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(BQ) Part 2 book "Petroleum accounting: Principles, procedures & issues" has contents: Farmouts, carried interests, and unitizations; accounting for partnership interests; accounting for international operations; accounting for income taxes; nonvalue disclosures about oil and gas producing activities,.and other contents. | C H A P T E R 23 Glossary Terms carried interests arrangement carried party carrying party equalizations free well agreement participation factors reversionary interest FARMOUTS, CARRIED INTERESTS, AND UNITIZATIONS Key Concepts: • Definition of the term farmout • Carried interests • Accounting for unitization • Tax accounting for farmouts, carried interests, and unitizations Chapter 23 Farmouts, Carried Interests, and Unitizations 388 The pooling of capital concept has long been a part of accounting theory as well as an essential element in the federal taxation of extractive industries. It is common for an entity to acquire an interest in a mineral property through the contribution of money, property, or services, and assume all or part of the risk and burden of developing and operating it. One party may contribute a leasehold to the venture, another may provide equipment or services, such as drilling, and still another entity may contribute money. Members of the venture agree that they are contributing to a common pool of capital. Thus, each is viewed as making an investment in a venture or adding to the venture’s reservoir of capital in return for ownership interest in the venture as a whole. Many transactions of this type are also considered as exchanges of productive assets in return for similar productive assets, especially if mineral interests, intangible drilling costs, and equipment are viewed as similar. FASB Current Text Oi5.135 states no gain or loss is recognized at the time of conveyance in a pooling of capital or an exchange of similar productive assets. Commonly encountered applications of these concepts are examined in this chapter. Generally, it is assumed that the successful efforts method is being followed. Although many of the same rules apply, special considerations for full cost companies are examined at the end of this chapter. FARMOUTS When the owner of a working interest transfers all or part of the operating rights to .
