New Accounting Principles

9 Months Ended

Sep. 30, 2014

New Accounting Principles [Abstract]

New Accounting Principles

Note O – New Accounting Principles

In August 2014, the Financial Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU), requiring, when applicable, disclosures regarding uncertainties about an entity’s ability to continue as a going concern.  During the preparation of quarterly and annual financial statements, management should evaluate whether conditions or events exist that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date the financial statements are issued.  If this evaluation indicates that it is probable that an entity will be unable to meet its obligations when they become due within one year of the financial statement issuance date, management must evaluate whether its mitigation plans will alleviate the substantial doubt of continuing as a going concern.  If substantial doubt exists, regardless of whether the mitigation plan alleviates the concern, additional disclosures are required in the financial statements addressing the conditions or events that raise substantial doubt, management’s evaluation of the significance of those conditions or events, and management’s mitigation plans.  This new guidance will become effective for the Company for all reporting periods beginning in 2016.  Early application is permitted.  Company management currently does not expect that this new guidance will have a significant effect on its consolidated financial statements when adopted.

Note O – New Accounting Principles (Contd.)

In May 2014, the FASB issued an ASU addressing recognition of revenue from contracts with customers.  When adopted, this guidance will supersede current revenue recognition rules currently followed by the Company.  The core principle of the new ASU is that an entity should recognize revenue to depict the transfer of promised goods or services to customers that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  The ASU provides five steps for an entity to apply in recognizing revenue, including:  (1) identify the customer contract; (2) identify the contractual performance obligations; (3) determine the transaction price; (4) allocate the transaction price to the contractual performance obligations; and (5) recognize revenue when the performance obligation is satisfied.  The new ASU also requires additional disclosures regarding significant contracts with customers.  The new ASU will be effective for the Company on January 1, 2017, and early adoption is not permitted.  For transition purposes, the new ASU permits either (a) a retrospective application to all years presented, or (b) an alternative transition method whereby the new guidance is only applied to contracts not completed at the date of initial application.  The vast majority of the Company’s revenue is recognized when oil and natural gas produced by the Company is delivered and legal ownership of these products has transferred to the purchaser.  Based on the Company’s present understanding, the accounting for oil and gas sales revenue is not expected to be significantly altered by the new ASU.  The Company has not yet selected which transition method it will use.

In April 2014, the FASB issued an ASU that will change the requirements for reporting discontinued operations after its adoption.  Under the new guidance, only disposals of components of an entity that represent a strategic shift that has or will have a major effect on an entity’s operations and financial results will be reported as discontinued operations in the financial statements.  Under prior guidance, a component of an entity that is a reportable segment, an operating segment, a reporting unit, a subsidiary, or an asset group that has been or will be eliminated from ongoing operations and for which the Company will not have any significant continuing involvement with the component after the disposal was generally reported as discontinued operations.  The FASB anticipates that fewer component disposals will be reported as discontinued operations under the new guidance.  The new guidance also requires expanded disclosures about discontinued operations.  The new guidance will be effective for the Company beginning in 2015.  The new guidance is not to be applied to a component that is classified as held for sale before the effective date of the guidance.