International Financial Reporting Standard 6 Exploration for and Evaluation of Mineral Resources (IFRS 6) is set out in paragraphs 1–27 and Appendices A and B. All the paragraphs have equal authority. Paragraphs in bold type state the main principles. Terms defined in Appendix A are in italics the first time they appear in the Standard. Definitions of other terms are given in the Glossary for International Financial Reporting Standards. IFRS 6 should be read in the context of its objective and the Basis for Conclusions, the Preface to IFRS Standards and the Conceptual Framework for Financial Reporting. IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors provides a basis for selecting and applying accounting policies in the absence of explicit guidance. [Refer:IAS 8 paragraphs 10–12. However, in this case, refer also to IFRS 6 paragraphs 6, 7, 9, 10, 13 and 14.]
1 | The objective of this IFRS is to specify the financial reporting for the exploration for and evaluation of mineral resources. |
2 | In particular, the IFRS requires:
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3 | An entity shall apply the IFRS to exploration and evaluation expenditures that it incurs.E1 |
| E1 | [IFRIC® Update, January 2006, Agenda Decision, ‘IFRS 6 Exploration for and Evaluation of Mineral Resources—Application of the "full‑cost" method’ The IFRIC was asked to clarify the effect of the limited scope of IFRS 6 on exploration and evaluation (E&E) activities. The IFRIC was asked if this limited scope (a) reflected the Board’s intention to impose limits on current national GAAP practices only in respect of activities conducted in the E&E phase, while permitting industry practices in other extractive industry areas (eg development and exploitation) to continue unchanged, or (b) whether the IASB focused on E&E activities because it was the only area for which the IASB was willing to grant some relief from the hierarchy for selection of accounting policies in IAS 8. Under the latter view, the IAS 8 hierarchy would apply fully to an entity’s selection of IFRS accounting policies for activities outside the E&E phase. The submission identified some inconsistencies between current extractive industry full‑cost accounting practices in respect of development and exploitation activities but questioned whether the IASB intended to require change from current practices in these areas in advance of a comprehensive extractive industry project. The IFRIC noted that the effect of the limited scope of IFRS 6 was to grant relief only to policies in respect of E&E activities, and that this relief did not extend to activities before or after the E&E phase. The Basis for Conclusions on IFRS 6 includes the Board’s intention of limiting the need for entities to change their existing accounting policies for E&E activities. The IFRIC believed it was clear that the scope of IFRS 6 consistently limited the relief from the hierarchy to policies applied to E&E activities and that there was no basis for interpreting IFRS 6 as granting any additional relief in areas outside its scope. Therefore, the IFRIC believed that diversity in practice should not become established and decided not to add the issue to its agenda.] |
4 | The IFRS does not address other aspects of accounting by entities engaged in the exploration for and evaluation of mineral resources. |
5 | An entity shall not apply the IFRS to expenditures incurred:
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6 | When developing its accounting policies, an entity recognising exploration and evaluation assets shall apply paragraph 10 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. |
7 | Paragraphs 11 and 12 of IAS 8 specify sources of authoritative requirements and guidance that management is required to consider in developing an accounting policy for an item if no IFRS applies specifically to that item. Subject to paragraphs 9 and 10 below, this IFRS exempts an entity from applying those paragraphs to its accounting policies for the recognition and measurement of exploration and evaluation assets. |
8 | Exploration and evaluation assets shall be measured at cost. |
9 | An entity shall determine an accounting policy specifying which expenditures are recognised as exploration and evaluation assets and apply the policy consistently. In making this determination, an entity considers the degree to which the expenditure can be associated with finding specific mineral resources. The following are examples of expenditures that might be included in the initial measurement of exploration and evaluation assets (the list is not exhaustive):
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10 | Expenditures related to the development of mineral resources shall not be recognised as exploration and evaluation assets. The Conceptual Framework for Financial Reporting and IAS 38 Intangible Assets [Refer:IAS 38 paragraphs 51–67] provide guidance on the recognition of assets arising from development. |
11 | In accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets an entity recognises any obligations for removal and restoration that are incurred during a particular period as a consequence of having undertaken the exploration for and evaluation of mineral resources. |
12 | After recognition, an entity shall apply either the cost model or the revaluation model to the exploration and evaluation assets. If the revaluation model is applied (either the model in IAS 16 Property, Plant and Equipment [Refer:IAS 16 paragraphs 31–42] or the model in IAS 38 [Refer:IAS 38 paragraphs 75–87]) it shall be consistent with the classification of the assets (see paragraph 15). |
13 | An entity may change its accounting policies for exploration and evaluation expenditures if the change makes the financial statements more relevant [Refer:Conceptual Framework paragraphs 2.6–2.11] to the economic decision‑making needs of users [Refer:Conceptual Framework paragraphs 1.2–1.10 and 2.36] and no less reliable,E2 or more reliable and no less relevant to those needs. An entity shall judge relevance and reliability using the criteria in IAS 8 [Refer:IAS 8 paragraphs 7–12]. |
| E2 | [The term ‘faithful representation’, which was used in the Conceptual Framework issued in 2010 and is also used in the revised version of the Conceptual Framework issued in 2018, encompasses the main characteristics that the Framework called ‘reliability’ (refer Conceptual Framework paragraphs 2.12–2.19 and Basis for Conclusions paragraphs BC2.21–BC2.31).] |
14 | To justify changing its accounting policies for exploration and evaluation expenditures, an entity shall demonstrate that the change brings its financial statements closer to meeting the criteria in IAS 8, but the change need not achieve full compliance with those criteria. |
15 | An entity shall classify exploration and evaluation assets as tangible or intangible according to the nature of the assets acquired and apply the classification consistently. |
16 | 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. However, using a tangible asset to develop an intangible asset does not change a tangible asset into an intangible asset. |
17 | An exploration and evaluation asset shall no longer be classified as such when the technical feasibility and commercial viability of extracting a mineral resource are demonstrable. Exploration and evaluation assets shall be assessed for impairment, and any impairment loss recognised, before reclassification. |
18 | Exploration and evaluation assets shall be assessed for impairment when facts and circumstances suggest that the carrying amount of an exploration and evaluation asset may exceed its recoverable amount. When facts and circumstances suggest that the carrying amount exceeds the recoverable amount, an entity shall measure, present and disclose any resulting impairment loss in accordance with IAS 36, except as provided by paragraph 21 below. |
19 | For the purposes of exploration and evaluation assets only, paragraph 20 of this IFRS shall be applied rather than paragraphs 8–17 of IAS 36 when identifying an exploration and evaluation asset that may be impaired. Paragraph 20 uses the term ‘assets’ but applies equally to separate exploration and evaluation assets or a cash‑generating unit. |
20 | One or more of the following facts and circumstances indicate that an entity should test exploration and evaluation assets for impairment (the list is not exhaustive):
In any such case, or similar cases, the entity shall perform an impairment test in accordance with IAS 36. Any impairment loss is recognised as an expense in accordance with IAS 36. |
21 | An entity shall determine an accounting policy for allocating exploration and evaluation assets to cash‑generating units or groups of cash‑generating units for the purpose of assessing such assets for impairment. Each cash‑generating unit or group of units to which an exploration and evaluation asset is allocated shall not be larger than an operating segment [Refer:IFRS 8 paragraphs 5–10] determined in accordance with IFRS 8 Operating Segments. |
22 | The level identified by the entity for the purposes of testing exploration and evaluation assets for impairment may comprise one or more cash‑generating units. |
23 | An entity shall disclose information that identifies and explains the amounts recognised in its financial statements arising from the exploration for and evaluation of mineral resources. |
24 | To comply with paragraph 23, an entity shall disclose:
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25 | An entity shall treat exploration and evaluation assets as a separate class of assets and make the disclosures required by either IAS 16 or IAS 38 consistent with how the assets are classified.
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26 | An entity shall apply this IFRS for annual periods beginning on or after 1 January 2006. Earlier application is encouraged. If an entity applies the IFRS for a period beginning before 1 January 2006, it shall disclose that fact. |
26A | Amendments to References to the Conceptual Framework in IFRS Standards, issued in 2018, amended paragraph 10. An entity shall apply that amendment for annual periods beginning on or after 1 January 2020. Earlier application is permitted if at the same time an entity also applies all other amendments made by Amendments to References to the Conceptual Framework in IFRS Standards. An entity shall apply the amendment to IFRS 6 retrospectively in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. However, if an entity determines that retrospective application would be impracticable or would involve undue cost or effort, it shall apply the amendment to IFRS 6 by reference to paragraphs 23–28, 50–53 and 54F of IAS 8. |
27 | If it is impracticable to apply a particular requirement of paragraph 18 to comparative information that relates to annual periods beginning before 1 January 2006, an entity shall disclose that fact. IAS 8 explains the term ‘impracticable’. [Refer:IAS 8 paragraphs 50–53] |
This appendix is an integral part of the IFRS.
Exploration and evaluation expenditures recognised as assets in accordance with the entity’s accounting policy.
Expenditures incurred by an entity in connection with the exploration for and evaluation of mineral resources before the technical feasibility and commercial viability of extracting a mineral resource are demonstrable.
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.
The amendments in this appendix shall be applied for annual periods beginning on or after 1 January 2006. If an entity applies this IFRS for an earlier period, these amendments shall be applied for that earlier period.
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The amendments contained in this appendix when this IFRS was issued in 2004 have been incorporated into the relevant IFRSs published in this volume.
International Financial Reporting Standard 6 Exploration for and Evaluation of Mineral Resources was approved for issue by ten of the fourteen members of the International Accounting Standards Board. Messrs Garnett, Leisenring, McGregor and Smith dissented. Their dissenting opinions are set out after the Basis for Conclusions.
| Sir David Tweedie | Chairman |
| Thomas E Jones | Vice‑Chairman |
| Mary E Barth | |
| Hans‑Georg Bruns | |
| Anthony T Cope | |
| Jan Engström | |
| Robert P Garnett | |
| Gilbert Gélard | |
| James J Leisenring | |
| Warren J McGregor | |
| Patricia L O’Malley | |
| John T Smith | |
| Geoffrey Whittington | |
| Tatsumi Yamada |
These Amendments to International Financial Reporting Standard 1 First‑time Adoption of International Financial Reporting Standards and International Financial Reporting Standard 6 Exploration for and Evaluation of Mineral Resources were approved for issue by the fourteen members of the International Accounting Standards Board.
| Sir David Tweedie | Chairman |
| Thomas E Jones | Vice‑Chairman |
| Mary E Barth | |
| Hans‑Georg Bruns | |
| Anthony T Cope | |
| Jan Engström | |
| Robert P Garnett | |
| Gilbert Gélard | |
| James J Leisenring | |
| Warren J McGregor | |
| Patricia L O’Malley | |
| John T Smith | |
| Geoffrey Whittington | |
| Tatsumi Yamada |