Finanstilsynet covered different areas of Statoil’s financial reporting for 2012 and has identified three issues with reporting.
The review found there were areas where Statoil failed to live up to international financial reporting standards (IFRS).
Statoil said it believed practices were in line with standards, but said it would take on two of the recommendations of the review. It intends to challenge the third issue with the Ministry of Finance.
The company will now use reliability intervals in impairments tests to make sure there is no uncertainty in the way the company books impairments.
“In order to ensure an objective and systematic practice, Statoil has, in line with economic valuation theory, applied a reliability interval in connection with impairment tests,” Statoil said.
“Finanstilsynet is of the opinion that this practice is not in accordance with IFRS.
“As a consequence, Statoil has discontinued this approach to valuation.”
The second recommendation was made regarding the identification of cash generating units in the US.
Finanstilsynet said that the Marcellus shale should no longer be treated as one cash generating unit.
“Finanstilsynet is of the opinion that Marcellus should be split into more than one cash generating unit, and Statoil has changed its accounting approach in this matter,” Statoil said.
The third issue, which Statoil has rejected, is the timing of provision for a contract for import capacity of liquefied natural gas to the US.
Statoil said it discussed the matter with its auditors to make sure the timing of the provision had been correct.
The provision was included in Statoil’s first quarter financial statements this year, but Finanstilsynet said it should have been included earlier.
The company will file an appeal of this decision and will request a stay.
“Statoil’s equity as of 2013 will not be impacted by the outcome of the appeal,” the company said. “If the appeal is not successful, Statoil’s net income for 2013 will be improved with a corresponding negative impact in previous periods.”
Finanstilsynet has also recommended Statoil report its North America development and production business as a separate segment in its future financial reporting, though the company has decided to continue with its current practice of grouping together its international upstream activity.