Accounting principles for development costs for oil and gas operators in Vietnam

Accounting principles for development costs for oil and gas operators in Vietnam (Internet image)

Clause 2, Article 7 of Circular 107/2014/TT-BTC stipulates the accounting principles for development costs for oil and gas operators in Vietnam as follows:

- Oil and gas development costs are all direct and indirect costs relating to development of one or more oil and gas wells within a development area as prescribed by the oil and gas agreement.

- Where the oil and gas agreement prescribes the following earnings recorded as decreases in oil and gas development costs, the O&G Operator is entitled to do so in accordance with the oil and gas agreement (after totally discharging obligations to the State Bank in accordance with laws and regulations where applicable):

+ Earnings derived from the produced oil and gas which can be used for offsetting oil and gas development costs;

+ Earnings derived from insurance or indemnity directly related to the oil and gas development process;

+ Earnings derived from subletting of assets to third parties which are directly related to the oil and gas development process;

+ Earnings derived from liquidation of assets directly related to the oil and gas development process;

+ Other costs directly related to oil and gas development operations.

- When the validity term of the oil and gas agreement ends, the O&G Operator must keep final accounts of oil and gas development costs and those costs which have already been recovered. Positive difference between the amount of oil and gas development costs in one side and the amount of costs actually recovered in the other side shall be recorded as a decrease in portions of capital contribution made by contracting parties.

- The O&G Operator shall consolidate and keep track of details of recoverable oil and gas development costs and costs which are not recovered under specific terms and conditions of oil and gas agreement. The O&G Operator can divide the Account 247 – Oil and gas development costs – into secondary or tertiary accounts where appropriate for its managerial requirements.

More details can be found in Circular 107/2014/TT-BTC, which comes into force from January 1, 2015.

Thuy Tram

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