Why Does The SEC Need A Reserves Report When I Already Prepare A Report For The IRS?
Even though you may already perform a reserves report for the tax purposes of the IRS, the SEC have different laws of compliance which warrants a separate statement altogether.
There are a few reasons for reporting reserves to the SEC:
Calculate The Complete Financial Standing Of Your Organization
Determine The Risk That Could Affect The Fiscal Standing Of A Company In The Future
What Are The Different Factors That The SEC Requires?
Since the SEC has different requirements than an IRS report, there needs to be a different process when producing the statements.
This isn’t the new Covid-19, this is the methodology that is used to determine the economic evaluations for SEC compliance.
You calculate this by the current value of estimated future oil and gas revenues minus direct expenses and discounted at a yearly rate of 10%
In contrast, the IRS values are generated by analyzing what the market participants expect in return for selling their business or assets, including any assumed capital structure or tax rates and synergies.