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IFRS Essentials by Norbert Lüdenbach, Dieter Christian

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IFRS 6 EXPLORATION FOR AND EVALUATION OF MINERAL RESOURCES

1 INTRODUCTION AND SCOPE

IFRS 6 specifies the financial reporting for the exploration for and evaluation of mineral resources (e.g. oil, natural gas, etc.). IFRS 6 is applied to exploration and evaluation expenditures that the entity incurs. However, IFRS 6 does not address other aspects of accounting by entities engaged in the exploration for and evaluation of mineral resources (IFRS 6.1–6.4).

Exploration and evaluation is the search for mineral resources after the receipt of the legal rights to explore in a specific area, as well as the determination of the technical feasibility and commercial viability of extracting the mineral resource (IFRS 6.Appendix A). An example of such activities would be test drillings.

IFRS 6 must not be applied to expenditures incurred before the exploration for and evaluation of mineral resources or after the technical feasibility and commercial viability of extracting a mineral resource are demonstrable (IFRS 6.5).

2 FINANCIAL REPORTING

Requirements with regard to the recognition and initial measurement of exploration and evaluation assets are included in IFRS 6 only to a minor degree. According to the general rules of IFRS, IAS 8.10–8.12 would have to be applied in order to close the regulatory gap. However, in the present case, only IAS 8.10 has to be applied, which results in a lot of discretion. An entity that applies IFRS for the first time can generally continue to apply its previously ...

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