IFRS 6 — Exploration for and Evaluation of Mineral Resources
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Overview
IFRS 6 Exploration for and Evaluation of Mineral Resources 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. It also modifies impairment testing of explo-
ration and evaluation assets by introducing different impairment indicators and allowing the
carrying amount to be tested at an aggregate level (not greater than a segment).
IFRS 6 was issued in December 2004 and applies to annual periods beginning on or after 1
January 2006.
History of IFRS 6
Date Development Comments
November 2000 IASC issues paper Summary of Issues: Extractive Comment deadline
Industries published and comments invited 30 June 2001
1 April 2001 Project on extractive industries carried over from History of the com-
IASC prehensive project
September 2002 Short-term project split off from comprehensive History of the short-
project term project
16 January 2004 Exposure Draft ED 6 Exploration for and Evalua- Comment deadline
tion of Mineral Resources published 16 April 2004
9 December 2004 IFRS 6 Exploration and Evaluation of Mineral Effective for annual
Resources issued periods beginning on
or after 1 January
2006
30 June 2005 Amended by Amendments to IFRS 1 First-time Amended Basis for
Adoption of International Financial Reporting Conclusions to IFRS
Standards and IFRS 6 Exploration for and Evalu- 6 only
ation of Mineral Resources (transitional relief)
Related Interpretations
o None
Amendments under consideration by the IASB
o Research project — Intangible assets
Summary of IFRS 6
Definitions
Exploration for and evaluation of mineral resources means the search for mineral resources,
including minerals, oil, natural gas and similar non-regenerative resources after the entity has
obtained legal rights to explore in a specific area, as well as the determination of the technical
feasibility and commercial viability of extracting the mineral resource. [IFRS 6.Appendix A]
Exploration and evaluation expenditures are expenditures incurred in connection with the explo-
ration and evaluation of mineral resources before the technical feasibility and commercial
viability of extracting a mineral resource is demonstrable. [IFRS 6.Appendix A]
Accounting policies for exploration and evaluation
IFRS 6 permits an entity to develop an accounting policy for recognition of exploration and eval-
uation expenditures as assets without specifically considering the requirements of paragraphs
11 and 12 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. [IFRS
6.9] Thus, an entity adopting IFRS 6 may continue to use the accounting policies applied imme-
diately before adopting the IFRS. This includes continuing to use recognition and measurement
practices that are part of those accounting policies.
Impairment
IFRS 6 effectively modifies the application of IAS 36 Impairment of Assets to exploration and
evaluation assets recognised by an entity under its accounting policy. Specifically:
o Entities recognising exploration and evaluation assets are required to perform an im-
pairment test on those assets when specific facts and circumstances outlined in the
standard indicate an impairment test is required. The facts and circumstances
outlined in IFRS 6 are non-exhaustive, and are applied instead of the 'indicators of
impairment' in IAS 36 [IFRS 6.19-20]
o Entities are permitted to determine an accounting policy for allocating exploration and
evaluation assets to cash-generating units or groups of CGUs. [IFRS 6.21] This
accounting policy may result in a different allocation than might otherwise arise on
applying the requirements of IAS 36
o If an impairment test is required, any impairment loss is measured, presented and
disclosed in accordance with IAS 36. [IFRS 6.18]
Presentation and disclosure
An entity treats exploration and evaluation assets as a separate class of assets and make the
disclosures required by either IAS 16 Property, Plant and Equipment or IAS 38 Intangible
Assets consistent with how the assets are classified. [IFRS 6.25]
IFRS 6 requires disclosure of information that identifies and explains the amounts recognised in
its financial statements arising from the exploration for and evaluation of mineral resources,
including: [IFRS 6.23–24]
a. its accounting policies for exploration and evaluation expenditures including the recogni-
tion of exploration and evaluation assets
b. the amounts of assets, liabilities, income and expense and operating and
investing cash flows arising from the exploration for and evaluation of mineral
resources.
Special IAS Plus Newsletter explaining IFRS 6
On 31 January 2005, Deloitte's IFRS Global Office published a special edition of our IAS Plus
Newsletter titled IFRS 6 Exploration for and Evaluation of Mineral Resources.
