IMPACT OF OIL AND GAS ACCOUNTING ON ACCOUNTING PRACTICE IN NIGERIA: (A STUDY OF SHELL NIGERIA PLC)

IMPACT OF OIL AND GAS ACCOUNTING ON ACCOUNTING PRACTICE IN NIGERIA: (A STUDY OF SHELL NIGERIA PLC)

ABSTRACT

This study examines the impact of oil and gas accounting and reporting on the organisation and to the Nigerian accounting practice using Shell Development Petroleum Company as a case study. The study was conducted using the Chi-square. The elements were selected by means of random and stratified sampling technique. Data were gathered from primary and secondary sources. Data collected were presented using tables and analyzed using the Chi-square analysis. It was found from the study that Oil and gas accounting practice in Nigeria is standardized in line with International Financial Reporting Standard; the challenges facing oil and gas accounting in Nigeria is low while the prospect of oil and gas accounting is high

The study recommended that the International Financial Reporting Standard be adopted by countries that are yet to standardized their oil and gas accounting information. It also recommended that oil and gas accounting software be developed in line with the IFRS requirements and standards to ease the complexities involved in the nature of oil and gas accounting.

TABLE OF CONTENTS

Title Page

Approval Page……………………………………………………………………………... I

Declaration……………………………………………………………………………...       II

Dedication………………………………………………………………………………      III

Acknowledgement……………………………………………………………...............       IV

Abstract………………………………………………………………………………...       V

Table of Contents …………………………………………………………………………VI

List of Tables………………………………………………………………………..            IX

CHAPTER ONE: INTRODUCTION

1.0     Introduction ………………………………………………………………………...   1

1.1   Background of the Study…………………………………………………………...      1

1.2   Statement of Problem      …………………………………………………………….. 3         

1.3  Objectives of Study………………………………………………………………..   3

1.4  Research Questions……………………………………………………………...           4

1.5  Research Hypothesis………………………………………………………………   4  

1.6  Significance of the Study…………………………………………………………..       5

1.7   Scope of the Study…………………………………………………………………

1.8  Definition of Terms……………………………………………………………….          6

CHAPTER TWO:LITERATURE REVIEW

2.0      Introduction……………….………………………………………………………..  7

2.1        Theoretical Framework………………………………………………………….      10

2.2        Conceptual Framework ………………………………………..............................   14

2.3        Empirical Framework……………………………………………………………     21

2.4        Challenges of Oil and Gas Accounting Practice in Nigeria and Solutions...………..41

2.5        Concept of Best Practices in Accounting // ……………………………………….  42

2.6        Shell Petroleum Development Company, SPDC: An Overview .............................. 45

            References ………………………………………………………………………..   49

CHAPTER THREE:  METHODOLOGY

3.0       Introduction………………………………………………………………………..  54

3.1       Area of Study ……………………………………………………………………...  54

3.2       Research Design…………………………………………………………………… 5 4

3.3       Population of Study ………………………………………………………………... 54

3.4       Sample Procedure and Sampling Size ……………………………………………   .55

3.5       Research Instrument ………………………………………………………………… 55

3.6       Method of Data Collection ………………………………………………………….. 55

3.7       Method of Data Analysis ……………………………………………………………. 55

3.8       Validation of Instrument …………………………………………………………  …56

CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS

4.1        Data Presentation and Analysis……………..……………………………………    57

4.2       Test of Hypotheses …………………………..………………………………….     59

4.3       Discussion of Findings …………………………………………………………...    64 

CHAPTER FIVE: SUMMARY, CONCLUSION AND   RECOMMENDATIONS

5.1        Summary of Findings…………………………………………………………….    68

5.2        Conclusion……………………………………………………………………….     68

5.3        Recommendations…………………………………………………………………  68

References …….……………………………………………………… 70

 ResearchWap ProjectTopics

CHAPTER ONE

INTRODUCTION

1.0     INTRODUCTION

Accounting regulatory bodies usually formulate industry specific standards when an industry has peculiar characteristic of accounting for banks and non-bank financial institutions.

The oil and gas industry is one of such industries that has specific accounting standards. This can be attributed to its peculiarity interms of high capital  requirement, earning volatility, regulation, type of business ownership, taxation, non-correlation between the amount of investment made and returns obtained (Wright and Hallun et al, 2008)  and high sensitive to risk - price risk and foreign exchange risk.

Before 2012 when the International Financial Reporting Standard (IFRS) was adopted by exploration companies in Nigeria, Nigerian companies in the upstream sector prepared their financial statements in line with the statement accounting standard 14 (accounting in the petroleum industry; upstream activities) and SAS 17 (accounting in the petroleum industry) formulated by the Nigerian Accounting Standard Board.

With its adoption of IFRS, Nigeria joined over 100 countries that either use or have adopted the accounting guidelines as stipulated by the International Accounting Standard Board (IASB). This will ensure harmony and easy comparison of financial statements. This is particularly useful in the oil and gas industry considering that it is one of the most global industries. The adoption of a common accounting framework also widens access to investment opportunities.

1.1     BACKGROUND OF THE STUDY

The oil and gas industry is one of such industries that has specific accounting standards. This is as a result of its peculiarity in terms of high capital requirement, earnings violability, regulation, type of business ownership, taxation, non-correlation between the account of investment made and returns obtained (Wright and Gullen et al, 2008) and high sensitivity to risk like price risk and foreign exchange risk etc.

Therefore, when the international Financial Reporting Standards (IFRS) was adopted by exploration companies in Nigeria, it became imperative for oil and gas companies in the sector to prepare financial statements in line with the statement of accounting standards.

Upstream oil and gas organizations must meticulously record, track, distribute and report sales of oil and gas and other products. Accurate and timely oil and gas revenues accounting require tracking complex contracts and owner lease agreements. It must also reflect joint venture and capital expenditure accounts among others.

The nature of the complexity of the oil and gas operations makes the nature of its accounting reporting even more complex by new challenges such as horizontal drilling etc.

The research, therefore, intends to explore the nature of oil and gas accounting in Nigeria, challenges and solutions.

1.2     STATEMENT OF THE PROBLEM

The complex nature of the operations of the upstream oil and gas industry makes the oil and gas accounting more complex in nature. However, the International Financial Reporting Standards (IFRS) requires that oil and gas companies in the upstream sector prepare their financial statement in-line with the statement of accounting standards 14 (accounting in the petroleum industry; upstream activities) andSAS 17 (accounting in petroleum) formulated by the Nigerian Accounting Standard Board. This is as a result of the guidelines stipulated by the International Accounting Standard Board (IASB)

However, oil and gas accounting is made increasingly difficult by new challenges and risks such as horizontal drilling, price risk, foreign exchange risk etc. Research work into the various accounting standards needed in this particular industry have not been detailed and thorough.

This research seeks to investigate the practice of oil and gas accounting in Nigeria, understand its operation and determine what extent it has been standardized to help move the industry forward to international standards

1.3     OBJECTIVES OF THE STUDY

The study seeks the following objectives:

1.         To determine if oil and gas accounting is standardized in Nigeria

2.         To examine the challenges of oil and gas accounting in Nigeria and proffering solutions

3.         To evaluate the prospects of oil and gas accounting in Nigeria.

1.4     RESEARCH QUESTIONS

The following research questions were formulated:

1.         Is oil and gas accounting standardized in Nigeria?

2.         Are there challenges in oil and gas accounting in Nigeria?

3.         Are there prospects for oil and gas accounting in Nigeria?

1.5     RESEARCH HYPOTHESIS

Hypotheses are usually gotten from research questions/problems and can be regarded as tentative solutions to research questions. Therefore, the researcher will test the following hypotheses

H1        Oil and gas accounting practice is standardized in Nigeria

H2        There are no challenges in oil and gas accounting in Nigeria

H3        Oil and gas accounting has huge prospects in Nigeria

1.6     SIGNIFICANCE OF THE STUDY

1.         It will help oil and gas companies know what relevant accounting standards they need to be up to standard in the Nigerian reporting environment.

2.         it will help relevant agencies know what is expected from oil and gas companies in terms of accounting  reporting

3.         It shall serve as reference material for accounting professionals and practitioners seeking more knowledge.

4.         It shall serve as a basis for further study.

1.7     SCOPE OF THE STUDY

The study seeks to evaluate the impact of oil and gas accounting practice in Nigeria and Shell Nigeria was used as the case study for this research

1.8     DEFINITION OF TERMS

Accounting: Accounting is the systematic and comprehensive recording of financial transactions pertaining to a business, and it also refers to the process of summarizing, analyzing and reporting these transactions to relevant regulating agencies and tax collection entities. Oil and Gas: Oil and natural gas are naturally occurring chemicals that are made up of just two elements -- carbon and hydrogen.

Accounting Practice: This is the system of procedures and controls that an accounting department uses to create and record business transactions. Accounting practice should ideally be extremely consistent, since there are a large number of business transactions that must be dealt with in exactly the same manner in order to produce consistently reliable financial statements.

IFRS: International Financial Reporting Standards (IFRS) are a set of accounting standards developed by the International Accounting Standards Board (IASB) that is becoming the global standard for the preparation of public company financial statements.

IASB: The International Accounting Standards Board (IASB) is an independent, private-sector body that develops and approves International Financial Reporting Standards (IFRSs). The IASB operates under the oversight of the IFRS Foundation.

SAS: SAS (Statistical Analysis System) is a software suite developed by SAS Institute for advanced analytics, multivariate analyses, business intelligence, data management, and predictive analytics. SAS was developed at North Carolina State University from 1966 until 1976, when SAS Institute was incorporated.

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How To Write Chapter Three Of Your Research Project (Research Methodology)

  • Methodology In Research Paper


    Chapter three of the research project or the research methodology is another significant part of the research project writing. In developing the chapter three of the research project, you state the purpose of research, research method you wish to adopt, the instruments to be used, where you will collect your data, types of data collection, and how you collected it.

    This chapter explains the different methods to be used in the research project. Here you mention the procedures and strategies you will employ in the study such as research design, study design in research, research area (area of the study), the population of the study, etc. You also tell the reader your research design methods, why you chose a particular method, method of analysis, how you planned to analyze your data.

    Your methodology should be written in a simple language such that other researchers can follow the method and arrive at the same conclusion or findings.

    You can choose a survey design when you want to survey a particular location or behavior by administering instruments such as structured questionnaires, interviews, or experimental; if you intend manipulating some variables.

    The purpose of chapter three (research methodology) is to give an experienced investigator enough information to replicate the study. Some supervisors do not understand this and require students to write what is in effect, a textbook.

    A research design is used to structure the research and to show how all of the major parts of the research project, including the sample, measures, and methods of assignment, work together to address the central research questions in the study. The chapter three should begin with a paragraph reiterating the purpose of research. It is very important that before choosing design methods try and ask yourself the following questions: Will I generate enough information that will help me to solve the research problem by adopting this method?

    Method vs Methodology

    I think the most appropriate in methods versus methodology is to think in terms of their inter-connectedness and relationship between both. You should not beging thinking so much about research methods without thinking of developing a research methodology.

    Metodologia or methodology is the consideration of your research objectives and the most effective method and approach to meet those objectives. That is to say that methodology in research paper is the first step in planning a research project work.

    Design Methodology: Methodological Approach

    Example of methodology in research paper, you are attempting to identify the influence of personality on a road accident, you may wish to look at different personality types, you may also look at accident records from the FRSC, you may also wish to look at the personality of drivers that are accident victims, once you adopt this method, you are already doing a survey, and that becomes your metodologia or methodology.

    Your methodology should aim to provide you with the information to allow you to come to some conclusions about the personalities that are susceptible to a road accident or those personality types that are likely to have a road accident.

    The following subjects may or may not be in the order required by a particular institution of higher education, but all of the subjects constitute a defensible in metodologia or methodology chapter.

    Click here to complete this article - How To Write Chapter Three Of Your Research Project (Research Methodology)

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