Extractive activities

Date recorded:

Cover Paper (Agenda Paper 19)

In 2010, the IASB published a Discussion Paper (DP) about financial reporting issues associated with exploring for and finding minerals, oil and natural gas deposits, developing and extracting the minerals, oil and natural gas.

At its September 2019 meeting, the Board discussed the potential effects, if any, on the analysis and proposals in the DP in light of:

  • Standards, amendments and other Board documents issued since the publication of the Discussion Paper; and
  • changes to the reserve and resource classification systems and other initiatives, such as ‘publish what you pay’ and sustainability reporting.

At that meeting the Board asked staff to perform outreach in other jurisdictions and additional research activities in order to be able to determine:

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

Staff have now completed those additional research activities requested by the Board.

There was no discussion on this paper.

Feedback summary (Agenda Paper 19A)

Key messages

There continue to be mixed views about the potential scope of a research project to replace or amend IFRS 6. For example:

  • Many respondents think the scope of the research project should be expanded to address accounting for all extractive activities, not only exploration and evaluation activities as currently addressed by IFRS 6.
  • Some respondents think that the Board should undertake a research project on only the activities addressed by IFRS 6.
  • Some respondents think that the scope of the research project should be expanded to also address non-IFRS information such as the disclosure of reserve and resource quantities.
  • A few respondents think there is no need for a project.

Most respondents provided feedback about application challenges arising applying IFRS 6 and other IFRS Standards which, in their view, are particularly difficult for entities with extractive activities. Respondents also provided comments on other application challenges which, in their view, are unique to entities in the extractives industry and are not specifically addressed in IFRS Standards.

Many respondents noted diversity between jurisdictions in relation to the reserve and resource classification systems that entities with extractive activities are required to apply. Feedback indicates these classification systems are predominantly based on the globally recognised classification systems established by the Committee for Minerals Reserves International Reporting Standards (CRIRSCO) and the Petroleum Resource Management System (PRMS). However, disclosure requirements for reserve and resource quantities differ significantly between jurisdictions.

Many respondents described information that entities with extractive activities disclose in addition to information required by IFRS Standards. In particular, these respondents noted that entities currently disclose the following types of additional information:

  • Additional information that is voluntarily disclosed generally outside the financial statements.
  • Additional information that a particular jurisdiction requires to be disclosed either within the financial statements, or outside the financial statements.

The Board was not asked to make any decisions in this session. Board members are invited to ask questions and to comment on the feedback.

Board discussion

Board members touched on various topics within accounting for extractive activities, including the following:

  • There are differences within the extractive industry, e.g. between mineral producers and oil and gas companies. The latter are more mature and do not rely as much on IFRS 6 as the former.
  • One of the difficulties of the project will be the scoping. When deciding the scope of the project, the staff should keep the agenda consultation in mind. Board members agreed that the accounting guidance should capture any extractive activity and not only companies in the extractive industry. However, it will be difficult to decide which accounting problems should be addressed and which not. For example, should the Board only address issues that are unique to extractive activities or should the Board focus on issues that are prevalent in the industry, but not unique to it.
  • Engagement of users with the project is low. This could be due to the difficult time, but could also result from the many failed attempts the Board has undertaken to address the issues around extractive industries.
  • Are there any learning points from other projects that could be used, for example, can work from the Primary Financial Statements project be leveraged for the development of guidance in the resources and reserves area?
  • Jurisdictional requirements may make it difficult to develop accounting principles that can be applied in all jurisdictions.

No decisions have been made.

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