Joint Venture Accounting in the Oil and Gas Industry

In some industries, like the oil and gas industry, certain ventures are considered high risk, demanding extensive capital investment and a long payback period. To minimize risks, companies develop partnerships called joint ventures. A joint venture consists of an operating partner (operator) and one or more non-operating partners who combine monetary or personnel resources to share a project’s expenses and revenues. The operator manages the venture, arranges venture activities, and maintains accounting records. The operator remits venture expenses, collects revenues, and distributes these to the partners, according to their ownership shares. This process is known as Joint Venture Accounting (JVA).

Typical Course Outline

·         Characteristic Features of the Oil and Gas Industry

ü  Scale of operations

ü  Nature and timing of cash flows

ü  Risks

ü  Determination of success

·         The Nature of Joint Ventures and Reasons Why Oil and Gas Companies Participate in Them

·         Typical Provisions of Joint Venture Agreements

·         IAS 31 Interests in Joint Ventures

·         US and UK GAAP Requirements Regarding Joint Ventures

·         Relationship between Operator and Non-operator Participants

·         The Financing of Joint Ventures – Billing Statements and Cash Flow Reporting

·         Reporting of Expenditures

·         Budgets and Approvals

·         Cost Allocation Methods and Issues

·         Revenue Recognition and Over & Under-lifting

·         Unitisations and Adjustment of Interests

·         Audits