Reference no: EM132465123

Question

Problem (a) Discuss the major differences between impairment rules for proved properties and unproved properties for successful efforts companies.

Problem (b) Sandman Oil Company, a successful efforts company, has three fields, A, B, and C. Costs and cash flows for the three fields are as follows:

                                                              Field A                   Field B                             Field C

Net capitalized costs                           4,000,000            5,000,000                6,000,000

Expected undiscounted future cash flows 4,500,000            4,000,000                5,000,000

Expected discounted future cash flows      3,850,000           3,900,000                 3,700,000

Question 1: For each field (1) determine if impairment is required, and (2) if applicable, calculate the amount of the impairment