Exploration for and Evaluation of Mineral Resources

CONTENT:
Objective and Scope
Recognition and Measurement of Exploration and Evaluation Assets
Impairment
Disclosure

IFRS 6 – Objective and
Scope
IFRS 6 is limited to the accounting for and reporting of costs associated only with the exploration and evaluation of mineral resources. These activities are defined as:
- the search for mineral resources…after the entity has obtained legal rights to explore in a specific area, and
- the determination of the technical feasibility and commercial viability of extracting the mineral resource.

IFRS 6 – Objective and Scope
IFRS 6 is an interim measure pending completion of a major project on extractive activities.
Permits continuation of accounting policies used prior to adoption of IFRS
Accounting policies may be inconsistent with IFRS Framework

IFRS 6 – Recognition and Measurement of Exploration and Evaluation Assets
Recognition:
Companies use a variety of methods to account for exploration and evaluation activities, from expensing all related costs to fully capitalizing them
Therefore, exploration and evaluation assets are defined in terms of the policy each company chooses

IFRS 6 – Recognition and Measurement of Exploration and Evaluation Assets
Exploration and evaluation assets are recognized at cost
Examples of costs that may be capitalized:
- Cost of exploration rights, geological studies, exploratory drilling and sampling, and evaluating technical and commercial viability of extraction

IFRS 6 – Recognition and Measurement of Exploration and Evaluation Assets
Classification of exploration and evaluation assets:

IFRS 6 - Impairment
Impaired? When facts and circumstances suggest that carrying amount > recoverable amount. Consider:
the right to explore expires and is not expected to be renewed
no other substantial expenditures are planned for exploration or evaluation in the area
the entity decides to stop exploration and evaluation activities because viable quantities have not been found in the area
although development is likely, the costs capitalized as exploration and evaluation assets exceed the amounts that are likely to be recovered
Impairment losses are taken to profit or loss – may be reversed

IFRS 6 - Disclosure
Disclosure objective: to identify and explain amounts recognized in the financial statements that result from exploration and evaluation activities
If classified as PP&E, use IAS 16
If classified as intangible asset, use IAS 38

IFRS 6 - Disclosure
Minimum disclosure:
Accounting policies for exploration and evaluation expenditures and their capitalization as assets
The amount of assets, liabilities, income, expense, and operating and investing cash flows from exploration and evaluation activities