Some observations regarding financial reporting, financial performance and portfolio optimization of major upstream IFRS petroleum companies

This thesis focuses on some observations regarding upstream petroleum companies in terms of financial reporting, financial performance and portfolio optimization. The sample of this research is made up of upstream petroleum companies whose financial reporting is based on International Financial Reporting Standards (IFRS) within the framework of the sales revenue constraint. The findings of this research were collected using frequency distribution method, financial ratios and appropriate spreadsheet functions. From the perspective of financial reporting, findings show that (1) the majority of the major upstream petroleum companies prepare their financial statements in accordance with IFRS; (2) there is a diversification of accounting policy choices adopted by these companies regarding IAS 1, IAS 2, IAS 7, IAS 16, IAS 38, IAS 40 in the general context; and (3) this research indicates that major IFRS petroleum companies are inclined to report their exploration and evaluation expenditures using Successful Efforts method. From the perspective of the financial performance analysis, findings show that quoted IFRS petroleum companies are profitable and they generally improved their liquidity from 2014 to 2015 but they should be prudent in managing their short-term liabilities which may create pressure on the liquidity. From the perspective of portfolio optimization, this research observed expected returns and risks of shares of major quoted IFRS petroleum companies should be observed by different portfolio scenarios for the purpose of risk minimization and return maximization. Compared to the prior of research of Jurkowski & Daly (2015) which uses financial ratios and particularly profitability v ratios for the purpose of investor's preference and risk tolerance, this research proposes that reasonable information that is required for investor's preference and risk tolerance is expected to be provided through financial ratios supported by different portfolio scenarios when investing into shares of petroleum companies.