IFRS 6

IFRS 6 specifies some aspects of the financial reporting for costs incurred for exploration for and evaluation of mineral resources (for example, minerals, oil, natural gas, and similar non-regenerative resources), as well as the costs of determination of the technical feasibility and commercial viability of extracting the mineral resources.

IFRS 6:

  • permits an entity to develop an accounting policy for exploration and evaluation assets without specifically considering the requirements of paragraphs 11–12 of IAS 8. Thus, an entity adopting IFRS 6 may continue to use the accounting policies applied immediately before adopting IFRS 6.
  • requires entities recognising exploration and evaluation assets to perform an impairment test on those assets when facts and circumstances suggest that the carrying amount of the assets may exceed their recoverable amount.
  • varies the recognition of impairment from that in IAS 36 but measures the impairment in accordance with that Standard once the impairment is identified.

Is IFRS 6 still applicable?

IFRS 6: permits an entity to develop an accounting policy for exploration and evaluation assets without specifically considering the requirements of paragraphs 11–12 of IAS 8. Thus, an entity adopting IFRS 6 may continue to use the accounting policies applied immediately before adopting IFRS 6.

What is the treatment of exploration and evaluation expenditures?

Exploration and evaluation expenditures are recognized as assets in accordance with the entity’s accounting policy. Expenditures incurred by an entity in connection with the exploration for and evaluation of before the technical feasibility and commercial viability of extracting a mineral resource are demonstrable.

What is exploration and evaluation assets?

Some exploration and evaluation assets are treated as intangible (eg drilling rights), whereas others are tangible (eg vehicles and drilling rigs). To the extent that a tangible asset is consumed in developing an intangible asset, the amount reflecting that consumption is part of the cost of the intangible asset.

What is the meaning of exploration and evaluation of mineral resources?

Exploration for and evaluation of mineral resources means the search for mineral resources, including minerals, oil, natural gas, and similar non-regenerative resources after the entity has obtained 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.