Research On The Accounting Standard About The Upper Reaches Activity In Extracting Industries

Extracting industry is to discover and remove the mineral resources, such as petroleum, natural gas from the earth surface or underground, etc. The industries have the characteristics of the high risk, long investment span, capital intensity and the complexity in accounting service. These characters mainly reflect in upper reach activities as exploration, plan development, mining and abolish. Many countries have already developed oil and gas accounting standards and related regulations. This thesis gave an overall analysis of the necessity and feasibility about developing Accounting Standard in Chinese extracting industries in the upper reach activities. At the same time, this analysis is done with consideration on those special problems about accounting Standard establishment. These problems include the recognition and measurement of mineral resources assets and the publicity of the accounting information.The Accounting Standard in extracting industries should take into account of the eight principles, The application range of this standard should apply in getting the rights of mineral area, exploration, development, mining and mineral area abandon activities of mineral resources in extracting industries. And the definition of related terms should apply "Accounting Standard No.27: Mining Activities in oil and gas Industry" and draw some method of "IASB .IFRS No.6: Exploration and Evaluation of Mineral Resources". The major contents of this standard should be within the limits of special accounting recognition, measurement and report in extractive industries. As to the contents beyond special business in extractive industries, should adopt other related accounting standards.Paper proposed that the high risk of extracting industries on the upper reach activities occurred at the exploration stage. So at the stage of exploration, the measurement method of mineral resources assets is suitable for successful efforts, at other stages, it is suitable for full cost. The thesis has concluded that the mineral mountain land rent is equal to the cost of getting mining right minus the cost of the geological survey minus the cost of development. The major reason that causes the deviation between capital costing and the value of mineral resources assets is the deference between the cost of getting mining right (deduct the cost of the exploration)plus the cost of development and the cost of land rent of mineral mountain, not is the essential defects of measurement attribution of historical cost. The measurement of the mineral resources assets should consider the attribution of historical cost.This thesis has proposed the fees of exploitation and mining rights. The mineral resource compensation should be capitalized in order to minimize the difference between the capitalization costing and the value of mineral resources reflecting the request of the sustainable development.This thesis has proposed the accounting standard of upper reach activities in Chinese extracting industries. The historical cost with reserves quantity and the information publication based on the reserves should reveal recovery and mining ratio without revealing fluctuation in the reserves.This thesis has proposed the framework about upper reach activities of Accounting Standard in extractive industries from many useful references, such as, "Accounting Standard No.27: Mining Activities in oil and gas Industry", "the principle of Chinese accounting international coordination", "The American oil and gas accounting standard", "IASC .November. Issues Paper: Extractive Industries" and "IASB. IFRS No.6: Exploration and Evaluation of Mineral Resources".