Full-Cost Method

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Dictionary Says

Definition of 'Full-Cost Method'

An accounting system used by companies that incur exploration costs for oil and natural gas that does not differentiate between operating expenses associated with successful and unsuccessful exploration projects. Regardless of the outcome, successful and unsuccessful operation expenses are capitalized. By contrast, the successful efforts accounting method only capitalizes expenses related to successful ventures.
Investopedia Says

Investopedia explains 'Full-Cost Method'

The two methods represent conflicting views in the industry about how oil and natural gas companies can most transparently report their earnings, and the two organizations that regulate accounting and financial reporting, the Financial Accounting Standards Board and the Securities and Exchange Commission, cannot always agree on which method is most appropriate.

 

The choice between these two accounting methods affects the company's reported net income and cash flows, so investors in such companies should be aware of the method used and the differences between the two.
Search results for

'Full-Cost Method'

  • Unearth Profits In Oil Exploration And Production

    http://www.investopedia.com/articles/stocks/07/oil-gas.asp
    ... Accounting E&P companies may use the successful efforts method or the full
    cost method to account for exploration activity. Under ...

  • Accounting For Differences In Oil And Gas Accounting

    http://www.investopedia.com/articles/fundamental-analysis/08/oil-gas.asp
    ... The alternative approach, known as the full cost (FC) method, allows all operating
    expenses relating to locating new oil and gas reserves - regardless of the ...

  • 4 Leverage Ratios Used In Evaluating Energy Firms

    http://www.investopedia.com/articles/fundamental-analysis/12/4-Leverage-Ratios-Used-In-Evaluating_Energy_Firms.asp
    ... It is commonly used in the United States to normalize different accounting treatments
    for exploration expenses (the full cost method versus the successful ...

  • CFA Level 1 Study Guide - Financial Statements - Income Statement ...

    http://www.investopedia.com/exam-guide/cfa-level-1/financial-statements/income-statement-non-recurring.asp
    ... Statement; 6.20 Cash Flow Statement Basics; 6.21 Cash Flow Computations - Indirect
    Method; 6.22 Cash Flow Computations - Direct Method; ...

  • 5 Common Trading Multiples Used In Oil And Gas Valuation

    http://www.investopedia.com/articles/basics/11/common-multiples-used-in-oil-and-gas-valuation.asp
    ... It is commonly used in the United States to standardize different accounting treatments
    for exploration expenses, which consist of the full cost method or the ...

  • How are oil reserves accounted for on an oil company's balance ...

    http://www.investopedia.com/ask/answers/09/oil-company-reserves-balance-sheet.asp
    ... Depending on the method of accounting for exploration, full cost versus successful
    efforts, certain costs of finding reserves are capitalized. ...

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