No IFRS consistency in oil and gas sector says KPMG

KPMG has said that oil and gas comapnies are not achieving full consistency in their accounting under IFRS.

The firm's survey ‘The Application of IFRS: Oil and Gas’ examined the financial statements of 33 oil and gas companies from 14 countries, finding flaws across a range of issues, including accounting, classification and terminology.

Jimmy Daboo, KPMG’s Global Head of Energy & Natural Resources for auditing and accounting said: 'The oil and gas industry is one of the most international and so stands to benefit significantly from the application of a consistent global accounting framework such as IFRS.

'Since the introduction of IFRS into the industry three years ago, there has been progress – but not enough to give analysts and investors the full level of transparency that IFRS promises.'

IFRS can cause massive volatility in value of derivatives linked to oil, gas and petroleum contracts because they have to be recorded at fair value.

Last week, BP, regarded as one of the best in terms of its disclosures, presented its third quarter results and entered into a comprehensive explanation of the effects of fair value on its derivatives.

Daboo added that all oil and gas companies should be held to such high standards:
'With continued volatility of the oil price, and a steady flow of acquisitions and disposals by oil and gas companies, it’s now more vital than ever that oil and gas companies focus on the quality and comparability of financial and reserves information.'