Evaluate two methods of accounting for predevelopment cost

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The major controversy relating to accounting for the upstream activities of the oil and gas industry concerns the accounting for predevelopment costs. The two principal methods which the industry uses in dealing with these costs, under historical cost convention, are the successful efforts and full cost methods of accounting. The situation is further compounded by the wide range of alternatives that exist in their detailed application and the types of companies which favour each method.

Question 1: Critically discuss and evaluate the two methods of accounting for predevelopment costs and their associated application problems, stating the types of company preferring each and the reasons for their preference.

Reference no: EM132519412

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