BG Group plc Accounting Coursework Example | Topics and Well Written Essays - 2000 words

BG Group plc Accounting - Coursework ExampleOf the three business segments of the company, the E&P segment is the largest in terms of non-current assets subject to impairment issues. oil color and suck exploration is a capital intensive activity and all costs incurred be capitalized as intangible assets until oil or bodge is discovered. once the reserves are proven, these costs are transferred to property, plant and equipment in the company balance sheet. Costs incurred on unsuccessful oil and gas fields are written off in the in the income statement (BG Report 2011, pp 89).This method of accounting based on successful efforts is non a term outlined in the IFRS 6 but used by the oil and gas industry as a carry over from previous GAAP practices (KPMG, 2008). BG plc does not differentiate between development fields and production fields. This too is inline with accepted industry practice (KPMG, 2008).Non current assets are reviewed at least once a year for impairment. As on 31 De cember 2011, BG Group held a balance of $ 4,383 million in expenditure related to unproved oil and gas reserves within the category of intangible assets. In the previous accounting year, this figure was higher at $5,342 million (BG Report 2011, pp 89).For assessment of impairment, BG plc combines oil and gas production fields into cash generating units based on geographical location, use of common facilities and marketing arrangements (BG Report 2011, pp90). This disclosure is not usually made in Oil company reports (KPMG, 2008) and is therefore an improvement on industry practice.BG plc uses the net present value of future cash flows for impairment assessment using reliable short term and long term assumptions depending on the nature of the asset. The Exploration & Production business segment is particularly sensitive to commodity prices. Impairment interrogation of oil and gas properties is based on assessment of proven and probable reserve estimates using the SEC definition (BG