Ann: Successful Efforts Accounting and write down of Inventories, page-3

Fangk

Jeepers, I wish I had an answer, but this is not something I can really provide an insight. I never worked as an accountant, and studied it years ago when I was middle aged so my recollection of the subject matter is dimming rapidly.

My overall view is that their statement that

"There will be no impact on Karoon's underlying business activities or on the Company's cash flow as a result of this change in policy"

is probably correct so it would not have an impact on the underlying value of the company.

It would have an impact on the timing of accounting profit recognition, as determined by the accounting rules (which are pretty flexible which is why they are able to change things around as to the timing of when write downs are made. It will also impact on the level of retained profits/losses in the balance sheet. Its unclear as to the extent any losses could be offset against future profits to reduce future tax payable because that depends on the rules and the country in which the losses happened - again that is something I dunno.

But taxation rules on such matters differ from country to country and these are not necessarily the same as Australian accounting rules under which KAR issues it financial reports.

I have been out of the oil/gas sector since around 2011 in recognition that I was a hopeless investor in that field, even when I was on a winning horse like BOW I somehow stuffed it. I have done much better on all sorts of miners, and have been focussed on goldies with an occasional play elsewhere.

From a maroeconomic perspective the beaten down oil/gas sector could have a bit of a run if COVID is beaten and global economic growth accelerates - so perhaps buying a basket of these companies would provide some useful gains over the next few years. That is just a guess, and for now I am staying away from them.

loki