Accounting for the Extractive Industries: Controversies and a Need for Harmonisation

The oil and gas industry is international in nature and being operated, in most, by multinational companies. However, accounting for the activities of the oil and gas industry is being practiced by using different methods. These methods produce incomparable results which makes it hard for users of thes companies’ accounts to make investments decissions. In this paper, we demonstrate the differences in accounting practices by oil and gas industry via an extensive literature review. Historically, there has been a number of attempts by accounting bodies to harmonise accounting practices by extractive industries, howeever these attempts have not been successful. We highlight the historical controversies sourounding accounting for the oil and gas industry and we make a call on the International Accounting Standard Board to produce a comprehensive accounting standard for the extractive industries in general, and the oil and gas industry in particular. Such a standard would unify accounting practices by oil and gas companies and act as a common language that companies use when preparing their accounts.