IFRS 6 — Application of the full-cost method

Date recorded:


The IFRIC was asked to clarify the effect of the limited scope of IFRS 6 Exploration for and Evaluation of Mineral Resources on exploration and evaluation (E&E) activities.

The IFRIC was asked if this limited scope (a) reflected the Board’s intention to impose limits on current national GAAP practices only in respect of activities conducted in the E&E phase, while permitting industry practices in other extractive industry areas (e.g. development and exploitation) to continue unchanged, or (b) whether the IASB focused only on E&E activities because it was the only area for which the IASB was willing to grant some relief from the hierarchy for selection of accounting policies in IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. Under the latter view, the IAS 8 hierarchy would apply fully to an entity’s selection of IFRS accounting policies for activities outside of the E&E phase. The submission identified some inconsistencies between current extractive industry full-cost accounting practices in respect of development and exploitation activities but questioned whether the IASB intended to require change from current practices in these areas in advance of a comprehensive extractive industry project.


Decision not to add

January 2006



The IFRIC noted that the effect of the limited scope of IFRS 6 was to grant relief only to policies in respect of E&E activities, and that this relief did not extend to activities before or after the E&E phase. The Basis for Conclusions on IFRS 6 includes the Board’s intention of limiting the need for entities to change their existing accounting policies for E&E activities. The IFRIC believed it was clear that the scope of IFRS 6 consistently limited the relief from the hierarchy to policies applied to E&E activities and that there was no basis for interpreting IFRS 6 as granting any additional relief in areas outside its scope. Therefore, the IFRIC believed that diversity in practice should not become established and decided not to add the issue to its agenda.


IFRIC reference: IFRS 6-1

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