The report, entitled The Application of IFRS: Oil and Gas, urges the completion of the International Accounting Standards Board’s Extractive Activities Project to achieve comparable information in a volatile market.

The report was produced by KPMG’s Global Energy and Natural Resources Practice and examines the financial statements of 33 oil and gas companies from 14 countries, including Australia.

It highlights inconsistencies across a range of issues including accounting, classification and terminology, and focuses particularly on the use of International Financial Reporting Standards (IFRS), which it says should be a driver of global consistency.

Partner and leader of the company’s Oil and Gas Centre of Excellence Brent Steedman said “The oil and gas industry is one of the most international and so stands to benefit significantly from the application of a consistent global accounting framework such as IFRS. Since the introduction of IFRS into the industry three years ago, there has been progress, but not enough to give analysts and investors the full level of transparency that IFRS promise.”

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The report says that accounting and classification inconsistencies are present in areas including inconsistence in the basis for calculating the depletion of upstream oil and gas assets, with the most common basis being proved and probable reserves; different presentational styles and measurement methodologies applied to reserves reporting making company comparisons difficult; and, considerable flexibility in accounting for exploration and evaluation expenditure. “With continued volatility of the oil price, and a steady flow of acquisitions and disposals by oil and gas companies, it’s now more vital than ever that oil and gas companies focus on the quality and comparability of financial and reserves information,” said Mr Steedman.

“In Australia, this means that our local oil and gas industry needs to be vigilant in evaluating the quality of accounting policies and practices, including consideration of global and industry best practice,” he said.