Accounting for Decommissioning Obligation : Upstream oil and gas Companies
IFRS Watch - Issue 1
Decommissioning' and 'abandonment' are two alternative terms which means: the final phase of the life of an oil and gas development; the obligation to remove and make safe a production site; and the obligation to restore suspended exploration/development sites.
The accounting for Decommissioning is well covered by the scope of IAS 37 'Provisions, Contingent Liabilities and Contingent Assets' and management will need to apply care and judgment in applying this standard. The objective of IAS 37 “is to ensure that appropriate recognition criteria and measurement bases are applied to provisions, contingent liabilities and contingent assets and to ensure that sufficient information is disclosed in the notes to enable users to understand their nature, timing and amount”.