1.

Purposes
o A petroleum training course helps a participant learn about financial reporting rules by
which a firm must abide when recording transactions and preparing accounting reports. For
example, an attendee can learn about generally accepted accounting principles (GAAP) and
how they may affect an oil and gas company's financial statements. An accounting training
session also may cover internal controls in financial reporting mechanisms. As an
illustration, a risk manager may familiarize himself with generally accepted auditing
standards (GAAS) and how they affect an oil refining company's internal procedures.
Types
o A human resources course manager at an oil and gas firm may provide courses on-site or
online. For instance, the risk manager who wants to learn about GAAS has many options.
He can log into a secure website and take relevant courses or attend an industry conference
that the American Institute of Certified Public Accountants (AICPA) sponsors. Alternatively,
the risk manager may attend a training session at the company's headquarters or at a local
university.
Features
o Petroleum accounting training course may cover several topics, depending on the company
size, business needs and the industry. Factors, such as employee skill levels, regulatory
requirements and budget allocation also may affect courses selected. To illustrate, a training
curriculum at the oil refining company may include fixed asset reporting rules that the
Institute of Management Accountants (IMA) recommends or accounting principles
regarding safety measures included in Occupational Safety and Health Administration
(OSHA) directives.
Benefits
o A petroleum accountant, who holds a certified public accountant (CPA), certified financial
manager (CFM) or certified management accountant (CMA) designation can take courses to
comply with minimum continuing professional education (CPE) criteria that IMA or a
state's board of accounting generally requires. He also can use newly learned skills to
become competent. An oil and gas firm sponsoring training sessions may benefit because
employees are more prone to abide by regulations when they attend training sessions.
Expert Insight
o Occasionally, petroleum accounting training supervisor may feel that a subject is difficult or
a field is complex to explain. If no employee has practical experience in the field, she may
hire a specialist to clear up the topic. For example, a human resources course supervisor at
an oil and gas company can hire a former Environmental Protection Agency enforcement
attorney to explain litigation risks when a firm engages in offshore drilling activities, and
how accountants must record such risks in financial statements.

Standard Oil Accounting Procedures
By Christopher Faille, eHow Contributo

Crude oil is transported across the ocean on its way to a refining plant.
The importance of Oil Company accounting procedures was demonstrated in August
2004, when the Securities and Exchange Commission fined Royal Dutch/Shell Group $120
million for misstating its oil and gas reserves. Royal Dutch paid the fine, neither admitting
guilt nor denying wrongdoing. This is among the largest penalties ever assigned in an
accounting matter. Oil Company accounting is politically controversial, because reserves
are connected to the debate about how long the oil-dependent industrial system can
continue before a breakthrough in alternative energy sources.

Proven and Unproven Reserves
o
In October 2009, the Securities and Exchange Commission issued guidelines about how
companies should report their oil and gas reserves. Until then, companies were expected to
report only their proven reserves. This was the issue that led to fines for Royal Dutch, which
reported uncertain reserves as proven. The post-2009 rule allows companies to also report
their probable and possible reserves, as long as they list the status.
Companies also may now report oil as reserves even if it must be recovered through the use
of unconventional methods of extraction.
2. Inventory: Last In, First Out
o Once a barrel of oil is pumped out of the ground, proving that it exists isn't the major issue.
It's the accounting method that's controversial. Many oil companies measure the cost of
their inventory--the cost of the crude oil sitting on a tanker or in an onland storage facility
waiting to be refined--according to the "last in, first out" accounting method. The value of all
the oil in storage, regardless of its historical cost, is deemed to be the value of the most
recently acquired increment. When crude oil prices are increasing, this means a higher
expense and lower reported profits are attributed to inventory than other accounting
methods would yield.
This method reduces the tax bite. U.S. tax law requires that companies cannot use LIFO for
tax purposes unless they also use it for their financial reporting.

3. Return on Capital
o Oil companies often measure their profitability by the Return On Average Capital Employed
after tax. This is distinct from such other yardsticks as Return on Equity, for ROACE
includes borrowed capital and equity investment as part of the base. ROACE is not a
measure recognized by the Generally Accepted Accounting Principles, as the companies
acknowledge.
Controversy
o The accounting procedures are controversial for several reasons. Critics contend that the
use of LIFO is a tax loophole that the U.S. Congress should close.
The argument exists that ROACE is not an adequate measure of the incremental
profitability of new projects. Entrepreneur magazine explained in 2006 that it includes in its
base "legacy assets that have low book values but still generate a considerable cash flow."