Ifrs 6 1j716v

IFRS 6: Exploration and Evaluation of Mineral Resources The standard aims to describe how the financial report discloses natural resources. More specifically, the standard aims to A) Limited improvements to current ing practices for exploration and evaluation expenses . B) determine which exploration and valuation expenses should be capitalized as an asset and which should be recognized as an expense .

C) subjecting the expenses of the exploration and assessment (classified as an asset) To assess impairment in accordance with IFRS 6, while measuring any impairment in accordance with IAS 36

D) Statement of disclosures that identify and clarify the amounts presented. Financial statements on disclosure and valuation of natural resources, and assist s of financial statements in understanding the amount, timing and uncertainty of cash flows arising from any recognized assets relating to exploration and valuation costs

A) Exploration and valuation items classified as The costs of exploration: exploration and evaluation of natural resources, which are classified as assets according to the ing policy followed by the establishment . B) Exploration and evaluation expenses : Is the expenses incurred during the exploration and exploration and before proving the feasibility of technical and economic extraction of natural resources.

C) Exploration and exploration of natural resources :

Is the expression of the process of searching for natural resources after obtaining the legal right to do the search for it in a specific area. The process includes determining the technical and economic feasibility of extraction of natural resources, including natural resources minerals, oil, gas and nonrenewable resources.

There are two generally accepted methods in oil and gas exploration companies used in ing for research costs : A) Successful method of efforts. B) Method of total cost. In accordance with the successful efforts included in US ing Standard No. 19, all exploration and evaluation costs are capitalized only for successful wells and mines. In addition, wells and mines that are not successful, whether economically or not, are considered to be more cost effective . As for the total cost method, it will capitalize the costs of prospecting for successful or unsuccessful wells or mines, within each cost center knowing that the cost center may be a particular country or a group of countries.

The cost of exploration with the company X, one of the oil companies as follows:

Required:

Statement of ing treatment for the above by both method of successful efforts and the method of total costs.

1) Successful efforts: According to the successful efforts method, the oil reserves will be shown at the cost of the successful wells only. The non-successful is considered an expense for the period to bear the income statement, and thus prove the following constraint:

2) Total cost method: According to the total cost method, oil stocks will be shown at the total cost as the empty wells are loaded on the successful wells. The following entry is therefore required

ing for depletion of natural resources After the process of discovering the natural resources and processing them for the purposes of exploitation and proven economic feasibility of the process of exploitation, the estimated quantity available in the source or quantity expected to be extracted from the source during the period of license granted to the establishment if there is a specific period of exploitation.

The costs of licensing, exploration and valuation are classified as assets over the period in which the source is extracted to recognize the cost of the part extracted as an expense of depletion or depletion. The depletion expense is calculated according to the following steps: 1) The unit cost is calculated according to the following equation: Cost per Unit = (Capitalized Capital Costs - Estimated Residual Value) / Estimated Value

2) In each fiscal period, the quantity extracted from the natural source is determined, and then the depletion expense to be loaded for the period is obtained by finding the quantity multiplied by the quantity extracted in the unit cost rate.

3) The depletion expense for each period is determined by the following entry:

It is noted that the costs of the quantity extracted (their share of depletion expense) have been charged to the inventory. In the case of additional costs to manufacture the product is added to the inventory , and when selling the inventory or any part of it is proved the following constraint:

Example 2 -On 1/1/2015 precious metals company obtained the right to prospect for gold in Jordan and within the point of Mafraq. On 1/12/2015 one of the mines was discovered, where the stock was estimated at 8000 ounces and the costs incurred on the mine until its date, which was capitalized at 1,200,000. -On 31/12/2015 it was found that 1000 ounces had been extracted, of which 800 ounces were sold at 50 per ounce. -On 31/12/2016 it was discovered that 20,000 ounces of gold had been extracted.

- Company sales for the year 2016/14200 ounce at 60 per ounce.

Required: Statement of ing treatment in the books of the company to recognize the expense of depletion, along with how to show the original budget for the years 2015 and 2016:

Solution Example 2: A) 2015: - Capitalize the costs of the mine :

b) 2016: -depletion expenses for 2016: Depletion expense for the year 2016 = (15 * 20000) = 300000

Example 3 If an oil drilling company spends $ 8,000,000 during 2010 on exploration of a number of wells, The result of the exploration was the success of two wells Of 8 wells and the failure of the rest of the wells, and estimated the amount of crude oil available in the wells 400,000 company will be extracted within five years and the company has produced 50,000 tons during 2010: Required: Registration of exploration using the method of successful efforts and the total cost and calculating the depletion expense for the year 2010.:

Solution Example 3

A) By successful efforts: Natural supplier / Crude oil Exploration and evaluation expenses cash

2,000,000 6,000,000 8,000,000

b) Total cost method: Natural supplier / Crude oil

cash

8,000,000 8,000,000

*Calculation of depletion expense for 2010:

1) Cost per unit = Assets cost /estimated value 8,000,000/400,000 =20 $ 2) Depletion expense for 2010 = ( Quantity extracted or produced * Cost per unit ( 500,000 * 20$ =1000,000 Inventory /oil depletion expense

1000,000 1000,000