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IMPAIRMENT OF ASSETS: A STUDY IN GLOBAL CRUDE-OIL COMPANIES

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Author(s): João Carlos de Aguiar Domingues | Carlos Roberto Godoy

Journal: Revista de Educação e Pesquisa em Contabilidade
ISSN 1981-8610

Volume: 6;
Issue: 4 English;
Start page: 329;
Date: 2012;
Original page

Keywords: Impairment | IAS 36 | SFAS 144 | Oil and Gas | Accounting for the crude-oil sector

ABSTRACT
Oil and gas exploration and production (E&P) is a typically capital-intensive activity, involves high risks and long investment maturity terms. These characteristics entail high asset values and difficulties to recover these capitalized values. Hence, the impairment test to check the possibility to recover these asset values is very important for this sector. In that context, the aim of this study was to undertake an analysis in order to identify how oil price and proven reserve variations are related to the impairment expenses attributed to oil E&P activities. An inverse relation was found between the impairment expenses attributed to E&P activities and the volume of discoveries and the net balance of reserve purchases and sales. The study did not confirm, however, that an inverse relation exists between the price and reserve volume and impairment expenses. The direct relation between production and impairment loss was not confirmed either.
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