Chapter 3

http://www.financialpost.com/news-sectors/energy/story.html?id=2607665

Summary
Oil and gas companies in Alberta are now facing a great disaster due the extra tax and royalty they have to pay according to a study on Canada's competitiveness. British Columbia and Saskatchewan also place a heavier tax and royalty burden on the energy industry compared with other sectors. According to Mr. Mintz, an influential tax expert and economist, the industries are not levelled and as a result the oil and gas companies are getting projects resulting in less capital. To help solve the problem, Mr Mintz recommended a simple royalty system similar to the structure they used for the mining companies but Alberta rejected his idea. Mr. Mintz shared his report, which contained all levels of taxes, to many people from different departments. A lower overall and royalty rate for the energy industry could translate into more revenue for Alberta, Saskatchewan, and British Columbia because companies could invest more cash and as a result extract more resources, which would give the provinces more royalties. Mr. Mintz's report found their tax and royalty rates are so low they translate into subsidies.

Connection
Chapter three focuses on the differences between the single-step income statement and the multi-step income statement. In the article, it talks a lot about taxes. Since income tax is an expense, it is recorded as income tax expense under 'expenses and losses' for a single-step income statement. As for the multi-step income statement, taxes are listed in a little section by itself which is known as 'income tax expense (or provision for income taxes)'. There is not much difference between multi-step and single-step income statements other than the layout. But even though there is a slight difference, they both end up with the same net income. Oil companies are at a great disadvantage because they have to pay more taxes than other companies. Also, due to the lack number of projects they get, they have troubles keeping their capital high. Therefore, these problems cause the financial statements for the companies to look poor and investors start to decrease causing a big ruckus for the oil and gas companies.

Reflection
In my opinion, I think that oil and gas companies are becoming more and more problematic. If they keep on doing so poorly and don't have enough projects, something bad is bound to happen. I agree with Mr. Mintz that the fields aren't levelled compared to other industries. Something that is very important in this chapter is the accounting cycle. If projects were so limited, less transaction will occur resulting in a less money made. As less money gets made, the net income becomes smaller creating a ruined financial statements show up. This triggers the discouragement in investments in the oil and gas industry causing everything to go downhill for them. I am very pleased that the oil and gas companies have been so ethical and not performing any unethical behaviour like the example on page 163. I think it is very important for a company to be ethical because if you are doing something unethical, it will only harm you in the future.