Nakisa Lease Administration streamlines lease accounting for organizations
in the oil and gas industry.
In the oil and gas industry, companies make pervasive use of leases to secure the geographically-dispersed assets they employ in their operations. These assets include the land from which producers extract resources, the equipment used in the production process, and the facilities used to store and transport product. The new lease accounting standards – IFRS 16 and ASC 842 – brings most of these leases onto balance sheets, exposing billions in lease liability across the industry.
For many companies, adopting an on-balance sheet lease accounting model is a significant challenge by itself because of the requirement to capture and record substantially all leases. For oil and gas businesses, however, some activities create industry-specific complexities for the ongoing application of the new lease rules.
“Because of the number and magnitude of contracts they will need to evaluate and potentially recognize on their balance sheets, oil and gas entities should start to accumulate information that will be necessary to evaluate agreements that may contain lease components, particularly drilling contracts, transportation or capacity arrangements, storage agreements and downstream retail land, building and equipment rental contracts.”