Objective: IFRS 6 specifies the financial reporting for exploration and evaluation expenditures, providing temporary exemptions from certain IASB requirements.
- Applies to expenditures incurred for exploration and evaluation of mineral resources
- Limited scope standard - interim solution pending comprehensive review
- Key focus: accounting policies, recognition, measurement, and impairment
Exploration and Evaluation Assets: Exploration and evaluation expenditures recognized as assets in accordance with entity's accounting policy.
Exploration and Evaluation Expenditures: Expenditures incurred in search for mineral resources and determination of technical feasibility/commercial viability.
- Includes: Acquisition of rights, topographical/geological studies, exploratory drilling, sampling, and feasibility studies
- Excludes: Expenditures related to development of mineral resource
Entities develop accounting policies specifically for E&E assets:
| Decision Point | Accounting Treatment |
|---|---|
| Expenditure Recognition | Entity determines which expenditures are recognized as E&E assets |
| Measurement Basis | Cost model or revaluation model after recognition |
| Classification | As tangible or intangible assets according to nature |
Note: Policies should result in information that is relevant and reliable.
Cost Measurement: E&E assets are measured at cost, including directly attributable expenditures.
- Directly Attributable Costs: Acquisition of rights, topographical/geological studies, exploratory drilling, sampling
- Administrative Overheads: Only included if directly related to E&E activities
- Borrowing Costs: May be capitalized if criteria in IAS 23 are met
Company A incurs $5 million in exploration costs for a mining site
After initial exploration, technical data suggests lower resource potential
Company must test E&E assets for impairment using IFRS 6 criteria
If impaired, recognize impairment loss in profit or loss
- Entities required to test E&E assets for impairment when facts and circumstances suggest impairment
- Specific impairment indicators include:
- Right to explore is expiring or will expire soon
- No further exploration/evaluation planned
- Unfavorable exploration results
- Sufficient data indicate economic viability unlikely
- Cash-generating unit for impairment testing cannot be larger than a segment
- Entities may apply IAS 36 impairment tests or develop specific approach for E&E assets
| Event | Accounting Treatment |
|---|---|
| Technical Feasibility | E&E assets reclassified to appropriate asset category (PPE, intangible, inventory) |
| Abandonment | E&E assets derecognized with gain/loss recognized in P&L |
| No Economic Value | Assets written off through impairment |
- Accounting policies for recognition and measurement of E&E expenditures
- Amounts of assets, liabilities, income, expenses, and operating/investing cash flows from E&E activities
- Classification of E&E assets as tangible or intangible
- Impairment losses and reversals related to E&E assets
- Explanation of judgments made in developing accounting policies
- Information about exploration and evaluation interests