ACCT3321 Lecture Notes - Lecture 7: Book Value, Financial Statement, Natural Gas Field
CHAPTER 34
Accounting for mineral resources
- Extractive industries are those industries involved in finding and removing wasting
natural resources in or near the earths’ crust
- Descriptions
- AASB 6 provides limited guidance on accounting policy because:
oHigh risk with the potential for, but no guarantee of, high rewards.
Costs are incurred for the hope of finding resources
oTime and cost to produce
Once mineral reserves are discovered, there can be considerable
additional expenditure involved in developing and producing those
reserves
OBJECTIVE OF AASB 16
- limited to specifying the financial reporting for the exploration for and evaluation of
mineral resources
SCOPE
- Limited to accounting for E&E expenditures and does not address other aspects of
accounting by entities engaged in the exploration for and evaluation of mineral
resources
- Does not deal with prospecting, development and productions
RECOGNITION OF EXPLOATION AND EVALUATION ASSETS
-Temporary exemption from AASB 108 para 11 and 12
oCan defer capitalising on the balance sheet – nearly all exploration and
evaluation expenditure to recognising all such expenditure in profit or loss
oE&E relates to areas of interest – an individual geological area which is
considered to constitute a favourable environment for the presence of a
mineral deposit or an oil or natural gas field, or has been proved to contain
such a deposit or field
oExemption – allows the continued application or use of much of the existing
industry accounting practices for recognition and measurement of E&E assets
and expenditures
oMost common ways to account
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Document Summary
Extractive industries are those industries involved in finding and removing wasting natural resources in or near the earths" crust. Aasb 6 provides limited guidance on accounting policy because: high risk with the potential for, but no guarantee of, high rewards. Costs are incurred for the hope of finding resources: time and cost to produce. Once mineral reserves are discovered, there can be considerable additional expenditure involved in developing and producing those reserves. Limited to specifying the financial reporting for the exploration for and evaluation of mineral resources. Limited to accounting for e&e expenditures and does not address other aspects of accounting by entities engaged in the exploration for and evaluation of mineral resources. Does not deal with prospecting, development and productions. Successful efforts method only those costs directly related to the discovery, acquisition or development of specific, distinct mineral reserves are capitalised and accumulated as part of a cost centre.
