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Recognition of losses to impairment of assets: impairment in oil operation and production assets

Author

Listed:
  • Odilanei Morais dos Santos

    (IBMEC / RJ)

  • Ariovaldo dos Santos

    (University of São Paulo (USP))

  • Paula Danyelle Almeida da Silva

    (University Petrobras)

Abstract

Losses to impairment of assets are placed in the context that assets cannot be registered above their recoverable amount, through use or sale of by the company. In the oil sector, the representativeness of exploration and production assets is relevant and meaningful. Therefore, the practice in the industry is not new and dates of the 70’s. Moreover, oil companies are obligated to publish additional information about their typical activities. Thus, the purpose is to analyze how this additional information about oil exploration and production are related by oil companies to impairment losses of E&P assets. We conducted a regression with panel data, using 212 observations of 53 oil companies for the period from 2005 to 2008. Findings suggest that the variables: price per barrel, reserves proved undeveloped, reserves x production ratio, development expenditures incurred, valuation standard of reserves and earnings per barrel are relevant to the recognition of loss to the impairment of E&P assets. The scarcity of empirical research allows importance to this study, but it has limitations and its findings remain restricted to the sample, variables and econometric tool used.

Suggested Citation

  • Odilanei Morais dos Santos & Ariovaldo dos Santos & Paula Danyelle Almeida da Silva, 2011. "Recognition of losses to impairment of assets: impairment in oil operation and production assets," Brazilian Business Review, Fucape Business School, vol. 8(2), pages 66-91, April.
    • Handle: RePEc:bbz:fcpbbr:v:8:y:2011:i:2:p:66-91
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    References listed on IDEAS

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    1. BoyntonIV, Charles E. & Boone, Jeffery P. & Coe, Teddy L., 1999. "Evaluating the exploration efficiency of oil and gas firms using SFAS 69 supplemental disclosures," Journal of Energy Finance & Development, Elsevier, vol. 4(1), pages 1-27, June.
    2. Boone, Jeff P. & Raman, K.K., 2007. "Does implementation guidance affect opportunistic reporting and value relevance of earnings?," Journal of Accounting and Public Policy, Elsevier, vol. 26(2), pages 160-192.
    3. Alciatore, Mimi & Easton, Peter & Spear, Nasser, 2000. "Accounting for the impairment of long-lived assets: Evidence from the petroleum industry," Journal of Accounting and Economics, Elsevier, vol. 29(2), pages 151-172, April.
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