Harbinger Group Inc.
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SEC Filings

PRER14A
HRG GROUP, INC. filed this Form PRER14A on 11/14/1995
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            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
acquisitions of Cimarron Gas Holding Company ("Cimarron") and the Stellar
Companies ("Stellar") in fiscal 1993 totalled $7.5 million and is being
amortized over 20 years using the straight-line method. Accumulated goodwill
amortization totalled $949,000 and $124,000 as of September 30, 1994 and 1993.
 
 Property, equipment and depreciation
 
  Property and equipment are recorded at cost. However, the Company effected an
accounting quasi-reorganization as of October 1, 1990 at which time the
historical cost basis of the Company's property and equipment was adjusted to
the fair value of such property and equipment. The carrying value of the assets
utilized in the marine protein operations was reduced to estimated fair value.
 
  Depreciation of property and equipment, other than that related to oil and
gas operations, is provided using the straight-line method over the estimated
useful lives of the assets. Estimated useful lives of assets acquired new,
determined as of the date of acquisition, are as follows:
 

<TABLE>
<CAPTION>
                                                                    USEFUL LIVES
                                                                    ------------
                                                                      (YEARS)
      <S>                                                           <C>
      Natural gas compressors......................................       15
      Gas gathering systems and gas processing plants..............       15
      Fishing vessels and fish processing plants...................    15-20
      Furniture and fixtures.......................................     3-10
</TABLE>

 
  Gains and losses resulting from sales and retirements of property and
equipment are included in operating income. Property and equipment no longer in
service pending disposition is classified as other assets and is recorded at
estimated net realizable value.
 
 Oil and gas operations
 
  Under the full cost accounting method all costs associated with property
acquisition and exploration for, and development of, oil and gas reserves are
capitalized within cost centers established on a country-by-country basis.
Capitalized costs within a cost center, as well as the estimated future
expenditures to develop proved reserves and estimated net costs of
dismantlement and abandonment, are amortized using the unit-of-production
method based on estimated proved oil and gas reserves. All costs relating to
production activities are charged to expense as incurred.
 
  Capitalized oil and gas property costs, less accumulated depreciation,
depletion and amortization and related deferred income taxes, are limited to an
amount (the ceiling limitation) equal to the sum of (a) the present value
(discounted at 10%) of estimated future net revenues from the projected
production of proved oil and gas reserves, calculated at prices in effect as of
the balance sheet date (with consideration of price changes only to the extent
provided by fixed and determinable contractual arrangements), and (b) the lower
of cost or estimated fair value of unproved and unevaluated properties, less
(c) income tax effects related to differences in the book and tax basis of the
oil and gas properties.
 
 Revenue recognition
 
  The Company utilizes the sales method of accounting for sales of natural gas
whereby revenues are recognized based on the amount of gas sold to purchasers.
The amount of natural gas sold may differ from the amount to which the Company
is entitled based on its working interests in the properties. The Company's
reserve estimates are adjusted accordingly to reflect any imbalance positions.
The gas imbalance position was not significant to the Company's financial
position at September 30, 1994.
 
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