Image of oil platform while cloudless day. Oil platform on sea is offshore structure with facilities to drill wells, extract and process oil and natural gas and temporarily store produced goods until it can be brought to the shore for refining.

Mandate for Maurel & Prom: Accounting treatment of risk hedging on oil prices

Background/Issues

Oil price is very volatile. The company is encouraged by its banks to put in place hedging financial instruments. However the low volumes hedged can not justify the implementation of a very sophisticated risks reporting sytem.

Nevertheless, IAS/IFRS constraints apply with the same level of requirements than for groups with higher volumes.

Scope and Target audience

Review of all hedging transactions in place

Audit of hedging’s processus

Validation of measurements realized by the banks

Work on three period-ends : one yearly and two half-yearly

Interventions modalities and learning tools

Auditing of entries’ schemes

Auditing of measurements used at three accounting period-ends to validate datas

Project management : communication, Internet web-site, information, …

Outcomes

Proposition of processus’s improvements

Securization of accounting treatment