Accounting for Mineral Resources

Accounting for Mineral Resources

Introduction to AASB 6, Exploration for and evaluation of mineral resources

 AASB 6 is the Australian equivalent to IFRS 6 Exploration and Evaluation of Minerals Resources, which was issued by the IASB in December 2004.

 Historically, the IASB has tended to avoid industry-specific standard setting, however the extractive industries, which include industries involved in seeking, finding and extracting minerals, oil and gas , present a significant economic contributor to the global economy and due to the unique accounting issues faced by these industries

Scope of AASB 6, Exploration for and evaluation of mineral resources

 The scope of IFRS 6 and therefore AASB 6 is specifically limited to accounting for exploration and evaluation (E&E) expenditures incurred by an entity in connection with the ‘exploration for and valuation of mineral resources’.

 The standard defines this process as being ‘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.’

 Because of the limited scope applied by IFRS, accounting policies should be determined in accordance with AASB 108, Accounting policies, Changes in Accoutring Estimates and Errors.i.e.

1. If a transaction, other event or condition is specifically covered by an existing Australian Accounting Standard, that standard should be applied in the determining the appropriate accounting policy, and;

2. If there is no specific Australian Accounting Standard that applies to a transaction, other event or condition, the entity’s management must

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