Panhandle Oil and Gas Inc.
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Income Taxes
The estimation of the amounts of income tax to be recorded by the Company involves
interpretation of complex tax laws and regulations as well as the completion of complex calculations,
including the determination of the Company’s percentage depletion deduction. Although the Company’s
management believes its tax accruals are adequate, differences may occur in the future depending on the
resolution of pending and new tax matters.
New Accounting Pronouncements
In June 2006, the FASB issued FIN 48, “Accounting for Uncertainty in Income Taxes - an
interpretation of FASB Statement 109,” which clarifies the accounting for uncertainty in income taxes
recognized in an enterprise’s financial statements in accordance with FAS 109, “Accounting for Income
Taxes.” FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 is
effective for fiscal years beginning after December 15, 2006, which will be our fiscal year beginning
October 1, 2007. The adoption of this statement is not expected to have a material impact on the
Company’s financial position or results of operations or cash flows.
On September 13, 2006, the Securities and Exchange Commission (“SEC”) issued Staff
Accounting Bulletin No. 108 (“SAB 108”), which provides interpretive guidance on how the effects of
the carryover or reversal of prior year misstatements should be considered in quantifying a current year
misstatement. SAB 108 was effective for the Company in fiscal year 2007. The adoption of this
statement did not have a material impact on the Company’s financial position, results of operations or
cash flows.
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. This statement
defines fair value, establishes a framework for measuring fair value in generally accepted accounting
principles (GAAP), and expands disclosures about fair value measurements. This statement is effective
for financial statements issued for fiscal years beginning after November 15, 2007. The Company is still
assessing the impact of this statement, but the adoption of this statement is not expected to have a
material effect on the Company’s financial position, results of operations or cash flows.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets
and Financial Liabilities. This statement permits entities to choose to measure many financial
instruments and certain other items at fair value. This statement is effective for financial statements
issued for fiscal years beginning after November 15, 2007. The adoption of this statement is not
expected to have a material effect on the Company’s financial position, results of operations or cash
flows.
Other accounting standards that have been issued or proposed by the FASB or other standardssetting bodies that do not require adoption until a future date are not expected to have a material impact
on the consolidated financial statements upon adoption.
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