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Abstract: This paper reviews the experience of introducing a self-reflective paper assignment into an oil and gas accounting course taught in Spring 2005 in KIMEP in Almaty, Kazakhstan. The author contends that in developing economies assumptions made in course design in more advanced economies with respect to institutions (including norms and values with respect to the importance of accountability and accounting systems) underpinning market economies cannot be taken for granted. As a result, inserting a course component that encourages students to reflect and take a broader view of the politics of accounting and accounting systems should be considered.
Introduction During the spring of 2005 I had the good fortune to teach a course in oil and gas accounting to MBA students in the Bang School of Business of the Kazakhstan Institute of Management, Economics and Strategic Research (KIMEP), in Almaty, Kazakhstan. As a graduate of a business school and professional education myself, 1 I came to the question of course design with an appreciation of the need to teach based on accounting first principles and of the importance of teaching the craft of accounting. Fundamentally, accounting is a basic skill or technique that allows for control of funds in commercial and non-commercial enterprises, and is as such is generally much more a question of practice than of theory. However, having also diverged from accounting to begin a second career in International Relations2 and having worked as a humanitarian aid worker for almost five years in two oil rich and conflict ridden African countries (Sudan and Angola),3 it seemed to me necessary to address what I perceive to be a gap in the standard approach to teaching accounting – particularly, perhaps, oil and gas accounting – the absence of self reflection or critical analysis as to the broader relevance and importance of accounting among students of the topic. Standard Approaches to Oil and Gas Accounting Oil and Gas Accounting is a relatively specialized sub-field within the field of accounting, and not one that I was very familiar with prior to teaching this course. A commonly used textbook, and one that I inherited as part of the curriculum for this class4 is Gallun, Wright, Nichols and Stevenson‟s “Fundamentals of Oil and Gas Accounting” which focuses on US Generally Accepted Accounting Practice (GAAP) for the oil and gas sector. The book provides an accessible and comprehensive introduction to the technical issues involved in accounting in the oil and gas sector with a particular focus on US GAAP and is typical of most accounting textbooks I studied myself as a student – with explanatory sections, followed by sample problems and solutions, followed by problem sets for students to solve. A search on the internet for other oil and gas accounting syllabi showed a similar pattern in syllabi for oil and gas accounting courses.5 Of the five courses reviewed (all of which were provided by universities in the US), all followed a pattern similar to the book described above – focusing heavily on the technical aspects of oil and gas accounting. Critique of this approach This technical approach, while necessary in imparting the core skills that students of accounting need to acquire, largely ignores the context in which students will, in their future professional lives, actually use these skills. While this may be of less concern in advanced economies such as the US where norms and institutions of accounting control and compliance are firmly established – though recent accounting scandals such as Enron and AIG may give a lie to that proposition, it seems to me that in a country such as Kazakhstan – with a still fragile system of accounting regulation, and without a history of norms with respect to the importance and relevance of accounting systems, such assumptions cannot be made. Institutions – understood as norms of behavior and legal systems that underpin and support the functioning of a market economy – matter (North, 1990). Indeed, the recent examples of Enron, Shell and AIG show us that legal requirements supporting accounting standards are not on their own sufficient to support full compliance even in advanced economies. Norms and values among both accountants and senior management that support the use and independence of accounting systems are also required. All ex-Soviet states, including Kazakhstan, inherited a Soviet system of accounting regulation that was developed primarily in response to the needs of central planners when state agencies were the only users of financial information. In centrally planned economies, the prime function of accounting was to monitor and control the use of financial resources to meet planned targets.
Since enterprises were wholly state-owned and their creditors were also other state-owned agencies, the need for independent financial accounting and reporting was never appreciated. Financial reporting systems of the former Soviet Union countries were as largely inappropriate to the needs of a market economy and as a result, in the 1990s began to be reformulated to a double entry accrual accounting system compliant with international standards (ADB, 2003, p1). In Kazakhstan, this process began in the mid 1990s, with the adoption of international accounting standards as national standards and continued with the adoption of international financial reporting standards. However, numbers of accountants trained in accruals based accounting methods lags far behind the needs of the economy. It is fair to say that accounting and accounting regulation as understood in more advanced economies, while progressing, and to some extent perhaps, sufficient given the level of complexity of commercial activity in the country, are still in their infancy in Kazakhstan.6 This manpower and institutional deficient is not helped by endemic levels of corruption in Kazakhstan. The country was ranked 121 of 146 (one being least corrupt) in Transparency International‟s Corruption Perception Index for 2004 (Transparency International, 2005). The same report highlights that oil producing nations (such as Kazakhstan) are prone to high levels of corruption. Taking a broader view With this in mind, in designing the curriculum for KIMEP‟s MBA class in Oil and Gas Accounting, I decided to include a written paper that sought to get students to reflect on the relevance of what they were learning to the wider context. The grading criteria for the course was broken down as follows: Mid-term exam (20%), Written Paper (30%), Final Exam (40%) and Participation (10%). Both exams followed standard assessment methods in mainstream accounting courses – and included short questions on terms, definitions and appropriate accounting treatments, short computations and longer problems to be solved. The written paper assignment was stated as follows: “ „Discuss the importance of adequate systems of accounting and financial control in the oil and gas industry from an ethical, managerial and governmental perspective.‟ The paper should be seen an opportunity for students to reflect on why the principles discussed in this class are important. The paper will be no more than 2,000 words long, excluding footnotes and references, written in type 12 Times New Roman font. Students are expected to draw from course material and other sources, and are encouraged to research internet sources for information on transparency and accountability within the oil and gas sector worldwide, including examples of poor accountability or other controversies related to transparency within the sector from the Central Asia region or further a field (e.g. the recent Enron scandal in the US, reports of advocacy groups on transparency within the international oil sector, etc). Students are encouraged to discuss their papers with the instructor after class or during office hours if they require more guidance.” The assignment was kept deliberately short and students were encouraged to make whatever argument they wanted to make – but to make it up with relevant researched facts. To ease worries of students regarding how the papers were graded – perhaps a particular concern of accounting students who are used to precise grading structures that match the generally quantitative nature of most of their subject matter, a detailed grading chart was also disseminated, showing how marks on the paper would be allocated. Briefly, of the 30 marks for the paper as a whole, five were awarded for research (two for correct use of a prescribed notation system and three for the quality of the research cited), seven for each section – ethical, managerial and governmental, and four for overall coherency. The seven mark sections comprised the „meat‟ of the paper, and grading in each section was structured to encourage students to express their own opinions, but to back these opinions up with referenced facts through use of examples of case studies. Students received no marks for a section if they did not
address it in the paper, received one mark for a weak discussion of the issues without any use of case material, three marks for a moderately well argued section that was not backed up by relevant facts, five for a good, well argued paper, that consistently used facts to support arguments and seven for a section that demonstrated strong critical analytical skills with arguments supported by facts. The grading structure was designed in this manner in order to encourage students to make reasonably supportable arguments, rather than just personal assertions, to encourage them to research for and read material relevant to their arguments, and (with respect to marks for research) to encourage good practices with respect to referencing and research and discourage plagiarism. The Outcome In general students produced papers to a good standard that demonstrated personal engagement with the issues. Students used examples from both local and international contexts, and could be broadly divided into two categories (though these are more a matter of degree than exact demarcation) - those that took a broad view, tying the importance of accounting systems to accountability in revenues from the oil and gas sector, governmental transparency and overall societal well-being (19 of 36 papers submitted, or 52%) and those that took a narrower, accounting based view, that focused more on the importance on internal systems of control and accountability and controversies within the oil and gas sector on accounting measurement and reporting issues (17 of 36 papers submitted, or 48%). Interestingly, reviewing all the papers and sources consulted also showed the degree to which different literatures are speaking similar language with respect to accountability and transparency – be it on corporate social responsibility from some of the larger oil companies, on transparency in payments – from both governments (such as the British government‟s Extractive Industry Transparency Initiative) or from NGOs – notably the Publish What You Pay campaign and Global Witness. This provides ample scope for students to select material from diverse sources, depending on their particular take on the issue and their own interests. Conclusion To conclude, it would appear that introducing a self reflective element into an accounting curriculum was a relatively successful exercise. While this initiative might not seem radical in the social sciences, it was, in my experience, an innovative one for students studying accounting to have to undertake, and important for students that will soon be graduating and beginning their careers in an environment that is still has some way to go in establishing institutions that can adequately support a more advanced – and hopefully more prosperous – economy that benefits the many rather than just simply the few.7
References Asian Development Bank, Technical assistance to the Republic of Tajikistan for improving Accounting and Management System of the subsidiaries of Barki Tajic, ADB, 2003 available at http://www.adb.org/Documents/TARs/TAJ/tar_taj_37040.pdf [04 May 2005]. Rebecca A. Gallun, Charlotte J. Wright, Linda Nichols and John W. Stevenson, Fundamentals of Oil and Gas Accounting, 4th edition, Tulsa, Oklahoma: Penn Well Corporation, 2001. North, Douglas C., Institutions, Institutional Change and Economic Performance. Cambridge, England: Cambridge University Press. Transparency International, Corruption Perceptions Index 2004, available at http://www.transparency.org/cpi/2004/cpi2004.en.html#cpi2004 [5 May 2005].
Endnotes 1 Bachelor of Commerce (Accounting) „93 and Masters of Accounting ‟94 at University College, Dublin, Ireland, followed by a three year training contract with Price Waterhouse and admission to the Institute of Chartered Accountants in Ireland in 1997. 2 I completed a Masters in International Relations at Dublin City University in 1999 and am currently a doctoral candidate in International Relations at the School of International Service of American University, Washington D.C. 3 Sudan 1997 – 1998 and 1999 – 2000, Angola 2000 – 2002. 4 Because of difficulties in importing textbooks quickly in Kazakhstan, it was not possible to choose alternative textbooks for this semester. 5 Depending on information available, I reviewed either full syllabi or short course descriptions. The syllabi reviewed came from Sam Houston State University, Texas; Oklahoma State University, Pittsburg State University, Professional Development Institute – the continuing education arm of the University of North Texas and the Stephen F. Austin State University, Texas. 6 This point was highlighted to the author in an interview conducted with Greg Hemphill, Regional Director for Accounting Education, Regulatory and Association Development, Certified International Professional Accountant Examination Network, in Almaty, Kazakhstan in April 2005. 7 With thanks to Ms. Elnura Abdullina, Teaching Assistant, Department of Accounting at KIMEP for research assistance on accounting regulation during the Soviet era and to the MBA students enrolled in the Spring 2005 Oil and Gas Accounting class at the Bang School of Business in KIMEP.
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