Provisions for Oil and Gas Decommissioning Costs: Compliance with Disclosure Requirements by Oil and Gas Companies Listed in the UK

Due to their complications in terms of uncertainty and calculations provisions for oil and gas decommissioning costs are not easy to be understood and interpret by users of no accounting and finance background. Furthermore, due to their significant sizes, cash outflow effect and importance for decision making disclosing more detailed information seem to be ideal requirement to simplify these complications. This study raises, almost for the first time, queries about compliance, sufficiency, uniformity and fairness of oil and gas companies’ disclosure practices with regard to provisions for decommissioning costs. In order to provide answers to the research quires, annual reports of 69 oil and gas companies listed in the UK were analysed and thirteen interviews with different professionals were conducted. Our results reveal that whilst there is sufficient standards to regulate accounting for provisions for decommissioning costs there seems to be lack of compliance with requirements of international accounting standards in terms of disclosing information on provisions for decommissioning costs. In many cases, and probably due to their sensitive nature, we found that oil and gas companies tend to disclose a minimum amount of information about provisions for decommissioning costs.