Anton Oussov, Head of the KPMG Oil & Gas practice in Russia and the CIS, focuses on oil prices forecasting for calculating the economic impairment according to international standards.
In his article Anton points out that despite the moderate historic accuracy and unpredictability of oil price fluctuations, price forecasts are a crucial part of budget planning and assets impairment calculation for oil companies. There are three approaches to creating a forecast: using the current oil price for the whole forecast period, using oil futures, or using consensus forecasts which incorporate expert opinions and the above approaches. Additionally, forecasting can be approached from the point of view of production costs. After these approaches have been worked through, three development scenarios can be formed: negative, conservative and optimistic. After the company's top management assesses these scenarios for their probability, the most probable one can be used for calculating the economic impairment of assets according to international standards, and the other ones can be used for budget planning. This way reliable 2015 financial statements report can be prepared, and the planned financial situation for the next year assessed.