Summary of Interpretation No. 36

Accounting for Exploratory Wells in Progress at the End of a Period—an interpretation of FASB Statement No. 19


FASB Statement No. 19, Financial Accounting and Reporting by Oil and Gas Producing Companies, requires that the costs of exploratory wells that do not locate proved oil and gas reserves (exploratory dry holes) be charged to expense. Questions have been raised about when to charge to expense the costs of an exploratory well in progress at the end of a period that is determined to be a dry hole before the financial statements for that period are issued. This Interpretation clarifies that the costs incurred through the end of the period shall be charged to expense for that period.