Exploration and Evaluation of Mineral Resources – IFRS 6

IFRS 6 specifies the financial reporting for expenditures incurred in exploration for and evaluation of mineral resources before the technical feasibility and commercial viability of extracting the mineral resources is demonstrable. It does not specify the financial reporting for the development of mineral resources.

Exploration and evaluation expenditures and mineral rights are excluded from the scope of the standards dealing with intangible assets and property, plant and equipment.

In most respects, an entity may continue to account for exploration and evaluation expenditures using the same accounting policies it applied immediately before adopting IFRS 6.

However, the standard makes some limited improvements to accounting for such expenditures:

• The entity must determine accounting policies specifying which exploration and evaluation expenditures are recognised as assets, and how such assets are to be measured.
• On recognition, exploration and evaluation assets are measured at cost. Subsequently they are measured using either the cost model or the revaluation model.
• Exploration and evaluation assets are classified as tangible or intangible assets according to their nature.
• An exploration and evaluation asset is assessed for impairment when facts and circumstances suggest the carrying amount exceeds the recoverable amount. The entity determines the ‘level’ (cash-generating unit or group of units) at which impairment is assessed. The ‘level’ must not be larger than a segment used for purposes of segment reporting. Impairment is measured in accordance with IAS 36 Impairment of Assets.

The standard restricts accounting policy changes. Any changes in accounting for exploration and evaluation expenditures must result in information that is more relevant and reliable.