muck Posted January 20, 2009 Share Posted January 20, 2009 I have an asset that I need to amortize and am having difficulty in figuring out the best way to do it. I was hopeful to find a website or two that could help me with my own research, but haven't found anything that is particularly helpful. Specifically, the asset is an investment in a partnerhsip that has drilled several oil and natural gas wells (which I know are written off as expensed for tax purposes). Because I have ZERO visibility as to the actual amount of 'proven reserves', I cannot use the "unit of production" (or anything similar to that) method of amortizing the investment ... so, I am hoping that for the purposes of calculating a balance sheet that I could (say) write it off using straight-line depreciation over the expected life of the wells (which I was thinking of using 10yrs or so since these wells should live for 6-8yrs at the short end and 15-20yrs at the long end) ... and am looking for any links that could help. The only other thought I had was to amortize the value of the well based on the cash that came in ... but, IIRC, that approach is not GAAP. Quote Link to comment Share on other sites More sharing options...
darin3 Posted January 20, 2009 Share Posted January 20, 2009 I've used DocStoc.com to find good professional documents in the past... so I went there and looked up what I think you might be looking for.... Follow this link... Quote Link to comment Share on other sites More sharing options...
BYoder Posted January 20, 2009 Share Posted January 20, 2009 Maybe I am not reading your post correctly but I don't understand why you want to amortize the investment. Shouldn't the investment be on the balance sheet at cost/basis and adjusted by the K1 that you will receive. I'm assuming that you will receive a K1 since the investment is in a partnership. That is the way that we have always treated investments in partnerships although I have never dealt with oil and natural gas drilling so the rules may be different. Quote Link to comment Share on other sites More sharing options...
westvirginia Posted January 20, 2009 Share Posted January 20, 2009 Maybe I am not reading your post correctly but I don't understand why you want to amortize the investment.Shouldn't the investment be on the balance sheet at cost/basis and adjusted by the K1 that you will receive. I'm assuming that you will receive a K1 since the investment is in a partnership. That is the way that we have always treated investments in partnerships although I have never dealt with oil and natural gas drilling so the rules may be different. +1. What are we missing? Quote Link to comment Share on other sites More sharing options...
muck Posted January 20, 2009 Author Share Posted January 20, 2009 +1. What are we missing? Monthly valuation requirements ... realizing income and expense throughout the year. Quote Link to comment Share on other sites More sharing options...
yo mama Posted January 21, 2009 Share Posted January 21, 2009 You don't amortize investments in partnerships because they don't have a fixed useful life. The partnership itself may or may not amortize certain underlying investments in oil and gas interests. But the partnership would issue a K-1 to its partners reporting their pro rata share of all income, deductions, credits, etc. But maybe I'm reading your question wrong. Are you trying to forecast what will appear on the K-1 that you'll receive? Or are you actually attempting to amortize a partnership interest? Quote Link to comment Share on other sites More sharing options...
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