Exxon Mobil accounting practices under scanner
17 September 2016
New York attorney general Eric Schneiderman has a tough job on his hand building a case against Exxon Mobil Corp for not writing down assets due to the oil-price slump as the energy companies had enjoyed a certain amount of laxity in accounting practices under US rules, accounting experts said.
Schneiderman is investigating the oil giant's accounting practices and why it had not taken write-downs even while oil prices had fallen, Reuters reported citing a source.
In the aftermath of the steep oil price drop of more than 60 per cent since 2014, many integrated oil producers around the world were forced to write down the value of their wells, leases and equipment, with Exxon being the only major exception. Oil in many wells could no longer be profitably recovered, and failing to write them down could give a misleading picture of the financial health of a company.
However, according to accounting experts, it was far from clear that Exxon's lack of write-downs signalled any wrongdoing.
Accounting rules gave companies a choice of methods for valuing and impairing their assets, and write-downs could vary widely on the method used and other factors, they said, Reuters reported.
Though rival energy companies had since 2014 slashed $200 billion off their combined holdings, Exxon Mobil Corp had for years kept the of its huge oil and gas reserves steady even as energy prices slumped.
The Irving, Texas-based company said it was extremely conservative in booking the value of new fields and wells, which reduced its need to reduce the value of its assets if falling prices later weighed on the reserves' value, Exxon said.
Last year, Exxon chief executive Rex Tillerson told trade publication Energy Intelligence that the company had avoided write-downs as it placed a high burden on executives to ensure that projects could work at lower prices, and held them accountable.