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Extractive Industries

Date recorded:

Exploration and evaluation costs

The staff presented a pre-ballot draft and asked to the Board to vote on three specific issues:

  • impairment test,
  • continuation of previous GAAP, and
  • nature of the amendments -- IAS 16, IAS 38, or both?

Impairment test and continuation of previous GAAP

The staff proposed an extractive industry cash generating unit for the purpose of applying the impairment test under IAS 36. The Board expressed some concerns that it would be unlikely that exploration-only entities will be able to capitalise exploration costs or that they would be impaired. One Board member reported that under the current practice in this industry, it appears that exploration costs are deferred until more information is available or expensed and reinstated as assets if the exploration is successful.

The Board agreed to allow current practice in the extractive industries to continue, and this should be applied to both current IFRS appliers and first-time adopters.

Nature of the amendments -- IAS 16, IAS 38, or both

The Board agreed to include exploration costs in the scope of IAS 16 and to cross-reference them to IAS 38, but the current practice of deferral (as explained above) would still be permitted. This proposal was supported by 9 in favour and 5 against.

Correction list for hyphenation

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