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

BG Group plc Accounting - Coursework ExampleOf the three occupation segments of the company, the E&P segment is the largest in bournes of non-current assets subject to impairment issues. Oil and bluster exploration is a detonator intensive activity and all costs incurred are capitalized as intangible assets until anele or gas is discovered. Once the reserves are proven, these costs are transferred to property, plant and equipment in the company balance sheet. cost incurred on unsuccessful oil and gas handle are written off in the in the income statement (BG Report 2011, pp 89).This method of accounting based on successful efforts is not a term defined 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 at one time a year for impairment. A s on 31 December 2011, BG Group held a balance of $ 4,383 billion 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 merchandising arrangements (BG Report 2011, pp90). This disclosure is not usually made in Oil company reports (KPMG, 2008) and is therefore an good on industry practice.BG plc uses the net present value of future cash flows for impairment assessment development certain 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 testing of oil and gas properties is based on assessment of proven and probable reserve estimates using the SEC definit ion (BG