Ind AS 106, Exploration for and Evaluation of Mineral Resources, Summary

Indian Accounting Standard (Ind AS) 106 Summary

The objective of Indian Accounting Standard (Ind AS) 106, Exploration for and Evaluation of Mineral Resources is to specify the financial reporting for the exploration for and evaluation of mineral resources. Entities identify and account for pre-exploration expenditure, Exploration and Evaluation (E&E) expenditure and development expenditure separately.

The entity may determine an accounting policy to specify which type of E&E costs are recognised as exploration and evaluation assets and those that can be expensed as incurred.

There is no industry-specific guidance on the recognition or measurement of pre-exploration expenditure or development expenditure. Pre-exploration expenditure is generally expensed as it is incurred.

Typically, the more closely that expenditure relates to a specific mineral resource, the more likely that its capitalisation will result in relevant and reliable information.

Capitalised E&E expenditures are classified as either tangible or intangible assets, according to their nature. If the entity elects to capitalise E&E expenditure as an E&E asset, then that asset is measured initially at cost.

After recognition, the entity shall apply either the cost model or the revaluation model to the exploration and evaluation assets. If the revaluation model is applied (either the model in Ind AS 16, Property, Plant and Equipment, or the model in Ind AS 38, Intangible Assets) it shall be consistent with the classification of the assets.

The entity may change its accounting policies for E&E expenditures if the change makes the financial statements more relevant to the economic decision-making needs of users and no less reliable, or more reliable and no less relevant to those needs.

An E&E asset shall no longer be classified as such when the technical feasibility and commercial viability of extracting a mineral resource are demonstrable. E&E assets shall be assessed for impairment, and impairment losses (if any) shall be recognised before reclassification.

E&E assets shall be assessed for impairment when facts and circumstances suggest that the carrying amount of an E&E asset may exceed its recoverable amount. Some relief is provided from the general requirements of Ind AS 36, Impairment of Assets in assessing whether there is any indication of impairment of E&E assets. The test for recoverability of E&E assets can combine several cash-generating units, as long as the combination is not larger than an operating segment.

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