B The expiration of the period for which the entity has the right to explore in the specific area, unless the right is expected to be renewed Answers: 1(d), 2(c), 3(a), Virtual classroom support for learning partners, Diploma in International Financial Reporting, IFRS 6, exploration for and evaluation of mineral resources, be relevant to the decision-making needs of users. The full functionality of our site is not supported on your browser version, or you may have 'compatibility mode' selected. A decision has been made to discontinue exploration and evaluation in an area because of the absence of commercial reserves. A policy must: Changes made to an entity’s accounting policy for exploration and extraction assets can only be made if the result is closer to the principles of the Conceptual Framework. If the Conceptual Framework or IAS 36 was applied to these entities, then no assets would ever be recognised. Recognised exploration and evaluation assets should be classified as either tangible or intangible assets under IFRS 6. D An entity would not be permitted to change accounting policy unless there is a new or revised standard that replaces the existing requirements in IFRS 6. C The absence of budgeted or planned substantive expenditure on further exploration and evaluation activities in the specific area IFRS 16 specifies how an IFRS reporter will recognise, measure, present and disclose leases. What is an entity required to consider when deciding on its accounting policies for exploration and evaluation activities? The IFRS include . A lease modification is defined as a change in the scope of a lease, or the consideration for a lease, that was not part of the original terms and conditions of the lease. The classification as ‘tangible’ or ‘intangible’, established during the exploration phase, should be continued through to the development and production phases. Short example of a similar situation: Under IAS 18, many telecom operators provided free handsets to customers and treated them as “marketing costs”, or costs to obtain a client. A principal purpose of IFRS 6 is to specify the circumstances in which entities should test exploration and evaluation costs for impairment, and when to require disclosure of information about such assets. Most of the major entities in this sector use the ‘successful efforts’ method, where the costs incurred in finding, acquiring, and developing reserves are capitalised on a ‘field by field’ basis. There was a lack of guidance prior to this IFRS Standard, and where national standards did exist, the accounting practices were diverse, and a number were used throughout the world to account for the costs involved in exploration and extraction. If a discovery is not made, the expenditure is charged as an expense. These illustrative IFRS financial statements are intended to be used as a source of general technical reference, as they show suggested disclosures together with their sources. IFRS 6 allows entities using quite different accounting policies to all claim adherence to the standard, effectively exempting them from applying the Conceptual Framework. IFRS 6 permits an entity to develop an accounting policy for recognition of exploration and evaluation expenditures as assets without specifically considering the requirements of paragraphs 11 and 12 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. The criteria to be used to determine if a policy is relevant and reliable are set out in paragraph 10 of IAS 8. Introduction and overview 421. The change must result in a policy that is more relevant and no less reliable, or more reliable and no less relevant, than the previous policy. 6 PwC | IFRS overview 2019 Accounting principles and applicability of IFRS The IASB has the authority to set IFRS and to approve interpretations of those standards. Without this exemption, it could mean that each individual extraction unit (such as an oil rig) would be treated as a CGU. IFRS. Key IFRS 16 Definition. No further exploration or evaluation is planned or budgeted for. In your second example, you are correct. BC67-BC81) Investment contracts with discretionary participation features (paragraphs 4(b) and 71 of IFRS … Definition of an insurance contract (paragraph 6, Appendix A and paragraphs B2-B30 of IFRS 17) (paras. IFRS 6 was issued in December 2004 and applies to annual periods beginning on or after 1 January 2006. IFRS 6 makes limited changes to existing practice. Subsequent costs incurred during the exploration and evaluation phase should be capitalised in accordance with this same policy. Under IFRS 15, this is not permitted, as IFRS 15 requires allocating the transaction price to individual performance obligations. C Recent pronouncements of standard-setting bodies, and accepted industry practices Depreciation and amortisation is not calculated for the assets because the economic resource that the assets represent are not consumed until the production phase. Example 1 An entity holds investments to collect their contractual cash flows. Model IFRS statements These are illustrative IFRS financial statements of a listed company, prepared in accordance with International Financial Reporting Standards. This site uses cookies to provide you with a more responsive and personalised service. Exploration and evaluation expenditure might therefore be capitalised earlier than would otherwise be the case under the Conceptual Framework. the amounts of assets, liabilities, income and expense and operating and investing cash flows arising from the exploration for and evaluation of mineral resources. Please visit our global website instead. Specifically: An entity treats exploration and evaluation assets as a separate class of assets and make the disclosures required by either IAS 16 Property, Plant and Equipment or IAS 38 Intangible Assets consistent with how the assets are classified. For professional accountants, Ca n't find your location/region listed to our use of cookies functionality of our site not. Guidance and examples about the application of key aspects of IFRS 9 planned or budgeted for company... In nature in their requirements, if compared to the discovery Sale and Operations. 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