Title: IFRS 6: Exploration and Evaluation of Mineral Resources

Welcome to our comprehensive guide on IFRS 6: Exploration and Evaluation of Mineral Resources. In this article, we will delve into the key aspects of this International Financial Reporting Standard (IFRS) and explore its significance in the world of bookkeeping and financial reporting. So, whether you are a bookkeeper, accountant, or simply someone interested in understanding the accounting treatment of mineral exploration and evaluation activities, this article is for you! 

  • Understanding IFRS 6:  

IFRS 6 sets out the accounting principles and disclosure requirements for the exploration and evaluation (E&E) activities of mineral resources. It provides guidance on how to recognize, measure, and disclose the costs incurred during the exploration and evaluation phases. 

  • Recognition and Measurement:  

Under IFRS 6, exploration and evaluation costs are classified as intangible assets and are initially recognized when they meet specific criteria, including the presence of a legal right to explore, technical feasibility, intention to develop or sell the resource, availability of adequate financial resources, and the likelihood of future economic benefits. 

To illustrate, let's consider an example: ABC Mining Corp. acquires a mining license for a potential gold deposit. The company incurs costs for geological surveys, drilling, and core sampling. These costs meet the recognition criteria of IFRS 6 and are capitalized as an intangible asset on the balance sheet. 

  • Impairment Testing:  

IFRS 6 requires entities to regularly assess whether their exploration and evaluation assets are impaired. If there are indications of impairment, the carrying amount of the asset is compared to its recoverable amount. The recoverable amount is determined by estimating the future cash flows expected from the asset and discounting them to present value. 

Continuing with our example, if ABC Mining Corp. discovers that the potential gold deposit is not economically viable, or if the estimated recoverable amount falls below the carrying amount, the company must recognize an impairment loss in its financial statements. 

  • Disclosure Requirements:  

IFRS 6 mandates certain disclosures to provide users of financial statements with relevant information about an entity's exploration and evaluation activities. These disclosures include the nature and extent of the entity's E&E assets, the accounting policies applied, significant assumptions used to measure the assets, and any restrictions on the realization of exploration and evaluation assets. 

  • Importance of IFRS 6:  

IFRS 6 plays a crucial role in the bookkeeping and financial reporting of entities involved in the exploration and evaluation of mineral resources. By providing specific guidance, it ensures transparency, comparability, and consistency in the accounting treatment of E&E activities. Compliance with IFRS 6 enables stakeholders to make informed investment decisions and assess the financial performance and position of companies operating in the extractive industries. 

IFRS 6: Exploration and Evaluation of Mineral Resources is a significant accounting standard that outlines the recognition, measurement, impairment testing, and disclosure requirements for exploration and evaluation activities. Compliance with this standard is essential for accurate and transparent financial reporting in the extractive industries. 

To stay updated on the latest bookkeeping tips and industry insights, we encourage you to visit and subscribe to our blog at www.completed-ledgers.com. Our blog covers a wide range of bookkeeping topics to help you enhance your financial knowledge and skills. Happy bookkeeping! 

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