Example with solution 418. However, there are many other differences between US GAAP and IFRS which will be covered in this article going forward. Assuming the interest rate is 6% per annum. [IFRS 6.18], its accounting policies for exploration and evaluation expenditures including the recognition of exploration and evaluation assets. 4. Objective. It was also argued that some entities are created just to carry out exploration, and once this is complete, they sell the rights to the minerals found. IFRS 6 has the effect of allowing entities adopting the standard for the first time to use accounting policies for exploration and evaluation assets that were applied before adopting IFRSs. Details of the amounts capitalised, and the amounts recognised as an expense from exploration, development, and production activities, should be disclosed. These Illustrative Examples accompany IFRS 17 Insurance Contracts (issued May 2017; see separate booklet) and are issued by the International Accounting Standards Board (the Board). The impact of International Financial Reporting Standards (IFRS® Standards) has been felt extensively in the exploration industry – particularly the oil and gas industry where key dilemmas and judgements made are greatest at the exploration and production stage. EC staff consolidated version as of 16 September 2009 Last EU endorsed/amended on 03.11.2008. IFRS 6 permits an entity to develop an accounting policy for recognition of exploration and evaluation expenditures as assets without specifically considering the requirements of paragraphs 11 and 12 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. 2. IFRSs – With respect to revenue recognition, the IFRS framework is general in nature in their requirements, if compared to the GAAP. It sometimes happens that a lease starts with a rent-free period. Fair Value Revaluations. Subsequent costs incurred during the exploration and evaluation phase should be capitalised in accordance with this same policy. [IFRS 6.Appendix A]. Practical guide to Phase 2 amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 for interest rate benchmark (IBOR) reform The IASB has issued amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 that address issues arising during the reform of benchmark interest rates including the replacement of one benchmark rate with an alternative one. 13.4 Consequential amendments to other IFRS requirements 341 13.5 First-time adoption 342 Guidance referenced 344 Detailed contents 345 Index of examples 348 Index of KPMG insights 355 About this publication 363 Keeping in touch 364 Acknowledgments 366 the amounts of assets, liabilities, income and expense and operating and investing cash flows arising from the exploration for and evaluation of mineral resources. ... For Example: A construction contract priced in foreign currency. Examples of expenditures that may be included as part of E&E assets: Acquisition of rights to explore; In your first example, a lease with less than 12 months left as of transition date, July 1, 2019 in this example, is able to be classified as short term and therefore out of scope for the transition to IFRS 17. The assets are tested for impairment in accordance with IAS 36, subject to certain special requirements. This is similar to IFRS 4, Insurance Contracts. IFRS 6 makes limited changes to existing practice. Scope 422. However, some companies have used the ‘full cost’ approach, where all costs are capitalised. IFRS 6 Exploration for and Evaluation of Mineral Resources provides guidance on accounting for exploration and evaluation expenditures, including the recognition of exploration and evaluation assets. B The definitions, recognition criteria, and measurement concepts set out in the Conceptual Framework Presentation of discontinued operations 426. [IFRS 6.21] This accounting policy may result in a different allocation than might otherwise arise on applying the requirements of IAS 36, If an impairment test is required, any impairment loss is measured, presented and disclosed in accordance with IAS 36. An entity should develop a policy for allocating these assets to groups of cash generating units (CGUs) and apply that policy consistently. Example 1: Lease accounting in IFRS 16. These words serve as exceptions. C The absence of budgeted or planned substantive expenditure on further exploration and evaluation activities in the specific area Once the technical and commercial feasibility of extracting a mineral resource has been demonstrated, the assets fall outside IFRS 6 and are reclassified according to other IFRS Standards. Examples with solutions 427. [IFRS 6.9] Thus, an entity adopting IFRS 6 may continue to use the accounting policies applied immediately before adopting the IFRS. 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