The IASB were joined by members of the IASB's Extractive Activities Research Team and by staff from the Office of the Chief Accountant, US Securities and Exchange Commission (SEC).

The session was an opportunity for the Board to hear about developments occurring in the United States of America in relation to oil and gas reserve definitions and disclosure requirements. In particular, the SEC staff outlined the content of the recent Concept Release on Possible Revisions to the Disclosure Requirements Relating to Oil and Gas Reserves (PDF 380k). The Concept Release was issued to gauge the interest in a revision of the current requirements for oil and gas reserve disclosures, which date from between 1978 and 1982. In particular, the SEC was aware of concern that their rules had not adapted to current practices and might not provide investors with the most useful picture of oil and gas reserves. This issue is relevant to the IASB's research project on extractive activities, because a central issue in the IASB's project is the definition of reserves and resources. The session shared information, and no decisions were made.

Subject to the usual SEC disclaimers, the staff noted that their preliminary analysis of the comments they have received fell broadly into three groups:

• those who thought that the current requirements gave a degree of standardisation that was desirable and need not be changed dramatically;
• those who favoured more radical change, perhaps adopting the approach to reserve evaluation developed by the Society of Petroleum Engineers, in particular the SPE's Petroleum Resource Management System (PRMS); and
• those who wanted something somewhere in between.

Contentious areas included the classification and disclosure of reserves; whether disclosure of reserves other than 'proved reserves' should be permitted; pricing; and issues related to 'unconventional' reserves (for example. tar sands and oil shale).

The SEC staff noted that the comment letter analysis was still under way and that the Commission had not yet determined whether any rulemaking is necessary.

A Board member asked the SEC staff what was meant by the Concept Release's Question 1, which asked whether the SEC should develop a 'principles-based rule'? The staff responded that the Commission were trying to find a way to ask registrants 'to do the right thing in good faith'. The Board member was relieved that the SEC "had no more idea of what 'principles-based' meant" than he did.

Another Board member asked whether the SEC had given thought to whether any rules it might issue, especially with respect to unconventional mineral resources and means of extraction, would become the standard for mining companies also, or whether mining entities would continue to have more latitude with respect to reserve disclosure. The SEC staff acknowledged the issue but had no ready answer (nor, the Board member noted, does the IASB).

With respect to pricing reserves, the same Board member noted that the current SEC rules require a trailing twelve-month average, whereas oil is priced on a forward basis. He was concerned that the SEC might continue to insist on historical information, while most market participants were interested in forward-looking information. Again, the SEC staff acknowledged the trade-off between the consistency that historical information would give and the decision-usefulness for forecasting future cash flows that forward-looking pricing would provide. This would be an issue for the Commission to decide.

The coordinator of the Research Team noted that of the 80 letters received by the SEC, 12 had been submitted by entities represented on the IASB's advisory panel and a further two had participated in the development of letters submitted by professional organisations.