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Drilling For More Time

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Companies across numerous industries are preparing for implementation of the FASB’s new lease accounting standard in 2019. The new standard requires companies to analyze their lease commitments to determine if they need to be recognized on the balance sheet as a right-of-use asset and a corresponding liability. One industry finding this process more difficult than anticipated is oil and gas. Recently, The American Petroleum Institute approached FASB to request a two year extension on the lease standard implementation.

The group claims that the oil and gas industry needs more time given the nature and range of its asset groups and contract structures. Drilling contracts tend to be large and technically complex, challenging companies to correctly ascertain the rights and uses of the assets involved, such as pipelines, drilling rigs, and railcars. As a result, companies in the industry have faced increased human judgment in applying this standard, which has consumed time and resources, causing many to fall behind.

FASB says it will consider the request made by the group, but made no promises. Berntson Porter will continue to follow any developments.