Dictionary of Accounting Terms: Reserve Recognition Accounting (RRA)
Reserve Recognition Accounting (RRA)
procedural attempt by the SEC to improve the reporting practices of oil and gas companies' valuations of natural resource reserves. Supplemental income statements are required that must exhibit the discounted value of new proven reserves discovered during the year and previously discovered reserves. The SEC specifies the use of a 10% discount rate, which among other difficulties (such as the definition of "proven," estimations of reserve quantities, projected selling prices, and inclusion of foreign reserves with foreign co-ownership), provides a somewhat arbitrary method of accounting for reserves.
