932/10/#sec-25-recognition) SEC content: yes ##### [932-10-S25-1](https://asc.understandingaccounting.org/asc/932/10/#932-10-S25-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:13:00.225Z to 2026-09-10T02:13:00.225Z Record version: sha256:ebc77a6c28cf889ea67169b84d6701205c1e9f7626518a40886b5c6fb12fc317 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2016-11](https://asc.understandingaccounting.org/updates/asu-2016-11/). Source downloaded (UTC): 2026-09-10T02:13:04.067Z to 2026-09-10T02:13:04.067Z Record version: sha256:742f145c731cb000c1f7492987391df1b2dc21e58923dd8bf2002a79a215a56a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 932-10-S45: SEC 45 Other Presentation Matters [Read section](https://asc.understandingaccounting.org/asc/932/10/#sec-45-other-presentation-matters) SEC content: yes #### Royalty Trusts ##### [932-10-S45-1](https://asc.understandingaccounting.org/asc/932/10/#932-10-S45-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:13:04.067Z to 2026-09-10T02:13:04.067Z Record version: sha256:8c86e63de8d62d680a20dd3f6a57242a654a2f47fc1f2858d75953d9e6bc9253 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [932-10-S99-4](https://asc.understandingaccounting.org/asc/932/10/#932-10-S99-4), SAB Topic 12.E, for SEC Staff views on the presentation of statement of distributable income for royalty trusts. Source downloaded (UTC): 2026-09-10T02:13:07.256Z to 2026-09-10T02:13:07.256Z Record version: sha256:2fa1436f8921902f6bf6b85ba1bea473d06180e689ea26b24a7fccaae5f44ee8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 932-10-S50: SEC 50 Disclosure [Read section](https://asc.understandingaccounting.org/asc/932/10/#sec-50-disclosure) SEC content: yes #### Oil and Gas Reserve Data ##### [932-10-S50-1](https://asc.understandingaccounting.org/asc/932/10/#932-10-S50-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:13:07.256Z to 2026-09-10T02:13:07.256Z Record version: sha256:ec302adcdba3dce328c77f2b45ad8b87b2a04787164467db027b8e2bcdd7c13b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [932-10-S99-2](https://asc.understandingaccounting.org/asc/932/10/#932-10-S99-2), SAB Topic 2.D, Question 4, for SEC Staff views on the disclosure of oil and gas reserve data by partnerships in an exchange offering. ##### [932-10-S50-2](https://asc.understandingaccounting.org/asc/932/10/#932-10-S50-2) Pending content: no Source downloaded (UTC): 2026-09-10T02:13:07.256Z to 2026-09-10T02:13:07.256Z Record version: sha256:7be933757a2ddd2366f79be459dac05c31775a2d92b07a9be10dc42fe31f4197 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2016-11](https://asc.understandingaccounting.org/updates/asu-2016-11/). Source downloaded (UTC): 2026-09-10T02:13:09.221Z to 2026-09-10T02:13:09.221Z Record version: sha256:d76d52dbe92f65a55c56782a496b3e165ed7b0e42cf328f603e1edec37a08f41 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 932-10-S55: SEC 55 Implementation Guidance and Illustrations [Read section](https://asc.understandingaccounting.org/asc/932/10/#sec-55-implementation-guidance-and-illustrations) SEC content: yes #### Accounting Issues in Oil and Gas Exchange Offers ##### [932-10-S55-1](https://asc.understandingaccounting.org/asc/932/10/#932-10-S55-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:13:09.221Z to 2026-09-10T02:13:09.221Z Record version: sha256:8edafc55f9eea353baa7b7b6709667c5546fcd655e38243e68795db136a83732 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [932-10-S99-2](https://asc.understandingaccounting.org/asc/932/10/#932-10-S99-2), SAB Topic 2.D, Questions 1 through 3, for SEC Staff views on accounting issues arising in oil and gas exchange offers. #### Methods of Accounting by Oil and Gas Producers ##### [932-10-S55-2](https://asc.understandingaccounting.org/asc/932/10/#932-10-S55-2) Pending content: no Source downloaded (UTC): 2026-09-10T02:13:09.221Z to 2026-09-10T02:13:09.221Z Record version: sha256:de10588cca5ce8a244496b3cc2a047bc4e628ea5db5ace3d1f334271e03917e0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [932-10-S99-3](https://asc.understandingaccounting.org/asc/932/10/#932-10-S99-3), SAB Topic 12.C, for SEC Staff views on methods of accounting by oil and gas producers. ##### [932-10-S55-3](https://asc.understandingaccounting.org/asc/932/10/#932-10-S55-3) Pending content: no Source downloaded (UTC): 2026-09-10T02:13:09.221Z to 2026-09-10T02:13:09.221Z Record version: sha256:97accdf56ac8c42cdab5be4b4cd6e91e96519fc3abcbabd5a02f80e8a1fc6bcf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [932-10-S99-3](https://asc.understandingaccounting.org/asc/932/10/#932-10-S99-3), SAB Topic 12.C.1, for SEC Staff views on changing methods of accounting by oil and gas producers who are first-time registrants. ##### [932-10-S55-4](https://asc.understandingaccounting.org/asc/932/10/#932-10-S55-4) Pending content: no Source downloaded (UTC): 2026-09-10T02:13:09.221Z to 2026-09-10T02:13:09.221Z Record version: sha256:7a79e08a5515eb929e131f8ceffbfc7039d168bf275a9844ee42895edb302303 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [932-10-S99-3](https://asc.understandingaccounting.org/asc/932/10/#932-10-S99-3), SAB Topic 12.C.2, for SEC Staff views on applying consistent methods of oil and gas accounting within a consolidated entity. Source downloaded (UTC): 2026-09-10T02:13:16.025Z to 2026-09-10T02:13:16.025Z Record version: sha256:bf27cc49693db02df61cc615a4fdafbda2e052ab24402f2995a05ea448847b4c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 932-10-S99: SEC 99 SEC Materials [Read section](https://asc.understandingaccounting.org/asc/932/10/#sec-99-sec-materials) SEC content: yes #### SEC Rules, Regulations, and Interpretations ##### [932-10-S99-1](https://asc.understandingaccounting.org/asc/932/10/#932-10-S99-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:13:16.025Z to 2026-09-10T02:13:16.025Z Record version: sha256:f0423d756525aa55ef39e7378e545537a7b1115e17f30278e3039839c31ce6ed Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following is the text of Regulation S-X Rule 4-10, Financial Accounting and Reporting for Oil and Gas Producing Activities Pursuant to the Federal Securities Laws and the Energy Policy and Conservation Act of 1975 (17 CFR 210.4-10). - This section prescribes financial accounting and reporting standards for registrants with the Commission engaged in oil and gas producing activities in filings under the Federal securities laws and for the preparation of accounts by persons engaged, in whole or in part, in the production of crude oil or natural gas in the United States, pursuant to section 503 of the Energy Policy and Conservation Act of 1975 (42 U.S.C. 6383) (EPCA) and section 11(c) of the Energy Supply and Environmental Coordination Act of 1974 (15 U.S.C. 796) (ESECA), as amended by section 505 of EPCA. The application of this section to those oil and gas producing operations of companies regulated for ratemaking purposes on an individual-company-cost-of-service basis may, however, give appropriate recognition to differences arising because of the effect of the ratemaking process. - Exemption. Any person exempted by the Department of Energy from any record-keeping or reporting requirements pursuant to section 11(c) of ESECA, as amended, is similarly exempted from the related provisions of this section in the preparation of accounts pursuant to EPCA. This exemption does not affect the applicability of this section to filings pursuant to the Federal securities laws. - DEFINITIONS - (a) Definitions. The following definitions apply to the terms listed below as they are used in this section: - (1) _[Acquisition of properties](https://asc.understandingaccounting.org/glossary/a/#acquisition-of-properties "See paragraph 932-10-S99-1, Regulation S-X Rule 4-10(a)(1), for the definition of acquisition of properties as used within that Rule.")_. Costs incurred to purchase, lease or otherwise acquire a property, including costs of lease bonuses and options to purchase or lease properties, the portion of costs applicable to minerals when land including mineral rights is purchased in fee, brokers' fees, recording fees, legal costs, and other costs incurred in acquiring properties. - (2) _Analogous reservoir_. Analogous reservoirs, as used in resources assessments, have similar rock and fluid properties, reservoir conditions (depth, temperature, and pressure) and drive mechanisms, but are typically at a more advanced stage of development than the reservoir of interest and thus may provide concepts to assist in the interpretation of more limited data and estimation of recovery. When used to support proved reserves, an "analogous reservoir" refers to a reservoir that shares the following characteristics with the reservoir of interest: - (i) Same geological formation (but not necessarily in pressure communication with the reservoir of interest); - (ii) Same environment of deposition; - (iii) Similar geological structure; and - (iv) Same drive mechanism. - _Instruction to paragraph (a)(2)_: Reservoir properties must, in the aggregate, be no more favorable in the analog than in the reservoir of interest. - (3) _Bitumen_. Bitumen, sometimes referred to as natural bitumen, is petroleum in a solid or semi-solid state in natural deposits with a viscosity greater than 10,000 centipoise measured at original temperature in the deposit and atmospheric pressure, on a gas free basis. In its natural state it usually contains sulfur, metals, and other non-hydrocarbons. - (4) _Condensate_. Condensate is a mixture of hydrocarbons that exists in the gaseous phase at original reservoir temperature and pressure, but that, when produced, is in the liquid phase at surface pressure and temperature. - (5) _Deterministic estimate_. The method of estimating reserves or resources is called deterministic when a single value for each parameter (from the geoscience, engineering, or economic data) in the reserves calculation is used in the reserves estimation procedure. - (6) _[Developed oil and gas reserves](https://asc.understandingaccounting.org/glossary/d/#developed-oil-and-gas-reserves "See paragraph 932-10-S99-1, Regulation S-X Rule 4-10(a)(6) for the definition of developed oil and gas reserves as used within that Rule.")_. Developed oil and gas reserves are reserves of any category that can be expected to be recovered: - (i) Through existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared to the cost of a new well; and - (ii) Through installed extraction equipment and infrastructure operational at the time of the reserves estimate if the extraction is by means not involving a well. - (7) _[Development costs](https://asc.understandingaccounting.org/glossary/d/#development-costs "See paragraph 932-10-S99-1, Regulation S-X Rule 4-10(a)(7), for the definition of development costs as used within that Rule.")_. Costs incurred to obtain access to proved reserves and to provide facilities for extracting, treating, gathering and storing the oil and gas. More specifically, development costs, including depreciation and applicable operating costs of support equipment and facilities and other costs of development activities, are costs incurred to: - (i) Gain access to and prepare well locations for drilling, including surveying well locations for the purpose of determining specific development drilling sites, clearing ground, draining, road building, and relocating public roads, gas lines, and power lines, to the extent necessary in developing the proved reserves. - (ii) Drill and equip development wells, development-type stratigraphic test wells, and service wells, including the costs of platforms and of well equipment such as casing, tubing, pumping equipment, and the wellhead assembly. - (iii) Acquire, construct, and install production facilities such as lease flow lines, separators, treaters, heaters, manifolds, measuring devices, and production storage tanks, natural gas cycling and processing plants, and central utility and waste disposal systems. - (iv) Provide improved recovery systems. - (8) _Development project_. A development project is the means by which petroleum resources are brought to the status of economically producible. As examples, the development of a single reservoir or field, an incremental development in a producing field, or the integrated development of a group of several fields and associated facilities with a common ownership may constitute a development project. - (9) _Development well_. A well drilled within the proved area of an oil or gas reservoir to the depth of a stratigraphic horizon known to be productive. - (10) _Economically producible_. The term economically producible, as it relates to a resource, means a resource which generates revenue that exceeds, or is reasonably expected to exceed, the costs of the operation. The value of the products that generate revenue shall be determined at the terminal point of oil and gas producing activities as defined in paragraph (a)(16) of this section. - (11) _Estimated ultimate recovery (EUR)_. Estimated ultimate recovery is the sum of reserves remaining as of a given date and cumulative production as of that date. - (12) _[Exploration costs](https://asc.understandingaccounting.org/glossary/e/#exploration-costs "See paragraph 932-10-S99-1, Regulation S-X Rule 4-10(a)(12), for the definition of exploration costs as used within that Rule.")_. Costs incurred in identifying areas that may warrant examination and in examining specific areas that are considered to have prospects of containing oil and gas reserves, including costs of drilling exploratory wells and exploratory-type stratigraphic test wells. Exploration costs may be incurred both before acquiring the related property (sometimes referred to in part as prospecting costs) and after acquiring the property. Principal types of exploration costs, which include depreciation and applicable operating costs of support equipment and facilities and other costs of exploration activities, are: - (i) Costs of topographical, geographical and geophysical studies, rights of access to properties to conduct those studies, and salaries and other expenses of geologists, geophysical crews, and others conducting those studies. Collectively, these are sometimes referred to as geological and geophysical or G&G costs. - (ii) Costs of carrying and retaining undeveloped properties, such as delay rentals, ad valorem taxes on properties, legal costs for title defense, and the maintenance of land and lease records. - (iii) Dry hole contributions and bottom hole contributions. - (iv) Costs of drilling and equipping exploratory wells. - (v) Costs of drilling exploratory-type stratigraphic test wells. - (13) _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, an extension well, a service well, or a stratigraphic test well as those items are defined in this section. - (14) _Extension well_. An extension well is a well drilled to extend the limits of a known reservoir. - (15) _Field_. An area consisting of a single reservoir or multiple reservoirs all grouped on or related to the same individual geological structural feature and/or stratigraphic condition. There may be two or more reservoirs in a field that are separated vertically by intervening impervious, strata, or laterally by local geologic barriers, or by both. Reservoirs that are associated by being in overlapping or adjacent fields may be treated as a single or common operational field. The geological terms structural feature and stratigraphic condition are intended to identify localized geological features as opposed to the broader terms of basins, trends, provinces, plays, areas-of-interest, etc. - (16) _Oil and gas producing activities_. - (i) Oil and gas producing activities include: - (A) The search for crude oil, including condensate and natural gas liquids, or natural gas ("oil and gas") in their natural states and original locations; - (B) The acquisition of property rights or properties for the purpose of further exploration or for the purpose of removing the oil or gas from such properties; - (C) The construction, drilling, and production activities necessary to retrieve oil and gas from their natural reservoirs, including the acquisition, construction, installation, and maintenance of field gathering and storage systems, such as: - _( 1 )_ Lifting the oil and gas to the surface; and - _( 2 )_ Gathering, treating, and field processing (as in the case of processing gas to extract liquid hydrocarbons); and - (D) Extraction of saleable hydrocarbons, in the solid, liquid, or gaseous state, from oil sands, shale, coalbeds, or other nonrenewable natural resources which are intended to be upgraded into synthetic oil or gas, and activities undertaken with a view to such extraction. - _Instruction 1 to paragraph (a)(16)(i)_: 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: - a. 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; and - b. 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 prior to 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 which upgrades such natural resources into synthetic oil or gas. - _Instruction 2 to paragraph (a)(16)(i)_: For purposes of this paragraph (a)(16), the term saleable hydrocarbons means hydrocarbons that are saleable in the state in which the hydrocarbons are delivered. - (ii) Oil and gas producing activities do not include: - (A) Transporting, refining, or marketing oil and gas; - (B) Processing of produced oil, gas or natural resources that can be upgraded into synthetic oil or gas by a registrant that does not have the legal right to produce or a revenue interest in such production; - (C) Activities relating to the production of natural resources other than oil, gas, or natural resources from which synthetic oil and gas can be extracted; or - (D) Production of geothermal steam. - (17) _Possible reserves_. Possible reserves are those additional reserves that are less certain to be recovered than probable reserves. - (i) When deterministic methods are used, the total quantities ultimately recovered from a project have a low probability of exceeding proved plus probable plus possible reserves. When probabilistic methods are used, there should be at least a 10% probability that the total quantities ultimately recovered will equal or exceed the proved plus probable plus possible reserves estimates. - (ii) Possible reserves may be assigned to areas of a reservoir adjacent to probable reserves where data control and interpretations of available data are progressively less certain. Frequently, this will be in areas where geoscience and engineering data are unable to define clearly the area and vertical limits of commercial production from the reservoir by a defined project. - (iii) Possible reserves also include incremental quantities associated with a greater percentage recovery of the hydrocarbons in place than the recovery quantities assumed for probable reserves. - (iv) The proved plus probable and proved plus probable plus possible reserves estimates must be based on reasonable alternative technical and commercial interpretations within the reservoir or subject project that are clearly documented, including comparisons to results in successful similar projects. - (v) Possible reserves may be assigned where geoscience and engineering data identify directly adjacent portions of a reservoir within the same accumulation that may be separated from proved areas by faults with displacement less than formation thickness or other geological discontinuities and that have not been penetrated by a wellbore, and the registrant believes that such adjacent portions are in communication with the known (proved) reservoir. Possible reserves may be assigned to areas that are structurally higher or lower than the proved area if these areas are in communication with the proved reservoir. - (vi) Pursuant to paragraph (a)(22)(iii) of this section, where direct observation has defined a highest known oil (HKO) elevation and the potential exists for an associated gas cap, proved oil reserves should be assigned in the structurally higher portions of the reservoir above the HKO only if the higher contact can be established with reasonable certainty through reliable technology. Portions of the reservoir that do not meet this reasonable certainty criterion may be assigned as probable and possible oil or gas based on reservoir fluid properties and pressure gradient interpretations. - (18) _Probable reserves_. Probable reserves are those additional reserves that are less certain to be recovered than proved reserves but which, together with proved reserves, are as likely as not to be recovered. - (i) When deterministic methods are used, it is as likely as not that actual remaining quantities recovered will exceed the sum of estimated proved plus probable reserves. When probabilistic methods are used, there should be at least a 50% probability that the actual quantities recovered will equal or exceed the proved plus probable reserves estimates. - (ii) Probable reserves may be assigned to areas of a reservoir adjacent to proved reserves where data control or interpretations of available data are less certain, even if the interpreted reservoir continuity of structure or productivity does not meet the reasonable certainty criterion. Probable reserves may be assigned to areas that are structurally higher than the proved area if these areas are in communication with the proved reservoir. - (iii) Probable reserves estimates also include potential incremental quantities associated with a greater percentage recovery of the hydrocarbons in place than assumed for proved reserves. - (iv) See also guidelines in paragraphs (a)(17)(iv) and (a)(17)(vi) of this section. - (19) _Probabilistic estimate_. The method of estimation of reserves or resources is called probabilistic when the full range of values that could reasonably occur for each unknown parameter (from the geoscience and engineering data) is used to generate a full range of possible outcomes and their associated probabilities of occurrence. - (20) _[Production costs](https://asc.understandingaccounting.org/glossary/p/#production-costs "See paragraph 932-10-S99-1, Regulation S-X Rule 4-10(a)(20), for the definition of production costs as used within that Rule.")_. - (i) Costs incurred to operate and maintain wells and related equipment and facilities, including depreciation and applicable operating costs of support equipment and facilities and other costs of operating and maintaining those wells and related equipment and facilities. They become part of the cost of oil and gas produced. Examples of production costs (sometimes called lifting costs) are: - (A) Costs of labor to operate the wells and related equipment and facilities. - (B) Repairs and maintenance. - (C) Materials, supplies, and fuel consumed and supplies utilized in operating the wells and related equipment and facilities. - (D) Property taxes and insurance applicable to proved properties and wells and related equipment and facilities. - (E) Severance taxes. - (ii) Some support equipment or facilities may serve two or more oil and gas producing activities and may also serve transportation, refining, and marketing activities. To the extent that the support equipment and facilities are used in oil and gas producing activities, their depreciation and applicable operating costs become exploration, development or production costs, as appropriate. Depreciation, depletion, and amortization of capitalized acquisition, exploration, and development costs are not production costs but also become part of the cost of oil and gas produced along with production (lifting) costs identified above. - (21) _Proved area_. The part of a property to which proved reserves have been specifically attributed. - (22) _Proved oil and gas reserves_. Proved oil and gas reserves are those quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible-from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations-prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time. - (i) The area of the reservoir considered as proved includes: - (A) The area identified by drilling and limited by fluid contacts, if any, and - (B) Adjacent undrilled portions of the reservoir that can, with reasonable certainty, be judged to be continuous with it and to contain economically producible oil or gas on the basis of available geoscience and engineering data. - (ii) In the absence of data on fluid contacts, proved quantities in a reservoir are limited by the lowest known hydrocarbons (LKH) as seen in a well penetration unless geoscience, engineering, or performance data and reliable technology establishes a lower contact with reasonable certainty. - (iii) Where direct observation from well penetrations has defined a highest known oil (HKO) elevation and the potential exists for an associated gas cap, proved oil reserves may be assigned in the structurally higher portions of the reservoir only if geoscience, engineering, or performance data and reliable technology establish the higher contact with reasonable certainty. - (iv) Reserves which can be produced economically through application of improved recovery techniques (including, but not limited to, fluid injection) are included in the proved classification when: - (A) Successful testing by a pilot project in an area of the reservoir with properties no more favorable than in the reservoir as a whole, the operation of an installed program in the reservoir or an analogous reservoir, or other evidence using reliable technology establishes the reasonable certainty of the engineering analysis on which the project or program was based; and - (B) The project has been approved for development by all necessary parties and entities, including governmental entities. - (v) Existing economic conditions include prices and costs at which economic producibility from a reservoir is to be determined. The price shall be the average price during the 12-month period prior to the ending date of the period covered by the report, determined as an unweighted arithmetic average of the first-day-of-the-month price for each month within such period, unless prices are defined by contractual arrangements, excluding escalations based upon future conditions. - (23) _Proved properties_. Properties with proved reserves. - (24) _Reasonable certainty_. If deterministic methods are used, reasonable certainty means a high degree of confidence that the quantities will be recovered. If probabilistic methods are used, there should be at least a 90% probability that the quantities actually recovered will equal or exceed the estimate. A high degree of confidence exists if the quantity is much more likely to be achieved than not, and, as changes due to increased availability of geoscience (geological, geophysical, and geochemical), engineering, and economic data are made to estimated ultimate recovery (EUR) with time, reasonably certain EUR is much more likely to increase or remain constant than to decrease. - (25) _Reliable technology_. Reliable technology is a grouping of one or more technologies (including computational methods) that has been field tested and has been demonstrated to provide reasonably certain results with consistency and repeatability in the formation being evaluated or in an analogous formation. - (26) _Reserves_. Reserves are estimated remaining quantities of oil and gas and related substances anticipated to be economically producible, as of a given date, by application of development projects to known accumulations. In addition, there must exist, or there must be a reasonable expectation that there will exist, the legal right to produce or a revenue interest in the production, installed means of delivering oil and gas or related substances to market, and all permits and financing required to implement the project. - _Note to paragraph (a)(26)_: Reserves should not be assigned to adjacent reservoirs isolated by major, potentially sealing, faults until those reservoirs are penetrated and evaluated as economically producible. Reserves should not be assigned to areas that are clearly separated from a known accumulation by a non-productive reservoir ( _i.e. ,_ absence of reservoir, structurally low reservoir, or negative test results). Such areas may contain prospective resources ( _i.e. ,_ potentially recoverable resources from undiscovered accumulations). - (27) _Reservoir_. A porous and permeable underground formation containing a natural accumulation of producible oil and/or gas that is confined by impermeable rock or water barriers and is individual and separate from other reservoirs. - (28) _Resources_. Resources are quantities of oil and gas estimated to exist in naturally occurring accumulations. A portion of the resources may be estimated to be recoverable, and another portion may be considered to be unrecoverable. Resources include both discovered and undiscovered accumulations. - (29) _Service well_. A well drilled or completed for the purpose of supporting production in an existing field. Specific purposes of service wells include gas injection, water injection, steam injection, air injection, salt-water disposal, water supply for injection, observation, or injection for in-situ combustion. - (30) _Stratigraphic test well_. A stratigraphic test well is a drilling effort, geologically directed, to obtain information pertaining to a specific geologic condition. Such wells customarily are drilled without the intent of being completed for hydrocarbon production. The 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 known area or "development type" if drilled in a known area. - (31) _[Undeveloped oil and gas reserves](https://asc.understandingaccounting.org/glossary/u/#undeveloped-oil-and-gas-reserves "See paragraph 932-10-S99-1, Regulation S-X Rule 4-10(a)(31), for the definition of undeveloped oil and gas reserves as used within that Rule.")_. Undeveloped oil and gas reserves are reserves of any category that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion. - (i) Reserves on undrilled acreage shall be limited to those directly offsetting development spacing areas that are reasonably certain of production when drilled, unless evidence using reliable technology exists that establishes reasonable certainty of economic producibility at greater distances. - (ii) Undrilled locations can be classified as having undeveloped reserves only if a development plan has been adopted indicating that they are scheduled to be drilled within five years, unless the specific circumstances, justify a longer time. - (iii) Under no circumstances shall estimates for undeveloped reserves be attributable to any acreage for which an application of fluid injection or other improved recovery technique is contemplated, unless such techniques have been proved effective by actual projects in the same reservoir or an analogous reservoir, as defined in paragraph (a)(2) of this section, or by other evidence using reliable technology establishing reasonable certainty. - (32) _Unproved properties_. Properties with no proved reserves. - SUCCESSFUL EFFORTS METHOD - (b) A reporting entity that follows the successful efforts method shall comply with the accounting and financial reporting disclosure requirements of FASB ASC Topic 932, _Extractive Activities—Oil and Gas_. - FULL COST METHOD - (c) Application of the full cost method of accounting. A reporting entity that follows the full cost method shall apply that method to all of its operations and to the operations of its subsidiaries, as follows: - (1) Determination of cost centers. Cost centers shall be established on a country-by-country basis. - (2) Costs to be capitalized. All costs associated with property acquisition, exploration, and development activities (as defined in paragraph (a) of this section) shall be capitalized within the appropriate cost center. Any internal costs that are capitalized shall be limited to those costs that can be directly identified with acquisition, exploration, and development activities undertaken by the reporting entity for its own account, and shall not include any costs related to production, general corporate overhead, or similar activities. - (3) Amortization of capitalized costs. Capitalized costs within a cost center shall be amortized on the unit-of-production basis using proved oil and gas reserves, as follows: - (i) Costs to be amortized shall include - (A) all capitalized costs, less accumulated amortization, other than the cost of properties described in paragraph (ii) below; - (B) the estimated future expenditures (based on current costs) to be incurred in developing proved reserves; and - (C) estimated dismantlement and abandonment costs, net of estimated salvage values. - (ii) The cost of investments in unproved properties and major development projects may be excluded from capitalized costs to be amortized, subject to the following: - (A) All costs directly associated with the acquisition and evaluation of unproved properties may be excluded from the amortization computation until it is determined whether or not proved reserves can be assigned to the properties, subject to the following conditions: - _(1)_ Until such a determination is made, the properties shall be assessed at least annually to ascertain whether impairment has occurred. Unevaluated properties whose costs are individually significant shall be assessed individually. Where it is not practicable to individually assess the amount of impairment of properties for which costs are not individually significant, such properties may be grouped for purposes of assessing impairment. Impairment may be estimated by applying factors based on historical experience and other data such as primary lease terms of the properties, average holding periods of unproved properties, and geographic and geologic data to groupings of individually insignificant properties and projects. The amount of impairment assessed under either of these methods shall be added to the costs to be amortized. - _(2)_ The costs of drilling exploratory dry holes shall be included in the amortization base immediately upon determination that the well is dry. - _(3)_ If geological and geophysical costs cannot be directly associated with specific unevaluated properties, they shall be included in the amortization base as incurred. Upon complete evaluation of a property, the total remaining excluded cost (net of any impairment) shall be included in the full cost amortization base. - (B) Certain costs may be excluded from amortization when incurred in connection with major development projects expected to entail significant costs to ascertain the quantities of proved reserves attributable to the properties under development (e. g., the installation of an offshore drilling platform from which development wells are to be drilled, the installation of improved recovery programs, and similar major projects undertaken in the expectation of significant additions to proved reserves). The amounts which may be excluded are applicable portions of _(1)_ the costs that relate to the major development project and have not previously been included in the amortization base, and _(2)_ the estimated future expenditures associated with the development project. The excluded portion of any common costs associated with the development project should be based, as is most appropriate in the circumstances, on a comparison of either _(i)_ existing proved reserves to total proved reserves expected to be established upon completion of the project, or _(ii)_ the number of wells to which proved reserves have been assigned and total number of wells expected to be drilled. Such costs may be excluded from costs to be amortized until the earlier determination of whether additional reserves are proved or impairment occurs. - (C) Excluded costs and the proved reserves related to such costs shall be transferred into the amortization base on an ongoing (well-by-well or property-by-property) basis as the project is evaluated and proved reserves established or impairment determined. Once proved reserves are established, there is no further justification for continued exclusion from the full cost amortization base even if other factors prevent immediate production or marketing. - (iii) Amortization shall be computed on the basis of physical units, with oil and gas converted to a common unit of measure on the basis of their approximate relative energy content, unless economic circumstances (related to the effects of regulated prices) indicate that use of units of revenue is a more appropriate basis of computing amortization. In the latter case, amortization shall be computed on the basis of current gross revenues (excluding royalty payments and net profits disbursements) from production in relation to future gross revenues, based on current prices (including consideration of changes in existing prices provided only by contractual arrangements), from estimated production of proved oil and gas reserves. The effect of a significant price increase during the year on estimated future gross revenues shall be reflected in the amortization provision only for the period after the price increase occurs. - (iv) In some cases it may be more appropriate to depreciate natural gas cycling and processing plants by a method other than the unit-of-production method. - (v) Amortization computations shall be made on a consolidated basis, including investees accounted for on a proportionate consolidation basis. Investees accounted for on the equity method shall be treated separately. - (4) Limitation on capitalized costs. - (i) For each cost center, capitalized costs, less accumulated amortization and related deferred income taxes, shall not exceed an amount (the cost center ceiling) equal to the sum of: - (A) The present value of estimated future net revenues computed by applying current prices of oil and gas reserves (with consideration of price changes only to the extent provided by contractual arrangements) to estimated future production of proved oil and gas reserves as of the date of the latest balance sheet presented, less estimated future expenditures (based on current costs) to be incurred in developing and producing the proved reserves computed using a discount factor of ten percent and assuming continuation of existing economic conditions; plus - (B) the cost of properties not being amortized pursuant to paragraph (i)(3)(ii) of this section; plus - (C) the lower of cost or estimated fair value of unproven properties included in the costs being amortized; less - (D) income tax effects related to differences between the book and tax basis of the properties referred to in paragraphs (i)(4)(i) (B) and (C) of this section. - (ii) If unamortized costs capitalized within a cost center, less related deferred income taxes, exceed the cost center ceiling, the excess shall be charged to expense and separately disclosed during the period in which the excess occurs. Amounts thus required to be written off shall not be reinstated for any subsequent increase in the cost center ceiling. - (5) Production costs. All costs relating to production activities, including workover costs incurred solely to maintain or increase levels of production from an existing completion interval, shall be charged to expense as incurred. - (6) Other transactions. The provisions of paragraph (h) of this section, "Mineral property conveyances and related transactions if the successful efforts method of accounting is followed," shall apply also to those reporting entities following the full cost method except as follows: - (i) Sales and abandonments of oil and gas properties. Sales of oil and gas properties, whether or not being amortized currently, shall be accounted for as adjustments of capitalized costs, with no gain or loss recognized, unless such adjustments would significantly alter the relationship between capitalized costs and proved reserves of oil and gas attributable to a cost center. For instance, a significant alteration would not ordinarily be expected to occur for sales involving less than 25 percent of the reserve quantities of a given cost center. If gain or loss is recognized on such a sale, total capitalization costs within the cost center shall be allocated between the reserves sold and reserves retained on the same basis used to compute amortization, unless there are substantial economic differences between the properties sold and those retained, in which case capitalized costs shall be allocated on the basis of the relative fair values of the properties. Abandonments of oil and gas properties shall be accounted for as adjustments of capitalized costs; that is, the cost of abandoned properties shall be charged to the full cost center and amortized (subject to the limitation on capitalized costs in paragraph (b) of this section). - (ii) Purchases of reserves. Purchases of oil and gas reserves in place ordinarily shall be accounted for as additional capitalized costs within the applicable cost center; however, significant purchases of production payments or properties with lives substantially shorter than the composite productive life of the cost center shall be accounted for separately. - (iii) Partnerships, joint ventures and drilling arrangements. - (A) Except as provided in paragraph (i)(6)(i) of this section, all consideration received from sales or transfers of properties in connection with partnerships, joint venture operations, or various other forms of drilling arrangements involving oil and gas exploration and development activities (e. g., carried interest, turnkey wells, management fees, etc.) shall be credited to the full cost account, except to the extent of amounts that represent reimbursement of organization, offering, general and administrative expenses, etc., that are identifiable with the transaction, if such amounts are currently incurred and charged to expense. - (B) Where a registrant organizes and manages a limited partnership involved only in the purchase of proved developed properties and subsequent distribution of income from such properties, management fee income may be recognized provided the properties involved do not require aggregate development expenditures in connection with production of existing proved reserves in excess of 10% of the partnership's recorded cost of such properties. Any income not recognized as a result of this limitation would be credited to the full cost account and recognized through a lower amortization provision as reserves are produced. - (iv) Other services. No income shall be recognized in connection with contractual services performed (e. g. drilling, well service, or equipment supply services, etc.) in connection with properties in which the registrant or an affiliate (as defined in § 210.1-02(b)) holds an ownership or other economic interest, except as follows: - (A) Where the registrant acquires an interest in the properties in connection with the service contract, income may be recognized to the extent the cash consideration received exceeds the related contract costs plus the registrant's share of costs incurred and estimated to be incurred in connection with the properties. Ownership interests acquired within one year of the date of such a contract are considered to be acquired in connection with the service for purposes of applying this rule. The amount of any guarantees or similar arrangements undertaken as part of this contract should be considered as part of the costs related to the properties for purposes of applying this rule. - (B) Where the registrant acquired an interest in the properties at least one year before the date of the service contract through transactions unrelated to the service contract, and that interest is unaffected by the service contract, income from such contract may be recognized subject to the general provisions for elimination of intercompany profit under generally accepted accounting principles. - (C) Notwithstanding the provisions of paragraphs (i)(6)(iv) (A) and (B) of this section, no income may be recognized for contractual services performed on behalf of investors in oil and gas producing activities managed by the registrant or an affiliate. Furthermore, no income may be recognized for contractual services to the extent that the consideration received for such services represents an interest in the underlying property. - (D) Any income not recognized as a result of these rules would be credited to the full cost account and recognized through a lower amortization provision as reserves are produced. - (7) Disclosures. Reporting entities that follow the full cost method of accounting shall disclose all of the information required by paragraph (k) of this section, with each cost center considered as a separate geographic area, except that reasonable groupings may be made of cost centers that are not significant in the aggregate. In addition: - (i) For each cost center for each year that a statement of comprehensive income is required, disclose the total amount of amortization expense (per equivalent physical unit of production if amortization is computed on the basis of physical units or per dollar of gross revenue from production if amortization is computed on the basis of gross revenue). - (ii) State separately on the face of the balance sheet the aggregate of the capitalized costs of unproved properties and major development projects that are excluded, in accordance with paragraph (i)(3) of this section, from the capitalized costs being amortized. Provide a description in the notes to the financial statements of the current status of the significant properties or projects involved, including the anticipated timing of the inclusion of the costs in the amortization computation. Present a table that shows, by category of cost, - (A) the total costs excluded as of the most recent fiscal year; and - (B) the amounts of such excluded costs, incurred _(1)_ in each of the three most recent fiscal years and _(2)_ in the aggregate for any earlier fiscal years in which the costs were incurred. Categories of cost to be disclosed include acquisition costs, exploration costs, development costs in the case of significant development projects and capitalized interest. - (8) For purposes of this paragraph (c), the term “current price” shall mean the average price during the 12-month period prior to the ending date of the period covered by the report, determined as an unweighted arithmetic average of the first-day-of-the-month price for each month within such period, unless prices are defined by contractual arrangements, excluding escalations based upon future conditions. - INCOME TAXES - (d) Income taxes. Comprehensive interperiod income tax allocation by a method which complies with generally accepted accounting principles shall be followed for intangible drilling and development costs and other costs incurred that enter into the determination of taxable income and pretax accounting income in different periods. - \[43 FR 60405, Dec. 27, 1978, as amended at 43 FR 60417, Dec. 27, 1978; 44 FR 57036, 57038, Oct. 9, 1979; 45 FR 27749, Apr. 24, 1980. Redesignated and amended at 45 FR 63669, Sept. 25, 1980; 47 FR 57913, Dec. 29, 1982; 48 FR 44200, Sept. 28, 1983; 49 FR 18473, May 1, 1984; 57 FR 45293, Oct. 1, 1992; 61 FR 30401, June 14, 1996; 74 FR 2190, Jan. 14, 2009, 76 FR 50119, Aug. 12, 2011; 83 FR 50200, Oct. 4, 2018\] #### SEC Staff Guidance ##### [932-10-S99-2](https://asc.understandingaccounting.org/asc/932/10/#932-10-S99-2) Pending content: no Source downloaded (UTC): 2026-09-10T02:13:16.025Z to 2026-09-10T02:13:16.025Z Record version: sha256:44c5f610076f163d85b2bd4bd239f89624d5bb340f537f152497718546f4ad45 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following is the text of SAB Topic 2.D, Financial Statements of Oil and Gas Exchange Offers. - Facts: The oil and gas industry has experienced periods of time where there have been a significant number of "exchange offers" (also referred to as "roll-ups" or "put-togethers") to form a publicly held company, take an existing private company public, or increase the size of an existing publicly held company. An exchange offer transaction involves a swap of shares in a corporation for interests in properties, typically limited partnership interests. Such interests could include direct interests such as working interests and royalties related to developed or undeveloped properties and indirect interests such as limited partnership interests or shares of existing oil and gas companies. Generally, such transactions are structured to be tax-free to the individual or entity trading the property interest for shares of the corporation. Under certain circumstances, however, part or all of the transaction may be taxable. For purposes of the discussion in this Topic, in each of these situations, the entity(ies) or property(ies) are deemed to constitute a business. - One financial reporting issue in exchange transactions involves deciding which prior financial results of the entities should be reported. - Question 1: In Form 10-K filings with the Commission, the staff has permitted limited partnerships to omit certain of the oil and gas reserve value information and the supplemental summary of oil and gas activities disclosures required by FASB ASC Subtopic 932-235, Extractive Activities—Oil and Gas—Notes to Financial Statements, in some circumstances. Is it permissible to omit these disclosures from the financial statements included in an exchange offering? - Interpretive Response: No. Normally full disclosures of reserve data and related information are required. The exemptions previously allowed relate only to partnerships where value-oriented data are otherwise available to the limited partners pursuant to the partnership agreement. The staff has previously stated that it will require all of the required disclosures for partnerships which are the subject of exchange offers. FN2 These disclosures may, however, be presented on a combined basis if the entities are under common control. - FN2 See SAB 40, Topic 12.A.3.c. - The staff believes that the financial statements in an exchange offer registration statement should provide sufficient historical reserve quantity and value-based disclosures to enable offerees and secondary market public investors to evaluate the effect of the exchange proposal. Accordingly, in all cases, it will be necessary to present information as of the latest year-end on reserve quantities and the future net revenues associated with such quantities. In certain circumstances, where the exchange is accounted for using the acquisition method of accounting, the staff will consider, on a case-by-case basis, granting exemptions from (i) the disclosure requirements for year-to-year reconciliations of reserve quantities, and (ii) the requirements for a summary of oil and gas producing activities and a summary of changes in the net present value of reserves. For instance, the staff may consider requests for exemptions in cases where the properties acquired in the exchange transaction are fully explored and developed, particularly if the management of the emerging company has not been involved in the exploration and development of such properties. - Question 2: If the exchange company will use the full cost method of accounting, does the full cost ceiling limitation apply as of the date of the financial statements reflecting the exchange? - Interpretive Response: Yes. The full cost ceiling limitation on costs capitalized does apply. However, as discussed under Topic 12.D.3 (Subtopic 932-360), the Commission has stated that in unusual circumstances, registrants may request an exemption if as a result of a major purchase, a write-down would be required even though it can be demonstrated that the fair value of the properties clearly exceeds the unamortized costs. - Question 3: How should "common control accounting" be applied to the specific assets and liabilities of the new exchange company? - Interpretive Response: Consistent with SAB Topic 12.C.2 (Subtopic 932-10), under "common control accounting" the various accounting methods followed by the offeree entities should be conformed to the methods adopted by the new exchange company. It is not appropriate to combine assets and liabilities accounted for on different bases. Accordingly, all of the oil and gas properties of the new entity must be accounted for on the same basis (either full cost or successful efforts) applied retroactively. - Question 4: What pro forma financial information is required in an exchange offering? - Interpretive Response: The requirements for pro forma financial information in exchange offer filings are the same as in any other filings with the Commission and are detailed in Article 11 of Regulation S-X. FN3 Rule 11-02(b) specifies the presentation requirements, including periods presented and types of adjustments to be made. The general criteria of Rule 11-02(b)(6) are that pro forma adjustments should give effect to events that are (i) directly attributable to the transaction, (ii) expected to have a continuing impact on the registrant, and (iii) factually supportable. In the case of an exchange offer, such adjustments typically are made to: - (1) Show varying levels of acceptance of the offer. - (2) Conform the accounting methods used in the historical financial statements to those to be applied by the new entity. - (3) Recompute the depreciation, depletion and amortization charges, in cases where the new entity will use full-cost accounting, on a combined basis. If this computation is not practicable, and the exchange offer is accounted for as a transaction among entities under common control, historical depreciation, depletion and amortization provisions may be aggregated, with appropriate disclosure. - (4) Reflect the acquisition in the pro forma statements where the exchange offer is accounted for using the acquisition method of accounting, including depreciation, depletion and amortization based on the measurement guidance in FASB ASC Topic 805, Business Combinations. - (5) Provide pro forma reserve information comparable to the disclosures required by FASB ASC paragraphs [932-235-50-3 through 932-235-50-11B](https://asc.understandingaccounting.org/asc/235/932/#235-932-50-3) and FASB ASC paragraphs [932-235-50-29 through 50-36](https://asc.understandingaccounting.org/asc/235/932/#235-932-50-29) . - (6) Reflect significant changes, if any, in levels of operations (revenues or costs), or in income tax status and to reflect debt incurred in connection with the transaction. - In addition, the depreciation, depletion and amortization rate which will apply for the initial period subsequent to consummation of the exchange offer should be disclosed. - FN3 As announced in Financial Reporting Release No. 2 (July 9, 1982). - Question 5: Are there conditions under which the presentation of other than full historical financial statements would be acceptable? - Interpretive Response: Generally, full historical financial statements as specified in Rules 3-01 and 3-02 of Regulation S-X are considered necessary to enable offerees and secondary market investors to evaluate the transaction. Where securities are being registered to offer to the security holders (including limited partners and other ownership interests) of the businesses to be acquired, such financial statements are normally required pursuant to Rule 3-05 of Regulation S-X, either individually for each entity or, where appropriate, separately for the offeror and on a combined basis for other entities, generally excluding corporations. However, certain exceptions may apply as explained in the outline below: - A. Acquisition Method Accounting. - 1\. If the registrant can demonstrate that full historical financial statements of the offeree partnerships are not reasonably available, the staff may permit presentation of audited Statements of Combined Gross Revenues and Direct Lease Operating Expenses for all years for which an income statement would otherwise be required. In these circumstances, the registrant should also disclose in an unaudited footnote the amounts of total exploration and development costs, and general and administrative expenses along with the reasons why presentation of full historical financial statements is not practicable. - 2.The staff will consider requests to waive the requirement for prior year financial statements of the offeree partnerships and instead allow presentation of only the latest fiscal year and interim period, if the registrant can demonstrate that the prior years' data would not be meaningful because the offeree partnerships had no material quantity of production. - B. Common Control Accounting. - The staff would expect the full historical financial statements as specified in Rules 3-01 and 3-02 of Regulation S-X would be included in the registration statement for exchange offers accounted for as reorganizations, including all required supplemental reserve information. The presentation of individual or combined financial statements would depend on the circumstances of the particular exchange offer. - Registrants are also reminded that wherever historical results are presented, it may be appropriate to explain the reasons why historical costs are not necessarily indicative of future expenditures. ##### [932-10-S99-3](https://asc.understandingaccounting.org/asc/932/10/#932-10-S99-3) Pending content: no Source downloaded (UTC): 2026-09-10T02:13:16.025Z to 2026-09-10T02:13:16.025Z Record version: sha256:c8d1ac94f1ec490cff19a36103bf520d43ecc97918159ef511cecf066ae25e39 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following is the text of SAB Topic 12.C, Methods of Accounting by Oil and Gas Producers. - Facts: In ASR 300, the Commission announced that it would allow registrants to change methods of accounting for oil and gas producing activities so long as such changes were in accordance with GAAP. Accordingly, the Commission stated that changes from the full cost method to the successful efforts method would not require a preferability letter because of the position expressed in Statement 25 that successful efforts is considered preferable by the FASB for accounting changes. Changes to full cost, however, would require justification by the company making the change and filing of a preferability letter from the company's independent accountants. - 1\. First-time Registrants - Question: How does this policy apply to a nonpublic company which changes its accounting method in connection with a forthcoming public offering or initial registration under either the 1933 Act or 1934 Act? - Interpretive Response: The Commission's policy that first time registrants may change their previous accounting methods without filing a preferability letter is applicable. Therefore, such a company may change to the full cost method without filing a preferability letter. - 2\. Consistent Use of Accounting Methods Within a Consolidated Entity - Facts: Rule 4-10(c) of Regulation S-X states that "a reporting entity that follows the full cost method shall apply that method to all of its operations and to the operations of its subsidiaries." - Question 1: If a parent company uses the successful efforts method of accounting for oil and gas producing activities, may a subsidiary of the parent use the full cost method? - Interpretive Response: No. The use of different methods of accounting in the consolidated financial statements by a parent company and its subsidiary would be inconsistent with the full cost requirement that a parent and its subsidiaries all use the same method of accounting. - The staff's general policy is that an enterprise should account for all its like operations in the same manner. However, Rule 4-10 of Regulation S-X provides that oil and gas companies with cost-of-service oil and gas properties may give effect to any differences resulting from the ratemaking process, including regulatory requirements that a certain accounting method be used for the cost-of-service properties. - Question 2: Must the method of accounting (full cost or successful efforts) followed by a registrant for its oil and gas producing activities also be followed by any fifty percent or less owned companies in which the registrant carries its investment on the equity method (equity investees)? - Interpretive Response: No. Conformity of accounting methods between a registrant and its equity investees, although desirable, may not be practicable and thus is not required. However, if a registrant proportionately consolidates its equity investees, it will be necessary to present them all on the same basis of accounting. ##### [932-10-S99-4](https://asc.understandingaccounting.org/asc/932/10/#932-10-S99-4) Pending content: no Source downloaded (UTC): 2026-09-10T02:13:16.025Z to 2026-09-10T02:13:16.025Z Record version: sha256:6942cbd05394284a73e5cf3baa53b0dfc356977f9b47da8903734519a8dc4e8e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following is the text of of SAB Topic 12.E, Financial Statements of Royalty Trusts. - Facts: Several oil and gas exploration and production companies have created "royalty trusts." Typically, the creating company conveys a net profits interest in certain of its oil and gas properties to the newly created trust and then distributes units in the trust to its shareholders. The trust is a passive entity which is prohibited from entering into or engaging in any business or commercial activity of any kind and from acquiring any oil and gas lease, royalty or other mineral interest. The function of the trust is to serve as an agent to distribute the income from the net profits interest. The amount to be periodically distributed to the unitholders is defined in the trust agreement and is typically determined based on the cash received from the net profits interest less expenses of the trustee. Royalty trusts have typically reported their earnings on the basis of cash distributions to unitholders. The net profits interest paid to the trust for any month is based on production from a preceding month; therefore, the method of accounting followed by the trust for the net profits interest income is different from the creating company's method of accounting for the related revenue. - Question: Will the staff accept a statement of distributable income which reflects the amounts to be distributed for the period in question under the terms of the trust agreement in lieu of a statement of income prepared under GAAP? - Interpretive Response: Yes. Although financial statements filed with the Commission are normally required to be prepared in accordance with GAAP, the Commission's rules provide that other presentations may be acceptable in unusual situations. Since the operations of a royalty trust are limited to the distribution of income from the net profits interests contributed to it, the staff believes that the item of primary importance to the reader of the financial statements of the royalty trust is the amount of the cash distributions to the unitholders for the period reported. Should there be any change in the nature of the trust's operations due to revisions in the tax laws or other factors, the staff's interpretation would be reexamined. - A note to the financial statements should disclose the method used in determining distributable income and should also describe how distributable income as reported differs from income determined on the basis of GAAP. ##### [932-10-S99-5](https://asc.understandingaccounting.org/asc/932/10/#932-10-S99-5) Pending content: no Source downloaded (UTC): 2026-09-10T02:13:16.025Z to 2026-09-10T02:13:16.025Z Record version: sha256:4dcaa220661e646fcb917da5b7ae2e5e79917d44e4540f88f38a1904518648fa Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2016-11](https://asc.understandingaccounting.org/updates/asu-2016-11/).