IFRS 6

Exploration for and Evaluation of Mineral Resources

1Objective and scope

IFRS 6 specifies the financial reporting for the exploration for, and evaluation of, mineral resources (exploration and evaluation, or E&E, activities), as a deliberately limited interim measure while the IASB carries out a broader project on extractive activities. It applies to expenditures incurred in searching for mineral resources before the technical feasibility and commercial viability of extracting them are demonstrable.

2Key definitions

Exploration and evaluation expenditures

Expenditures incurred in connection with the exploration for and evaluation of mineral resources before the technical feasibility and commercial viability of extracting them are demonstrable.

Exploration and evaluation assets

Exploration and evaluation expenditures recognised as assets in accordance with an entity's accounting policy.

3Recognition and measurement

IFRS 6 permits an entity to continue applying the accounting policies for E&E assets it used under its previous GAAP, provided those policies result in information that is relevant and no less reliable, without needing to change them to comply with the Conceptual Framework as strictly as other IFRSs require - a deliberate, narrow transitional relief. E&E assets are classified as tangible or intangible, according to their nature, and initially measured at cost, which may include costs of acquiring exploration rights, topographical/geological/geochemical/geophysical studies, exploratory drilling, trenching and sampling, and activities related to evaluating the technical feasibility and commercial viability of extracting a mineral resource.

E&E assets are not depreciated or amortised while classified as such, but must be assessed for impairment when facts and circumstances suggest the carrying amount may exceed recoverable amount - IFRS 6 provides a modified, industry-specific list of impairment triggers (e.g. the right to explore in a specific area has expired or will expire soon with no expectation of renewal, substantive further expenditure is neither budgeted nor planned, exploration and evaluation activities have not led to the discovery of commercially viable quantities, or the entity has decided to discontinue activities in the area).

4Presentation and disclosure

The accounting policies for exploration and evaluation expenditures, including the recognition of E&E assets
The amounts of assets, liabilities, income, expense, and operating and investing cash flows arising from exploration for and evaluation of mineral resources

5Examinable focus

What KASNEB tests

A narrow-scope standard relevant mainly to advanced papers touching the extractive sector; expect it tested lightly, mainly the transitional 'continue your previous GAAP policy' relief and the modified list of impairment triggers specific to E&E assets, rather than heavy computation.