Professor Elam

Weekend Sept 17 2016

Click the link at the bottom of this article to read the entier WSJ story.

Oil and gas firms have taken $163 Billion in write downs in 2015, but not Exxon Mobil XOM. The NY Attorney General, unable to pin a ignoring climate change on XOM, is not investigating the lack of write downs. Here is a must read article for Texas accounting students.

A write down or impairment charge is a result of comparing an undiscounted cash flow from a project with its carrying cost. If the cash flow number is less than book value, the item is reduced by the difference between book value and fair value. This is different from the original booking of the reserve value for the oil or gas, got it?

CEO REx Tillerson states that XOM does not bail out managers by writing down reserves. He claims XOM is very conservative in its initial valuations, ignoring short term changes in price in the future.

And what does external auditor PwC have to say-nothing which is to be expected.

Once again, accounting students need to read for context.