Financial reporting briefs Oil and gas

What you need to know about this quarter’s accounting, financial reporting and other developments

September 2013

In this issue:

Top story ..................................... 2

Accounting update ........................ 3

Regulatory developments .............. 8

Other considerations ................... 11

Effective date highlights .............. 12

Reference library ........................ 14

2 | Financial reporting briefs Oil and gas September 2013

Top story

New priorities at the FASB

The Financial Accounting Standards Board (FASB or Board) is setting new priorities under Russell Golden,

who took over as chairman on 1 July, and James Kroeker, who joined the FASB as vice chairman on

1 September.

In recent years, the FASB’s agenda has been dominated by its joint projects with the International

Accounting Standards Board (IASB). The FASB and the IASB (collectively, the Boards) are wrapping up

that work now. They plan to issue a new revenue recognition standard later this year and new standards

on credit losses and classification and measurement of financial instruments next year. Standards on

leases and insurance contracts will follow. The FASB plans to form transition resource groups for each of

the new standards. Starting as soon as 2017, companies may face the biggest bang of new guidance

they’ve had to adopt in years.

Mr. Golden also is looking beyond the joint projects. He says the FASB will continue to participate in

international standard setting through the Accounting Standards Advisory Forum, while focusing on

“the pressing needs of investors in the US capital markets.” Hot topics include developing a framework

for disclosures and addressing issues in pension and hedge accounting. The FASB will continue to work

with its year-old Private Company Council (PCC) to simplify the accounting for private companies under

US GAAP. Rewriting confusing sections of the Accounting Standards Codification is another priority for

Mr. Golden.

In reviving the role of vice chairman and appointing Mr. Kroeker, the Financial Accounting Foundation

said it was responding to the growing demands on the chairman. Mr. Kroeker, a former chief accountant

of the Securities and Exchange Commission (SEC), filled a vacancy on the Board created when former

Chairman Leslie Seidman’s term ended.

Welcome to the September

2013 Financial reporting

briefs — oil and gas. We’ve

changed the look of our

publication and hope you

like it.

As always, this edition

highlights the latest

developments in financial

reporting and alerts you

to some important

considerations for 2013.

Interested in the latest

developments at the FASB?

We’ve got it covered in the

Accounting update, where

you also can find the status

of the FASB’s major joint

projects with the IASB.

In our Regulatory

developments section,

we offer insights about

the SEC and the PCAOB.

Our Other considerations

section provides you with

other news from the

quarter and a summary of

open comment periods.

Need more information?

Check out our Reference

library, where we list our

recent publications on the

topics discussed here and

provide links to them.

Financial reporting briefs Oil and gas September 2013 | 3

Accounting update

Comments are in on latest proposal on leases

In our comment letter to the FASB and the IASB, we said we were unable to support the Boards’ proposal

on lease accounting because it is unclear to us whether the proposal would significantly improve the

decision-useful information available to financial statement users. We also said it is unclear to us whether

any of the perceived benefits to financial statement users would justify the costs and complexity of

applying the proposal.

Many other constituents also expressed various concerns about cost, complexity and whether the

proposal represents an improvement from today’s accounting. Oil and gas companies expressed

concerns that the cost of complying with the model would outweigh benefits for users. They also raised

questions about the scope of the proposal (e.g., is a drilling rig or a right of way a lease?). It’s unclear

what direction the Boards will take in redeliberations. When the FASB voted last spring to seek comment

on the proposal, three of its seven members dissented, citing various reasons including that it would not

represent an improvement to existing requirements for leases. Ms. Seidman, who retired as chairman

in June, cast the deciding ballot in favor of exposure. Mr. Kroeker could now be the swing vote.

Boards continue work on revenue standard, plan joint transition group

The Boards continue to work on finalizing their new revenue recognition standard. Certain aspects of

the standard have required additional attention during drafting including the measurement of variable

consideration, the assessment and impact of collectibility and the accounting for licenses of intellectual

property. The Boards are targeting a fourth quarter release of the final standard but their ongoing

discussions could cause a further delay if the conclusions reached on any of the open topics cause

meaningful changes to the working language in the standard.

The Boards also announced plans to create a joint transition resource group to discuss implementation

issues and provide information the Boards will use to determine what action, if any, is needed. The group

will not issue guidance of its own.

Noninsurance entities could be affected by the FASB insurance proposal

The FASB has proposed a new accounting model that would apply to all contracts that meet the

definition of an insurance contract, not just those issued by insurance entities. Entities that issue certain

financial guarantees, performance bonds, warranties and indemnities would have to follow the guidance

in accounting for those contracts. Oil and gas entities also will need to consider the implications to

standalone reporting for captive insurance companies and may need to evaluate guarantees of joint

ventures or other partially owned entities, performance bonds in oil field service arrangements and

indemnifications embedded within acquisition contracts, among other contract provisions.

The proposal is aimed at giving users of the financial statements better information about an entity’s

insurance liabilities and promoting comparability by treating arrangements with attributes, risk transfer

and cash flows similar to insurance contracts as insurance contracts. Entities would have to consider

various outcomes to measure the expected cash flows for obligations resulting from contracts in the

scope of the proposal on a discounted basis each reporting period. Revenue would be recognized as

coverage is provided. Claims expense would be recognized when incurred.

The FASB and the IASB issued separate proposals after deliberating jointly and disagreeing on certain

key issues. Comments on both proposals are due by 25 October 2013.

Accounting update

4 | Financial reporting briefs Oil and gas September 2013

New guidance on presentation of unrecognized tax benefits

The FASB issued final guidance requiring unrecognized tax benefits to be offset against a deferred tax

asset for a net operating loss carryforward, similar tax loss or tax credit carryforward in certain

situations. The guidance will likely change the balance sheet presentation of certain unrecognized tax

benefits and deferred tax assets but will not change the way entities assess deferred tax assets for

realizability or disclose tax uncertainties.

The guidance, which is based on a consensus of the Emerging Issues Task Force (EITF), is effective for

fiscal years and interim periods within those years beginning after 15 December 2013 for public entities

and a year later for nonpublic entities. Early adoption is permitted.

New benchmark interest rate for hedge accounting

Entities can now use the Federal Funds Effective Swap Rate (which is the Overnight Index Swap Rate,

or OIS rate, in the US) as a benchmark interest rate for hedge accounting purposes under US GAAP.

Previously, only US Treasury and London Interbank Offered Rate (LIBOR) rates could be used as

benchmark interest rates in hedge accounting.

In issuing the new guidance, which became effective 17 July 2013, the FASB responded to an increase in

demand for hedging exposures to the OIS rate, driven partly by regulations that require collateralization

and central clearing of over-the-counter derivatives. The guidance allows entities to develop new hedging

strategies but doesn’t resolve ineffectiveness issues that arise in existing LIBOR hedges when the OIS rate

is used to discount future cash flows. The guidance is based on an EITF consensus.

Support for FASB proposal on discontinued operations

Comments are in on the FASB’s proposal to raise the threshold for reporting discontinued operations,

allow entities to have continuing operations and cash flows with and significant continuing involvement

in the disposed component and require extensive new disclosures.

In our comment letter, we supported the FASB’s objective to improve the usefulness of financial

statements by raising the threshold for what qualifies as a discontinued operation. However, we

recommended that the FASB consider reporting discontinued operations in pro forma disclosure rather

than on the face of the financial statements. We disagreed with the Board’s decision to exclude from the

definition of a discontinued operation the existing consideration of significant continuing operations and

cash flows with the disposed component. We also expressed concerns about the extensive proposed

disclosures for disposals that do not meet the definition of discontinued operations. Lastly, we did not

object to the Board’s proposal to include oil and gas properties subject to the full cost method in the

scope of discontinued operations if certain conditions are met, including that a complete cost center

must be disposed. .

Disclosure project draws attention

The disclosure framework project is aimed at improving the effectiveness of disclosures in the notes to

financial statements by clearly communicating the information that is most important to users of the

financial statements. The FASB has said that, while its goal isn’t to reduce the volume of notes to

financial statements, sharpening the focus on important information should result in fewer disclosures in

most cases. We have encouraged the FASB to focus directly on addressing disclosure overload and the

extensive disclosure requirements that have caused it. The IASB and the SEC also are reviewing

disclosure requirements.

The Board has decided to separate the entity’s disclosure decision process from the Board’s decision

process. Also, the FASB is seeking volunteers for a field study to test the ability of public and private

companies and not-for-profit organizations to exercise discretion over which disclosures they provide in

notes to their financial statements. Volunteers will be asked to change the notes to their financial

statements based on a set of guidelines the FASB staff provides.

Creating a framework for note disclosures was the top response to a recent Financial Accounting Standards

Advisory Council survey seeking input from stakeholders on projects the FASB should tackle next.

Accounting update

Financial reporting briefs Oil and gas September 2013 | 5

Stay tuned on financial instruments

The FASB has reviewed comment letters on its proposals on classification and measurement of financial

instruments and credit losses and is beginning redeliberations in earnest this month. First up: joint

redeliberations with the IASB on the cash flow characteristics test and business model assessment in

their classification and measurement proposals. The Boards also will try to move closer together on their

approaches to credit losses. The FASB chairman has said he expects the Board to issue final standards

on both topics in early 2014.

Defining a public business entity

The FASB proposed a new definition of a “public business entity” that would be used in future standard

setting, including determining which entities would be eligible to use any private company alternatives

under US GAAP that the FASB and the PCC provide. The proposed definition wouldn’t be used to replace

any language in existing standards. As a result, the Codification would continue to include many different

definitions of public and nonpublic entities. Comments are due by 20 September 2013.

Comments are in on PCC proposals, decision-making framework is final

The comment period has ended for the first three PCC proposals the FASB has issued to provide

alternatives under US GAAP for private companies. The proposals would allow private companies to

simplify their accounting for intangibles acquired in a business combination, goodwill and certain hedges

involving interest rate swaps.

In our letters to the FASB, we expressed support for the goal of simplifying the accounting for private

companies but raised concerns about aspects of each of the proposals. We also said the FASB should

finalize its definition of a public business entity, which will determine the scope of its private company

decision-making framework, before finalizing decisions on the scope of the proposals. The FASB recently

voted to finalize the framework.

FASB proposes PCC’s consolidation alternative

The FASB is seeking comment on a fourth PCC proposal that would allow private companies to elect not

to evaluate whether a legal entity is subject to consolidation under the variable interest entity guidance

when the private company and the legal entity are under common control, they have a leasing arrangement

and substantially all of the activities between them relate to the leasing activity. Comments are due by

14 October 2013.

Fair value disclosure relief for certain private company benefit plans

The FASB indefinitely deferred the requirement for certain employee benefit plans to disclose

quantitative information about the unobservable inputs used to value equity investments in a nonpublic

plan sponsor and the sponsor’s nonpublic affiliates. In doing so, the FASB responded to concerns that

requiring these disclosures could result in a plan revealing proprietary information about the financial

performance of its nonpublic sponsor or the sponsor’s affiliates because financial statements of employee

benefit plans are posted on the US Department of Labor website. The deferral does not apply to plans

that are subject to SEC filing requirements.

Accounting update

6 | Financial reporting briefs Oil and gas September 2013

EITF issues

At its September meeting, the EITF discussed the following issues:

• Determining whether a performance target that can be met after the requisite service period is a

performance condition or a condition that affects the grant-date fair value of the awards

• Determining whether the host contract in a hybrid financial instrument is more akin to debt or to equity

• Accounting for investments in tax credits

Management could have to assess going concern uncertainties

The FASB has proposed requiring management to assess going concern uncertainties and the need for

related disclosures. Disclosures would be required when existing events or conditions indicate that it is:

• More likely than not that the entity will be unable to meet its obligations within 12 months after the

financial statement date

• Known or probable that the entity will be unable to meet its obligations within 24 months after the

financial statement date

Management would consider in its assessment the effect of mitigating conditions and events but would

not take into account plans that are outside the “ordinary course of business.”

SEC filers also would be required to disclose in the notes to the financial statements that there is substantial

doubt about a company’s ability to continue as a going concern when the likelihood of the company being

unable to meet its obligations within 24 months after the financial statement date becomes probable. In this

assessment, management would consider the effects of all of its plans, including plans that are outside the

“ordinary course of business.”

We agree that management should be responsible for identifying, evaluating and disclosing going concern

uncertainties, but we believe that implementation guidance is needed to make the proposal operational.

Comments are due by 24 September 2013.

The proposed requirements would be a big change. Today, the responsibility for assessing a company’s

ability to continue as a going concern rests primarily with the independent auditor. The Public Company

Accounting Oversight Board (PCAOB) is expected to propose revisions to its related rules.

Accounting for income taxes tops list of restatements — again

Accounting for income taxes once again topped the list of causes of restatements in our survey of 2012

results. Revenue recognition and statement of cash flows filled out the top three topics.

Many of the restatements related to accounting for income taxes resulted from the following:

• Incorrect identification or calculation of tax bases

• Misapplication of outside-basis difference exceptions

• Failure to recognize deferred taxes on identifiable intangible assets in a business combination

In our survey, we looked at restatements disclosed in annual financial statements filed in 2012 by public

companies that are audited by the four largest accounting firms. We believe that understanding the

common reasons for restatements can help companies as they perform internal risk assessments and

evaluate their control environments. Management and audit committee members should consider asking

about these topics as they discharge their responsibilities.

Accounting update

Financial reporting briefs Oil and gas September 2013 | 7

Reminders on impairment testing

With many companies now preparing for their annual impairment assessments for goodwill and

indefinite-lived intangibles, we thought it was a good time for some reminders.

First, we want to remind companies that the qualitative impairment assessments, which were introduced

for goodwill in 2011 and indefinite-lived intangibles in 2012, are optional and can be used for any

reporting unit or intangible asset in any period. That is, companies don’t have to use the same approach

for all reporting units or assets, and they can switch back and forth between the quantitative and

qualitative approaches each year. Companies also need to evaluate whether their internal controls and

related processes are up-to-date, are documented and reflect the control activities performed. This

includes any qualitative impairment assessments, if elected.

Companies that have recently completed business combinations should keep in mind that goodwill and

intangible assets they acquired also need to be tested for impairment annually. These companies might

benefit from using the qualitative screen because they have recent evidence of the fair value of the asset

being tested.

We have seen the SEC staff question public companies in comment letters about their impairment testing

of oil and gas properties. Many of these comments relate to whether assumptions used in impairment

testing are consistent with those used for other purposes, such as reserve reporting, capital and

operational budgeting and valuing properties in business combinations.

8 | Financial reporting briefs Oil and gas September 2013

Regulatory developments

Resource extraction rule is vacated, conflict minerals rule is upheld,

A US District Court judge in Washington, D.C. vacated the SEC’s new rule requiring resource extraction

issuers to disclose payments to the US and foreign governments. The court determined the SEC provided

insufficient justification for requiring registrants to make their complete filings of payment disclosures

public, rather than summaries. Opponents of the rule had argued that full disclosure could reveal

sensitive information. The judge also concluded that the SEC didn’t have an adequate rationale for

rejecting an industry request that it provide waivers to companies operating in countries where

governments prohibit such disclosure.

The SEC did not appeal the ruling and will issue a new proposal, though the timing is unclear.

In a separate ruling, the SEC’s new conflict minerals rule was upheld by a US District Court judge in

Washington, who granted the SEC’s motion for summary judgment in a challenge brought by business

groups. While business groups have asked the US Court of Appeals in Washington to review the case,

companies need to continue preparing to comply with the new disclosure, due diligence and audit

requirements.

The rule requires registrants to disclose the use of conflict minerals in their products and whether any of

those minerals originated in certain conflict-ridden regions of Africa and financed or benefited armed

groups. The first disclosures, covering calendar-year 2013, must be filed by 2 June 2014. Both rules

were mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

SEC allows solicitation in exempt offerings, disqualifies ‘bad actors’

The SEC finalized a rule that allows general solicitation and advertising in certain exempt offerings as

required by the Jumpstart Our Business Startups Act. As a result, issuers, hedge funds and other

private entities that raise capital through private offerings can solicit investments from a larger pool

of potential investors.

Under the new Rule 506(c) of Regulation D, entities are required to take “reasonable steps” to verify

that all purchasers meet the SEC’s definition of “accredited investors.” To protect investors, the SEC

finalized a rule disqualifying “bad actors” from participating in exempt offerings under Rule 506 of

Regulation D. The SEC also proposed requiring issuers to provide more information about offerings that

use the new rule on solicitation and advertising so the SEC can evaluate market practices in these

offerings. The SEC also is reviewing and seeking comment on the definition of an “accredited investor.”

New commissioners join SEC, chairman’s term is extended

Michael Piwowar and Kara Stein were sworn in as SEC commissioners after the Senate confirmed their

nominations. The Senate also approved a full five-year term expiring June 2019 for SEC Chair Mary Jo

White, who had been serving the remainder of her predecessor’s term.

Mr. Piwowar, who was the chief economist for the Senate Banking Committee, succeeds Troy Paredes.

Ms. Stein, who was a senior policy adviser and legal counsel to Sen. Jack Reed (D-R.I.), succeeds Elisse Walter.

Regulatory developments

Financial reporting briefs Oil and gas September 2013 | 9

SEC proposes changes to rules on money market funds

The SEC proposed two approaches aimed at minimizing money market funds’ exposure to rapid

redemptions and making the risks of investing in the funds more transparent. One would require all

institutional prime money market funds to operate with a floating net asset value (NAV) and use a more

precise method to price their shares. The other would allow nongovernment money market funds to

impose redemption fees of up to 2% if their weekly liquid assets fall below a certain threshold and allow

fund boards of directors to suspend redemptions for up to 30 days.

The SEC is considering the approaches separately and in combination. It also proposed changing rules

related to diversification, disclosures and stress-testing requirements.

One issue the SEC sought feedback on is whether a floating NAV would preclude shareholders from

classifying their investments in money market funds as cash equivalents. The SEC said in the proposal that

it doesn’t believe a floating NAV alone would preclude this treatment “because fluctuations in the amount

of cash received upon redemption would likely be insignificant and would be consistent with the concept of

a ‘known’ amount of cash.” We agree that money market funds could still be considered cash equivalents

under the two approaches proposed by the Commission, but we urged the SEC in our comment letter to

work with the accounting standard setters to consider whether additional guidance is necessary.

Several groups representing state and local governments and infrastructure development agencies have

asked the SEC to hold a roundtable discussion on the proposal.

NYSE to give new public companies relief on internal audit rule

The New York Stock Exchange (NYSE) will give companies listing their securities on the exchange for the

first time in connection with an initial public offering or an initial Exchange Act registration statement

(e.g., a spin-off) a year to comply with its requirement that listed companies have an internal audit

function. The exchange already provides this relief to companies that transfer to the NYSE from another

national exchange that does not have an internal audit requirement.

In proposing the change, the NYSE said the proposal would benefit investors by reducing a company’s

costs in its first year as a public company and would make the company’s implementation of its internal

audit function more effective by giving a newly appointed audit committee time to understand the

company’s processes. The SEC approved the change.

SEC steps up use of technology to fight fraud

The SEC has launched three enforcement initiatives to use technology and analytics to identify high-risk

areas in the market:

• Establishing the Financial Reporting and Audit Task Force to detect fraud

• Creating the Microcap Fraud Task Force to focus on fraudulent conduct in the microcap securities market

• Establishing the Center for Risk and Quantitative Analytics to work closely with other divisions to

identify patterns that could indicate potential fraud or misconduct

The initiatives underscore the SEC’s renewed focus on accounting fraud.

Regulatory developments

10 | Financial reporting briefs Oil and gas September 2013

PCAOB proposes changes to the auditor’s reporting model

The PCAOB proposed two standards and related amendments that would enhance the auditor’s

reporting model and the auditors’ responsibilities related to information in a company’s annual report

outside the financial statements. The proposal would retain today’s pass/fail approach but also would

require auditors to:

• Identify “critical audit matters” that involve the most difficult, subjective or complex auditor

judgments, describe what led the auditor to determine that a matter is critical and, when applicable,

refer to the relevant financial statement accounts and disclosures

• Provide information on auditor independence, auditor tenure and the auditor’s responsibilities to

evaluate information outside the financial statements along with the results of that evaluation

• Provide information on the auditors’ responsibilities for the financial statement notes and the risk of

material misstatement due to fraud

The proposal also would require auditors to perform additional procedures to evaluate, based on

evidence gathered during the audit, whether information outside the financial statements contained

material inconsistencies with amounts or information in the financial statements, a material

misstatement of fact or both. Information outside the financial statements would include, for example,

management’s discussion and analysis and, in certain cases, a definitive proxy statement.

The proposed standards would be effective, subject to SEC approval, for audits of financial statements

for fiscal years beginning on or after 15 December 2015. Comments are due by 11 December 2013.

Transition to new COSO framework

When the Committee of Sponsoring Organizations of the Treadway Commission (COSO) released the

Internal Control — Integrated Framework: 2013, it said it will make the 1992 framework available until

15 December 2014, when it will consider the 1992 framework superseded. As a result, questions have

arisen about whether issuers can continue to use the 1992 framework to assess internal control over

financial reporting (ICFR) after COSO’s transition date.

Our understanding is that the SEC staff intends to allow issuers to use the 1992 framework for ICFR

assessments for a period of time after COSO’s transition date. However, the longer issuers use the 1992

framework, the more likely they are to face questions from the SEC staff.

Given the recent focus by the SEC and the PCAOB on the assessment of a company’s ICFR, we believe

the issuance of the updated framework provides an opportunity for companies to consider

improvements in the design, operation and assessment of their systems of internal control. For example,

companies may find it helpful to:

• Consider the updated framework as they evaluate whether their review controls are operating

effectively to address risks of material misstatement in the financial statements

• Consider the guidance about information quality as they evaluate whether the information used in the

operation of controls, such as electronic audit evidence, is sufficient to allow the controls to operate

as designed

Financial reporting briefs Oil and gas September 2013 | 11

Other considerations

Updated guide on valuing private company stock

The American Institute of Certified Public Accountants (AICPA) has

issued a new Accounting and Valuation Guide that updates its 2004

Practice Aid on valuing private company equity securities issued as

compensation.

The SEC staff historically has said that companies planning initial

public offerings should follow the recommendations in the AICPA’s

Practice Aid. New information in the Guide addresses the growth of

secondary markets (e.g., platforms for certain investors to buy and

sell securities of privately held companies), changes in valuation

practices and other developments since the Practice Aid was issued

nine years ago.

Highly inflationary economies

The SEC staff has indicated that companies should treat the

following countries as highly inflationary economies, as defined

under US GAAP:

Venezuela

Belarus

South Sudan

Summary of open comment periods

Proposal Comment period ends

Definition of a public business entity 20 September 2013

Going concern 24 September 2013

Applying variable interest guidance to common control leasing arrangements

14 October 2013

Insurance contracts 25 October 2013

Changes to the auditor’s reporting model 11 December 2013

12 | Financial reporting briefs Oil and gas September 2013

Effective date highlights

Public companies

Effective in 2013 (for public calendar year-end companies) Effective beginning ASU 2013-10 — Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes (EITF Issue 13-A; ASC 815)

Effective for qualifying new or redesignated hedging relationships entered into on or after 17 July 2013

Q3 2013

ASU 2013-02 — Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (ASC 220)

Fiscal years (and interim periods within those years) beginning after 15 December 2012

Q1 2013

ASU 2013-01 — Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities (ASC 210)

Annual reporting periods beginning on or after 1 January 2013 (and interim periods within those annual periods)

Q1 2013

ASU 2012-04 — Technical Corrections and Improvements Amendments subject to transition guidance are effective for fiscal periods beginning after 15 December 20121

Q1 2013

ASU 2012-02 — Testing Indefinite-Lived Intangible Assets for Impairment (ASC 350)

Fiscal years beginning after 15 September 20122

Q1 2013

ASU 2011-11 — Disclosures about Offsetting Assets and Liabilities (ASC 210)

Annual reporting periods beginning on or after 1 January 2013 (and interim periods within those annual periods)

Q1 2013

ASU 2011-10 — Derecognition of in Substance Real Estate — a Scope Clarification (EITF Issue 10-E; ASC 360)

Fiscal years (and interim periods within those years) beginning on or after 15 June 2012

Q1 2013

Effective after 2013 (for public calendar year-end companies) Effective beginning

ASU 2013-11 — Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (EITF Issue 13-C; ASC 740)

Fiscal years (and interim periods within those years) beginning after 15 December 2013 Q1 2014

ASU 2013-07 — Liquidation Basis of Accounting (ASC 205) Effective for entities that determine liquidation is imminent during annual reporting periods beginning after 15 December 2013 (and interim reporting periods therein)

Q1 2014

ASU 2013-06 — Services Received from Personnel of an Affiliate (EITF Issue 12-B; ASC 958)

Fiscal years beginning after 15 June 2014 (and interim and annual periods thereafter)

Q1 2015

ASU 2013-05 — Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity (EITF Issue 11-A; ASC 830)

Fiscal years (and interim periods within those fiscal years) beginning after 15 December 2013

Q1 2014

ASU 2013-04 — Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation is Fixed at the Reporting Date (EITF Issue 12-D; ASC 405)

Fiscal years (and interim periods within those fiscal years) beginning after 15 December 2013 Q1 2014

1 Amendments that were not subject to transition guidance were effective upon issuance (1 October 2012). 2 The amendments are effective for annual and interim impairment tests performed for fiscal years beginning after 15 September 2012.

Effective date highlights

Financial reporting briefs Oil and gas September 2013 | 13

Private companies

Effective in 2013 (for private calendar year-end companies) Effective beginning

ASU 2013-10 — Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes (EITF Issue 13-A; ASC 815)

Effective for qualifying new or redesignated hedging relationships entered into on or after 17 July 2013

2013

ASU 2013-09 — Deferral of the Effective Date of Certain Disclosures for Nonpublic Employee Benefit Plans in Update No. 2011-04 (ASU 820)

Effective upon issuance (8 July 2013) 2013

ASU 2013-03 — Clarifying the Scope and Applicability of a Particular Disclosure to Nonpublic Entities (ASC 825)

Effective upon issuance (7 February 2013) 2013

ASU 2013-01 — Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities (ASC 210)

Annual reporting periods beginning on or after 1 January 2013 (and interim periods within those annual periods)

2013

ASU 2012-02 — Testing Indefinite-Lived Intangible Assets for Impairment (ASC 350)

Fiscal years beginning after 15 September 20123

2013

ASU 2011-11 — Disclosures about Offsetting Assets and Liabilities (ASC 210)

Annual reporting periods beginning on or after 1 January 2013 (and interim periods within those annual periods)

2013

ASU 2011-10 — Derecognition of in Substance Real Estate — a Scope Clarification (EITF Issue 10-E; ASC 360)

Fiscal years ending after 15 December 2013 (and interim and annual periods thereafter)

2013

Effective after 2013 (for private calendar year-end companies) Effective beginning

ASU 2013-11 — Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (EITF Issue 13-C; ASC 740)

Fiscal years (and interim periods within those years) beginning after 15 December 2014

2015

ASU 2013-07 — Liquidation Basis of Accounting (ASC 205) Effective for entities that determine liquidation is imminent during annual reporting periods beginning after 15 December 2013 (and interim reporting periods therein)

2014

ASU 2013-05 — Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity (EITF Issue 11-A; ASC 830)

Fiscal years beginning after 15 December 2014 (and interim and annual periods thereafter)

2015

ASU 2013-04 — Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation is Fixed at the Reporting Date (EITF Issue 12-D; ASC 405)

Fiscal years ending after 15 December 2014 (and interim and annual periods thereafter)

2014

ASU 2013-02 — Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (ASC 220)

Fiscal years beginning after 15 December 2013 (and interim and annual periods thereafter)

2014

ASU 2012-04 — Technical Corrections and Improvements Amendments subject to transition guidance are effective for fiscal periods beginning after 15 December 20134

2014

4 The amendments are effective for annual and interim impairment tests performed for fiscal years beginning after 15 September 2012. 4 Amendments that were not subject to transition guidance were effective upon issuance (1 October 2012).

14 | Financial reporting briefs Oil and gas September 2013

Reference library

To the Point • FASB proposes new definition of a public company for future

standard setting (8 August 2013)

• Boards near completion of the revenue recognition standard (25 July 2013)

• Presentation of unrecognized tax benefits (18 July 2013)

• Private company framework approved, PCC proposes consolidation alternative (18 July 2013)

• Companies can use a new benchmark interest rate for hedge accounting (17 July 2013)

• SEC allows general solicitation and disqualifies ‘bad actors’ (11 July 2013)

• Fair value disclosure relief for nonpublic employee benefit plans (10 July 2013)

• FASB seeks comment on three Private Company Council proposals (3 July 2013)

• Management would have to assess going concern uncertainties (28 June 2013)

• Accounting for insurance contracts could change significantly (27 June 2013)

Technical Line • Movin’ on up to accelerated filer status: You’ll need an audit of

ICFR for this year (22 August 2013)

• Insurance contracts proposal would overhaul accounting and disclosures for insurers and others (22 August 2013)

• How the lease accounting proposal might affect your company (25 July 2013)

• Reminders about ‘cheap stock’ as AICPA issues new Guide (11 July 2013)

Financial reporting developments • Certain investments in debt and equity securities (26 July 2013)

• Fair value measurement (18 July 2013)

• Foreign currency matters (18 July 2013)

• Consolidation and the Variable Interest Model: Determination of a controlling financial interest (20 June 2013 )

• Transfers and servicing of financial assets (20 June 2013)

• Issuer’s accounting for debt and equity financings (12 June 2013)

Comment letters • FASB/IASB proposal on leasing (13 September 2013)

• SEC money market proposal (12 September 2013)

• Reporting discontinued operations (26 August 2013)

• Accounting for identifiable intangible assets in a business combination, a proposal of the Private Company Council (23 August 2013)

• Accounting for goodwill, a proposal of the Private Company Council (23 August 2013)

• Accounting for certain receive-variable, pay-fixed interest rate swaps, a proposal of the Private Company Council (23 August 2013)

• Technical corrections and improvements related to glossary terms (25 July 2013)

• PCAOB reproposal on related party transactions (8 July 2013)

• Private company decision-making framework (21 June 2013)

Other • EITF Update — September 2013 (16 September 2013)

• Second quarter 2013 Standard Setter Update (18 July 2013)

• Quarterly tax developments — June 2013 (17 July 2013)

• SEC in Focus — July 2013 (3 July 2013)

• EITF Update — June 2013 (12 June 2013 )

• Board Matters Quarterly — Critical insights for today’s audit committee — June 2013 (12 June 2013)

On-demand webcasts • IASB’s revised ED on Insurance Contracts — Hosted by the EY

Global Insurance Center (10 July 2013, Duration 01:00)

• Leases exposure draft: understanding the proposal (5 June 2013, Duration 01:00)

Click on any of the EY publications below, all of which

are available free of charge on AccountingLink at www.ey.com/us/accountinglink.

EY | Assurance | Tax | Transactions | Advisory

© 2013 Ernst & Young LLP.

All Rights Reserved.

SCORE No. BB2616

ey.com/us/accountinglink

About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com.

Ernst & Young LLP is a client-serving member firm of Ernst & Young Global Limited operating in the US.

This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice.