SEC opens investigation into Exxon’s accounting practices

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The U.S. Securities and Exchange Commission (SEC) opened a probe into ExxonMobil’s decision not to mark down valued assets as oil prices continue to fall, The Wall Street Journal reported Tuesday.

The SEC’s investigation also seeks to determine how the oil company estimates its future worth as climate regulations continue apace. It has received a treasure trove of documents in connection to a continuing probe into similar issues forged in 2015 by New York Attorney General Eric Schneiderman.

Ultimately, the agency aims to investigate the company’s practice of not writing down the value of its oil reserves, especially as oil prices continue to crater. Exxon has managed to avoid taking write-downs since oil prices plunged to nearly $30 per barrel.

The investigation is partially the result of a September investigation of Exxon conducted by InsideClimate News. The investigation found Exxon had allegedly played fast and loose with information concerning global warming.

InsideClimate News also alleges that Amoco, Phillips, Texaco, Shell, and others joined Exxon in misleading the public about the supposed affects global warming has on sea levels.

The probe will drill down on how the largest oil company in the U.S. calculates how the world’s mounting battle against so-called man-made global warming will affect Exxon’s balance sheet. It will also try to discover what numbers and models the company uses to determine how regulations will affect its bottom line.

Exxon argued earlier this month that it conservative accounting measures have allowed it to avoid lowering the value of new fields and wells, ultimately lowering the need to reduce the value of assets in the face of ebbing oil prices.

Exxon CEO Rex Tillerson told reporters in 2015 that the company weathers oil price troughs mostly because it demands executives keep projects humming along at lower prices.

“We don’t do write-downs,” Tillerson said at the time. “We are not going to bail you out by writing it down. That is the message to our organization.”

An Exxon spokesman told reporters on Sept. 16 the company follows all rules and regulations.

The Texas-based company performed tests on its most “at risk” assets in 2015 and discovered they are still at reasonably high rates, indicating no write-down was necessary, according to a financial disclosure by the company.

The SEC is scraping around to determine how Exxon’s carbon price affects its balance sheet, The Wall Street Journal reported, citing reports from people familiar to the case. If carbon prices are low, then more oil and gas are available; vice versa when carbon prices are set high.

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