Ambay, Fenladen C.

ACD – AEC 12
TASK 1 – Reaction Paper July 16, 2021

The research article entitled “The Critical Discussion of the IFRS 6 and Mineral
Resources Exploration and Evaluation Cost” was authored by Bazhar A. Abdulrahman
and Kahi Ilham Abdal, both lecturers from the Technical Finance and Accounting
Department of Erbil Polytechnic University. This study comprehensively discusses the
historical evolution of accounting for the extractive industry, the different methods of
recognizing and measuring oil and gas exploration and development costs, the
necessitation of a uniform and standardized accounting treatment in the said industry,
the application of IFRS 6, and the future development of accounting practice and
disclosure requirement in the oil and gas industry. The objective of this paper is to
provide knowledge to the readers regarding the standard IFRS 6 and relevant
concepts within its scope. This study is useful and beneficial for accountancy students
like me because it enlightens and helps me understand our lesson on depletion of
mineral resources, especially the different cost methods, such as the full cost and
successful effort methods, and the different requirements of IFRS 6.

Our modern world is in great need of mineral resources such as oil and gas as
they serve as our sources of energy. They are used to propel our vehicles, heat
buildings, produce electricity, etc. For that reason, the demand and importance of the
extractive industry continue to grow. Due to high profitability, many individuals are
interested in engaging and investing in this industry. Therefore, there is a need to
develop a more improved and enhanced accounting treatment and policies to guide
the companies within this sector in recognizing and measuring their expenses and
revenue and provide a framework for their asset evaluation. Many accounting
professional bodies, such as FASB and IASB, take part in forming a universal standard
for the extractive companies to follow. The formation of the universal standard is
significant because utilizing it results in a fair presentation and accurate disclosure. It
also makes accounting information for the exploration and evaluation of mineral
resources more accurate, reliable, and comparable. Moreover, the concept of
universal standard makes me realize the importance of having a “basis” or “framework”
because it provides a structure that guides us on how to accomplish tasks. It informs
us to comply with certain rules and helps us foster consistency and organization in
doing our duties to effectively achieve our goals and objectives.
I believe that continuously enhancing and developing the accounting standard
relevant in the extractive industry can provide many benefits. It can increase the
investment opportunities and help monitor and improve the performance of the
companies, which in turn would impact the national economy positively. Above all, the
said industry plays an essential role in every country, so they must be nurtured and
cultivated for them to carry on their operations efficiently and effectively.