PFRS 6 EXPLORATION FOR AND EVALUATION OF MINERAL

RESOURCES

I. NATURE
PFRS 6 addresses the accounting for expenditures on exploration for and evaluation of
mineral resources.
PFRS 6 applies to expenditures incurred after the entity has obtained legal rights to
explore in a specific area but before the existence of the mineral reserves is in fact
established and the technical feasibility and commercial viability of extracting mineral
resources are demonstrable.
PFRS 6 temporarily exempts an entity from applying the hierarchy.
PFRS 6 permits entities to develop their own accounting policy for exploration and
evaluation assets that results in relevant and reliable information based entirely on
management’s judgment and without the need to consider the hierarchy of standards
in PAS 8.

II. RECOGNITION
An entity may recognize exploration and evaluation expenditures as expense or assets
depending on its chosen accounting policy (which is developed based entirely on
management’s judgment). In making judgment, an entity considers the degree to which
the expenditure can be associated with finding specific mineral resources.
Exploration and evaluation assets are treated as a separate class of assets and
classified as tangible (ex. Vehicles and drilling rigs) or intangible (ex. Drilling rights)
depending on the nature of the assets.

III. MEASUREMENT
Initial measurement
Exploration and evaluation assets are initially measured at cost.
Examples of expenditures that might be included in the initial measurement of
exploration and evaluation assets:
a. Acquisition of rights to explore
b. Topographical, geological, geochemical and geophysical studies
c. Exploratory drilling
d. Trenching sampling
e. Activities in relation to evaluating the technical feasibility and commercial viability
of extracting a mineral resource.
The initial measurement also includes the present value of any decommissioning and
restoration costs for which the entity has incurred the obligation as a consequence of
having undertaken the exploration and evaluation activities.
Subsequent measurement
Exploration and evaluation assets are subsequently measured using either the cost
model of the revaluation model.