Extractive Industries

Date recorded:

The purpose of this session was to seek the Board's input on:

  • Disclosures for minerals or oil & gas activities; and
  • Drafting of the Discussion Paper


The first part was structured as follows:

  • Disclosure objective(s) for extractive activities;
  • Guiding principles for financial statement note disclosures; and
  • Types of disclosure that would satisfy these objectives.


Disclosure objective(s) for extractive activities

The staff presented its proposed disclosure objective for extractive industries:

  • Future cash flow prospects from the minerals or oil & gas assets;
  • Current period financial performance of the entity; and
  • Nature and extent of risks and uncertainties associated with such assets.


It was noted that these objectives are similar to the disclosure objective of IFRS 7 Financial Instruments: Disclosures.

Some Board member noted that although financial performance was identified as one objective, much of the disclosure the staff proposals would require is cash flow information (not on an accrual basis) or is a volume measure. The staff agreed to refine the objectives.

Guiding principles for financial statement note disclosures

The staff noted that the same types of information should be provided across the mining and oil & gas industries, but this is not meant to imply they would have to be identical. Instead they should be directionally consistent and comparable within each industry.

The staff informed the Board that it does not intend to make a split between disclosures within the financial statement and management commentary (which is currently not part of IFRS financial statements) and would await feedback from constituents on this point.

Types of disclosure that would satisfy these objectives

Categories of reserves and resources to be disclosed

The staff presented the volume information they considered as useful. It was proposed to require entities to report, at a minimum, the best estimate of the economically recoverable resources. One Board member asked what was meant by 'economically recoverable'. The staff responded that this was aimed at the probability given a price as many entities would manage on a 'proven + probable' basis and that this was indicated the most appropriate information to be provided.

Another Board member asked what was meant by the best estimate and that the staff should consider using a different notion to avoid confusion with existing IFRS terms. It was also questioned whether sensitivity analyses would be required on the number disclosed. One Board member noted that changes in prices have an influence on the volume and that would be useful information.

There seemed to be agreement to the approach proposed by the staff.

Disaggregation of volumes

The staff proposed to require disclosure of volumes by commodity type and geographical location and that these volumes should be attributed to segments. It was noted that oil sands operations should be separately reported from other oil reserves as they are high cost activities. It was also highlighted that while geographical disaggregation in the oil industry would not be feasible on a property-by-property basis, this would be existing practice for minerals. The Board had a short discussion on how to treat production sharing arrangements.

It was also proposed that the mineral industry should be required to provide information on an property-by-property basis to ensure consistency and comparability within the industry.

Attribution of reserve volumes

The staff presented the proposed treatment of the attribution of reserves that are attributable to the shareholders of the parent entity. It proposed two approaches:

  • Only the equity interest of the parent in the reserves; and/or
  • Minority interests in the reserves.


The Board discussed whether the approach taken by the staff was in line with the entity concept taken in IFRSs, notably with regard to the treatment of minority as equity. The proposed approach would be unique, as usually disclosures are not separating between majority and minority shareholder.

It was also discussed whether time restrictions should be disclosed and how expected renewals should be treated.

Underlying assumptions for reserve estimates

The staff explained the disclosures for the key assumptions used in estimating the reserves. At a minimum, they proposed the commodity price to be disclosed. The basis for the commodity price assumption could be:

  • A market participant view;
  • Management's own expectation; or
  • A historical average.


One of the Board members expressed his preference for a disclosure based on spot prices plus market participants' expectations.

The Board discussed the pros and cons of the approaches, but leaned towards a market participants' view.

Reconciliations of changes in volume from year-to-year

The staff informed the Board that it would propose a predominantly quantitative reconciliation of the changes in reserves to allow users better understanding the nature and extent of estimation uncertainties. The minimum items of such a reconciliation would be:

  • Discoveries and extensions;
  • Revisions of previous estimates;
  • Production of minerals or oil & gas;
  • Acquisition of reserves through the purchase of minerals or oil & gas properties; and
  • Disposal of reserves through sale or disposal.


It was noted that there must be further breakdowns to enhance usefulness. The Board seemed to agree.

Value-based information

The staff noted that the previous disclosures would not provide an indication of the amount of future cash flows the reserves could generate. The disclosures would depend on the recognition and measurement of mineral and oil & gas assets. The staff outlined two approaches based depending on whether the assets are measured at cost or at fair value/current value basis.

It was proposed that a standardised current value measurement could be employed. The staff highlighted that this would not be an estimate of fair value; rather, the objective would be to reduce variability and cost of preparing the estimate.

Board members asked the staff to make clear in the Discussion Paper that disclosures would differ depending on the measurement attribute used for mineral and oil & gas assets.

Other types of value-based information

The staff proposed that the Discussion Paper should also include an alternative to a current value approach. In this approach users would be provided with information on the cost structure and the expected production. According to the staff this would enable users to prepare their own valuations. The Board seemed to agree.

Sensitivity analysis

The staff proposed to require sensitivity analyses to enable users estimating uncertainties surrounding volume estimates. The

Board seemed to agree.

Time series of exploration, development and operating costs incurred

It was proposed to require time series information for certain cost incurred. In response to a question by a Board member, it was explained that this was cash-based information. A possible time horizon could be five years.

The staff then gave a brief update on a meeting with the 'Publish what you pay'-initiative. It was highlighted that they requested amendments to the country-specific disclosures and extended cost information.

Drafting the Discussion Paper

The staff informed the Board that they plan to present staff views only and no preliminary view by the Board. It should be published as an IASB document. There should also be explanation why this research project had been undertaken and a list of questions. The staff talked the Board through the proposed structure of the paper and the view the staff would take on the topics. The Board seemed to agree with the approach taken.

The Chairman thanked the staff and highlighted the good work done by the staff.

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