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Journal entry — SEC discusses effects of declines in oil and gas prices

Published on: Mar 11, 2015

At the Practising Law Institute’s two-day “SEC Speaks in 2015” Conference in late February, the SEC staff reminded registrants of the need to consider the effects of the decline in oil and gas (O&G) prices on their results of operations, liquidity, and financial condition.

Under Regulation S-K, Item 303,1 a registrant must disclose in MD&A any known trends or uncertainties that have had, or that are reasonably expected to have, a material impact on its results of operations (whether favorably or unfavorably). The SEC staff stressed the importance of a registrant’s MD&A disclosure of the decline in the prices of crude oil, gas, and other commodities (e.g., iron, ore, copper) if the decline materially affects, or is expected to affect, the registrant’s operations.

Editor’s Note: While not specifically addressed at the conference, a registrant should also consider the recent volatility in foreign currency exchange rates and enhance its MD&A disclosure if such volatility has had, or is reasonably expected to have, a material impact on its results of operations and liquidity (whether favorably or unfavorably).

The staff noted that the mining and O&G industries may be particularly affected by such price decreases. Registrants were reminded to consider (and disclose if material) how (1) a decline in oil, gas, and commodity prices could affect the registrant’s current or future calculated reserves and periodic reserve analysis and (2) this trend has had or will have a material impact on the registrant’s results of operations or its reserves.

For an overview of the current landscape in the O&G industry, additional information on approaches commonly used in the valuation of O&G assets, and considerations related to assessing and accounting for the impairment of O&G assets, see Deloitte’s January 2015 Oil & Gas Spotlight.


1 SEC Regulation S-K, Item 303, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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