Properties of Accounting Numbers Under Full Costing and Successful-Efforts Costing in the Petroleum Industry.

Abstract The article focuses on properties of accounting numbers in costing in petroleum industries. Financial reporting and accounting practices used in the petroleum industry differ both among firms within the industry and also from practices of other industries in several respects. One area of difference is accounting for prediscovery costs. Because such costs are relatively large and because a large degree of uncertainty is associated with the potential benefits sought by incurrence of such costs, this area has provoked many practices; most can be grouped either as successful-efforts costing or full-costing practices. The practice of capitalizing only those prediscovery costs, which are directly identifiable with discovery of a commercial reserve and treating all other costs as operating expense is referred to as successful-efforts costing. On the other hand, the practice of capitalizing all prediscovery costs irrespective of their result is called the full-costing method. The study described in the paper is an attempt to analyze the effect of using the alternative methods on various accounting variables.