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PFRS 6 - Here are problems and solutions. There are some

theories as well that may help
Conceptual Framework And Accounting Standards (Cavite State University)

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PFRS 6: EXPLORATION FOR AND 2. Judgment

EVALUATION OF MINERAL
When making the judgments:
RESOURCES
• Management shall consider the
INTRODUCTION
following:
PFRS 6 addresses the accounting for o Requirements in other
expenditures or exploration for and PFRS dealing with
evaluation of mineral resources. similar transaction
o Conceptual Framework
EXPLORATION FOR AND
• Management may consider the
EVALUATION OF MINERAL
following:
RESOURCES
o Pronouncement issued by
‘‘The search for mineral resources, other standard-editing
including minerals, oil, natural gas and bodies
similar non-regenerative resources o Other accounting
after the entity has obtained legal literature and industry
rights to explore in a specific area, as practices
well as the determination of the
technical feasibility and commercial PFRS 6 permits entities to develop
viability of extracting the mineral their own accounting policy for
resource. ’’ (PFRS 6. Appendix A) exploration and evaluation assets that
results in relevant and reliable
EXPLORATION AND EVALUATION information based entirely on
EXPENDITURES management’s judgment and without
the need to consider the hierarchy of
‘‘Expenditures incurred by an entity in
standards in PAS 8.
connection with the exploration for
and evaluation of mineral resources An entity may recognize exploration
before the technical feasibility and and evaluation expenditures as
commercial viability of extracting a expenses or assets depending on its
mineral resource are demonstrable’’ chosen policy. In making the
(PFRS 6. Appendix A) judgment, an entity considers the
degree to which the expenditure can be
DEVELOPMENT COSTS
associated with finding specific
Expenditures incurred after technical mineral resources.
feasibility and commercial.
INITIAL MEASUREMENT
Accounted for under other applicable
Exploration and evaluation assets are
standards.
initially measured at cost.
EXEMPTION FROM HIERARCHY OF
It includes present value of any
REPORTING STANDARDS UNDER PAS
decommissioning and restoration
8
costs.
Hierarchy of Reporting Standards
Expenditures related to development
(PAS 8)
of mineral resources are not
1. PFRS recognized.
Exploration expenditures
and evaluation recognized at
assets- are assets in
“exploration accordance with
and evaluation the entity’s
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accounting cost model or and classified exceeds their

policy” (PFRS the revaluation as tangible or recoverable
6. Appendix A) model. intangible amount. The
Examples of CHANGES depending on entity applies
expenditures the nature of PAS 36 when
that might be IN the assets. making the
included in the assessment,
RECLASSIFICA
initial ACCOUNTING except for the
TIONOF
measurement of POLICIES allocation of
EXPLORATION
exploration and impairment
An entity may AND
evaluation loss on assets
change its EVALUATION
assets: within cash-
accounting ASSETS
generating
a. Acquisition of policy for units wherein
When the
rights to exploration and the entity is
technical
explore evaluation allowed to
feasibility and
expenditures if determine its
b. Topogr commercial
the change own
aphical, viability of
results in more accounting
extracting a
relevant and no policy for the
geological, mineral
less reliable, or allocation.
geochemical resource are
more reliable
and demonstrable,
and no less Examples of
geophysical the exploration
relevant indications
studies and evaluation
information. that
assets are
c. Exploratory The entity exploration and
reclassified in
drilling judge relevance evaluation
accordance
and reliability assets need to
d. Trenching with other
using the be assessed for
relevant
e. Sampling criteria in PAS impairment:
standards. The
8.
f. Activities in exploration a. The right to
relation to CLASSIFICATIO and evaluation explore has
evaluating the N OF assets are expired or will
technical EXPLORATION assessed first expire in the
feasibility and AND for impairment near future and
commercial EVALUATION before the is not expected
viability of ASSETS reclassification to be renewed.
extracting a .
Exploration b. Expenditures
mineral and evaluation IMPAIRMENT for further
resource. assets are LOSS exploration and
(PFRS6.9) treated as a evaluation
Exploration
SUBSEQUENT separate class activities are
and evaluation
MEASUREMEN of assets significantly
assets are
T higher than
assessed for
expected.
Exploration impairment
and evaluation when c. The
assets are indication exploration
subsequently exists that their and evaluation
measured carrying activities in a
using either the amount specific areas
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have to be
discontinued
because no
mineral
resources have
been
discovered.
d. Indication
exists that,
although a
specific area
will be
developed,
the

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carrying amount of the exploration
and evaluation asset is unlikely to be
fully recovered.
Source: Conceptual Framework and
Accounting Standards (2020 edition) by
Zeus Vernon B. Millan