Extractive activities

Date recorded:

Reserve and resource reporting (Agenda Paper 19A)

In July, the Board asked staff to perform outreach in other jurisdictions and additional research activities in order to be able to determine:

  • (a) what problems, if any, entities with extractive activities have applying IFRS Standards; and
  • (b) whether the primary users of financial statements of entities with extractive activities are obtaining all the information they need for these entities.

This paper summarises the research findings, which demonstrate diversity in the accounting policies applied to exploration and evaluation expenditure within the scope of IFRS 6 and in the related disclosure requirements. Regulatory requirements for entities with extractive activities specify the use of a particular reserve and resource classification system, but these classification systems differ between jurisdictions.

The paper reiterates that users of financial statements rely on information found outside the financial statements to enhance their understanding of an entity with extractive activities and that reserve and resource information disclosed often lacks comparability and consistency.

The Board was not asked to make any decisions at this meeting.

Board discussion

The Board commented on the findings listed in Agenda Paper 19A.

The Board noted a consensus of the financial statements users on the importance of reserves and resources disclosures for the valuation of extractive companies. However, the level of requirements for mandatory disclosures are higher in jurisdictions where extractive businesses have a large contribution to the economy.

The Board have asked staff to further research on the reasons why disclosure requirements differ between the jurisdictions.

Some Board members commented on how reserve findings disclosed in areas other than the financial accounts often materially affects the share price of listed extractive companies.

No decisions were made.

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