OT02200 | Oil Industry accounting: disclosure of commercial reserve quantities

Commercial reserves are not recorded in the statement of financial position unless they have been acquired from another entity or by way of a business combination. Instead, they are reflected through the recording of the cost of their discovery and development - see OT02030.

However, commercial reserves are a key indicator of the financial performance and strength of oil and gas producers and can be used in several areas including when:

• determining rates of depreciation and amortisation;

• conducting impairment tests; and

• allocating the purchase price in business acquisition.

The quantum of commercial reserves may be shown by way of supplementary note in the annual report and accounts of an oil and gas exploration and producing company. An example of such disclosure would comprise reserves that are proved developed and proved undeveloped.