Discretionary Accounting Changes from "Successful Efforts" to "Full Cost" Methods: 1970-76

W. Bruce Johnson; Ramachandran Ramanan

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Discretionary Accounting Changes from "Successful Efforts" to "Full Cost" Methods: 1970-76

Journal article

Peer reviewed

Discretionary Accounting Changes from "Successful Efforts" to "Full Cost" Methods: 1970-76

W. Bruce Johnson and Ramachandran Ramanan

The Accounting review, Vol.63(1), pp.96-110

01/01/1988

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Abstract

This note extends previous research on accounting method choice in the petroleum industry by examining the association between selected attributes of "successful efforts" firms and the decision to change to "full cost" accounting. Firms that changed to full cost are found to exhibit higher levels of financial risk (leverage) and exploration activity (capital expenditures) when compared to firms that retained successful efforts, and these differences are shown to predate full cost adoption by several years. Tests also indicate that the change to full cost is associated with concurrent increases in debt financing and exploration investment.

Accounting changes

Accounting interpretations

Accounting methods

Business structures

Capital expenditures

Debt financing

Drilling

Financial accounting

Financial leverage

Fossil fuels

Details

Title: Subtitle: Discretionary Accounting Changes from "Successful Efforts" to "Full Cost" Methods: 1970-76
Creators: W. Bruce Johnson
Ramachandran Ramanan
Resource Type: Journal article
Publication Details: The Accounting review, Vol.63(1), pp.96-110
ISSN: 0001-4826
eISSN: 1558-7967
Publisher: American Accounting Association
Number of pages: 15
Language: English
Date published: 01/01/1988
Academic Unit: Accounting
Record Identifier: 9984963125602771

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