IFRS 6 — Exploration for and Evaluation of Mineral Resources
IFRS 6 Exploration for and Evaluation of Mineral Resources has the effect of allowing entities adopting the standard for the first time to use accounting policies for exploration and evaluation assets that were applied before adopting IFRSs. It also modifies impairment testing of exploration and evaluation assets by introducing different impairment indicators and allowing the carrying amount to be tested at an aggregate level (not greater than a segment).
IFRS 6 was issued in December 2004 and applies to annual periods beginning on or after 1 January 2006.
History of IFRS 6
|Project on extractive industries carried over from IASC|
|November 2000||IASC issues paper Extractive Industries published and comments invited|
|16 January 2004||Exposure Draft ED 6 Exploration for and Evaluation of Mineral Resources issued|
|10 December 2004||IFRS 6 Exploration and Evaluation of Mineral Resources issued Click for IASB Press Release (PDF 28k).|
|1 January 2006||Effective Date|
|30 June 2005||Amendment to IFRS 6 on comparative disclosures for 2005 adoptions Click for IASB Press Release (PDF 48k).|
Amendments under consideration by the IASB
Summary of IFRS 6
Exploration for and evaluation of mineral resources mean 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. [IFRS 6.Appendix A]
Exploration and evaluation expenditures are expenditures incurred in connection with the exploration and evaluation of mineral resources before the technical feasibility and commercial viability of extracting a mineral resource is demonstrable. [IFRS 6.Appendix A]
IFRS 6 permits an entity to develop an accounting policy for recognition of exploration and evaluation expenditures as assets without specifically considering the requirements of paragraphs 11 and 12 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. [IFRS 6.9] Thus, an entity adopting IFRS 6 may continue to use the accounting policies applied immediately before adopting the IFRS. This includes continuing to use recognition and measurement practices that are part of those accounting policies.
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. [IFRS 6.18]Entities shall measures the impairment in accordance with IAS 36 Impairment of Assets once it is identified.
IFRS 6 also provides guidance on how to identify cash-generating units. [IFRS 6.21–22]
IFRS 6 requires disclosure of information that identifies and explains the amounts recognised in its financial statements arising from the exploration for and evaluation of mineral resources, including: [IFRS 6.23–24]
a. its accounting policies for exploration and evaluation expenditures including the recognition of exploration and evaluation assets.
b. the amounts of assets, liabilities, income and expense and operating and investing cash flows arising from the exploration for and evaluation of mineral resources.
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. [IFRS 6.25]
Special IAS Plus Newsletter explaining IFRS 6
On 31 January 2005, Deloitte's IFRS Global Office published a special edition of our IAS Plus Newsletter titled IFRS 6 Exploration for and Evaluation of Mineral Resources (PDF 54k).