The Federal Accounting Standards Advisory Board (FASAB) is seeking comment on a Revised Exposure Draft, Accounting for Federal Oil and Gas Resources . The proposed standard would result in recognition of the estimated value of royalties from federal oil and gas leases and changes over time in those values as well as the amount of royalties designated for distribution to nonfederal entities such as state governments.
If the proposal is adopted, federal financial reports would also provide information about revenues and depletion expense attributable to production during the reporting period, related trend information, estimated quantities of federal oil and gas resources, and the estimated value of royalty relief on production during the period.
The proposed standards in the revised exposure draft are similar in concept to the original exposure draft issued on May 21, 2007, but substantive changes to the valuation and disclosure requirements require re-exposure.
“I believe the end result of this exposure draft, if implemented, would be a more cost-effective standard that is sensitive to the lack of resources available to implement accounting standards,” FASAB Chairman Tom Allen said in a press release.
The FASAB press release accompanying the proposal notes that extensive federal oil and gas resources exist on public lands throughout the country and on the Outer Continental Shelf. Currently, there are no specific accounting standards for federal oil and gas resources, and there is no federal financial reporting about the quantity or value of these assets. In addition, royalty revenues are recognized, but expenses are not recognized for the asset exchanged to produce those revenues.