Exxon probe faces uphill climb amid ambiguous accounting rules

Fri Sep 16, 2016 7:10pm EDT
 
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By Dena Aubin and Karen Freifeld

NEW YORK (Reuters) - New York Attorney General Eric Schneiderman faces an uphill climb in building a case against Exxon Mobil Corp for not writing down assets amid the oil-price slump because of the broad leeway that energy companies have enjoyed reporting under U.S. rules, accounting experts said.

Schneiderman is investigating Exxon's accounting practices and why the oil giant has not taken writedowns even while oil prices have fallen, a person familiar with the matter told Reuters.

The price drop of more than 60 percent since 2014 has forced many integrated oil producers around the world to write down the value of their wells, leases and equipment, and Exxon is the only major producer to hold off so far. Oil in many wells can no longer be profitably recovered, and failing to write them down could give a misleading picture of a company's financial health.

But accounting experts said it was far from clear that Exxon's lack of writedowns signaled any wrongdoing. Accounting rules give companies a choice of methods for valuing and impairing their assets, and writedowns can vary sharply based on the method used and other factors, they said.

"This is an extremely subjective area," said Tom Selling, author of The Accounting Onion blog. "Everyone will have a different pattern of writedowns depending on how old their fields are and how much they cost to develop."

Doug Cohen, spokesman for the AG's office, declined comment.

An Exxon spokesman on Friday told Reuters its accounting follows rules of the U.S. Securities and Exchange Commission and the Financial Accounting Standards Board, which sets reporting standards for U.S. public companies.

The largest U.S. oil companies have historically not taken large charges to write down the value of their assets when commodity prices tumble, said Brian Youngberg, oil company analyst at Edward Jones in St. Louis.   Continued...

 
The logo of Exxon Mobil Corporation is shown on a monitor above the floor of the New York Stock Exchange in New York, New York, U.S. December 30, 2015.  REUTERS/Lucas Jackson/File Photo