Which of the following methods best reflects the volatility inherent in E&E activities?
A) The area of interest method.
B) The successful efforts method.
C) The appropriation method.
D) The full cost method.

Question

Quizplus · Accepted Answer

The successful efforts method is the best choice as it only capitalizes costs associated with successful exploration and development activities. This method is more volatile as it results in larger fluctuations in capitalized costs and therefore reflects the inherent volatility of E&E activities. The other methods (area of interest, appropriation, and full cost) all require capitalization of costs regardless of success and therefore may not accurately reflect the volatility of E&E activities.

Which of the Following Methods Best Reflects the Volatility Inherent