ACYFAR PORTFOLIO

Reflection paper presented to the

Accountancy Department

In partial fulfillment
of the course requirement in
ACYFAR2

Ong, Kaycee Nazarene, C.

K33
Debt Securities
Debt securities are negotiable instruments; thus, the ownership of the security can be
transferred easily from one party to another (Corporate Financial Institution, 2022). It should be
noted that equity and debt securities differ; equity securities pertain to the claims of earnings of
the business, representing the rights of ownership through shares of stock, whereas debt
securities only pertain to investing in debt instruments. Unlike debt securities that have a fixed
and guaranteed rate of return for the business as there is a set schedule for each payment,
equity securities’ rate of return, on the other hand, is quite unpredictable as the payment and
distribution of dividends dramatically depend on the financial performance of the company
(Corporate Financial Institution, 2022). Thus, debt securities are considered to be safer as
compared to equity securities.

The company could use different types of debt securities whenever they want to offer loans to
prospective investors. However, the most common type of debt securities is bonds. Bonds are
financial instruments in which the issuer, which would be the borrower, upholds the promise of
paying the bondholder, also known as the investor, to pay them back a certain amount of
money on a specific future date; hence, the debtor is obligated to pay periodic payments until
the debt security matures. Unfortunately, equity securities were the only securities to be found
upon checking the financial statements of Dizon Copper-Silver Mines Inc.

However, the entity was able to state in its second note, namely “summary of significant
accounting policies,” the initial recognition and measurement of financial assets, as well as its
subsequent measurement of their disclosures should they have debt securities. For instance,
the company’s equity and debt securities are initially measured at fair value with additional
transaction costs if the financial instrument is not classified through profit or loss. Still, the
classification of equity and debt securities would depend on the contractual cash flow
characteristics and the entity’s business model in managing its financial assets. PFRS 9 states
that bond securities can be classified as financial assets at amortized cost, profit or loss, or
comprehensive income. However, the instruments’ classification would depend on the
company’s business model (how the company would manage its assets to achieve its business
goals) and the SPPI (sole payment of principal and interest) test to determine the financial
asset’s contractual terms. Since the company could disclose its way of initial measurement of
debt securities, they comply with IFRS 9, paragraphs 4.1.1, which talks about the classification
of financial assets, and 5.1.1, which talks about the initial measurement of financial support
(IFRS, n.d).

Meanwhile, the debt securities can subsequently be measured through amortized cost or other
comprehensive income, as stated in their consolidated notes to financial statements. For
instance, the company later estimates debt instruments (should they have any in the future)
through amortized cost and other comprehensive income with recycling cumulative gains and
losses. Concerning this, Dizon Copper-Silver Mines Inc. disclosed the following conditions for the
debt instrument to be classified as amortized cost: first, it should be held for collection of
contractual cash flows, and second, the contractual cash flows are only for principal and interest
payments on the outstanding principal amount. Additionally, it was also stated by the company
that financial assets through amortized costs are then subsequently measured by using effective
interest rates, making the company comply with IFRS 9 paragraphs 4.1.2, which talks about the
classification of financial assets and 5.4.1, which talks about amortized cost measurement (IFRS,
n.d). Despite this, the company should have included the conditions for the debt instrument to
be classified as other comprehensive income; thus, they should also have it for uniformity.

Meanwhile, the company also disclosed the following conditions of derecognition of their
financial assets would be derecognized or removed from their consolidated financial
statements. it can either be because the rights to receive cash have already expired, the
company may have transferred the rights to receive the cash flow, or it has assumed to pay the
cash flows received. Thus, the company has also complied with paragraph 3.2.3 of IFRS 9, which
tackles the derecognition of financial assets, including debt instruments (IFRS, n.d).
Impairment of financial assets was also discussed briefly in the consolidated notes as, according
to the company, allowances for expected credit losses for all debt instruments that are not
classified through profit or loss, which complies with paragraph 5.5.1 of the IFRS 9 (IFRS, n.d).
The company also expounded on how its expected credit losses are computed and how they are
recognized in two stages. For instance, within the next 12 months, loss allowances are provided
equally to the 12-month expected default. At the same time, the company should provide loss
allowances equal to a lifetime of expected credit losses when the risk of the debt securities has
significantly increased following its initial recognition. Thus, the company can comply with
paragraphs 5.5.3 and 5.5.5, which discuss recognizing expected credit losses (IFRS, n.d).

Thus, Dizon Copper-Silver Mines has complied with the necessary disclosures and provisions
regarding debt instruments. However, should the company acquire debt securities in the future,
it should also discuss the reclassification of debt securities in its consolidated notes to financial
statements since a change in the business model is considered a significant event. In addition,
the company should also observe proper reclassification such that the reclassification is applied
from the reclassification date prospectively, and the date should be the company’s first day of
the reporting period. In addition, the entity should avoid restating any previously recognized
losses, gains, or interest from the previous business model used to comply with paragraph 5.6.1
of the IFRS 9 (IFRS, n.d).

Inventories
Inventories are current assets expected to be sold within a business cycle, undergoing a
process to be sold, or intended to be consumed in the production stage. Based on the
definition, inventories are divided into three main categories: raw materials, work in process,
and finished goods. Inventories are classified under current assets and should be presented as a
one-line item in the statement of financial position. Additional information about inventories
should be further disclosed in the notes to financial statements.
However, Dizon Copper-Silver Mines Inc. does not possess any inventories in their consolidated
financial statements nor any notes to financial statements. It may be due to the nature of the
business and its main activities being acquiring, leasing, working, and operating mines, grounds,
or lodes in the Philippines or any foreign country. It is stated in the company’s corporate
information and status of operations; thus, they are not concerned with selling or acquiring
minerals or ores they will encounter in their exploration. The statement can be supported by IAS
2 as it states that the standard only applies to companies that do not engage in any agricultural
activities and produce at the point of harvest (IASB, n.d). As the company lacks inventories,
assessment is limited to the extent that I can only give provisions and necessary disclosures that
the company should abide by if they are ever to consider also to acquire and sell minerals or
acquire inventory that will aid in their operations.

Thus, should Dizon Copper-Silver Mines ever consider acquiring and selling minerals, they
should first disclose the type of mine products they possess in their second note. In addition, it
should also state the type of measurement used in measuring the minerals. According to
paragraph 9 of IAS 2, inventories should be calculated at a lower cost and net realizable value.
However, it would only be applicable for the company to use this if they want to acquire and sell
minerals. To comply with paragraph 3A of IAS 2, the company should measure the minerals in
net realizable value, following the practices of well-established companies in the same industry,
and any changes to be recognized should be included in the profit or loss section. For additional
information, the corporation should also state how they can compute the net realizable value of
their minerals for transparency purposes. It would also comply with paragraph 6, which briefly
discusses the definition of net realizable value or its composition, as well as paragraph 7 of IAS
2, which briefly focuses on how the net realizable value is the amount that the company is
expected to realize after selling their inventories (IASB, n.d). The company should also record
the lists on an individual basis as it is not acceptable to group these items and record them
based on classification unless the following conditions are met: the items are included in the
same product line with similar uses or produced in the same area and cannot be separately
evaluated, as according to paragraph 29 of IAS 2 (IFRS, n.d). The company should also disclose
the necessary costs to bring the items to their present location, which would comply with
paragraphs 10 and 11 of IAS 2 (IFRS, n.d).

However, not every mineral is in perfect condition; thus, the company should also consider the
obsolescence of their inventory when determining the net realizable value to comply with
paragraph 28 of IAS 2 as it is stated that should the inventory be partially or fully damaged, then
the cost of such inventory is not anymore recoverable. It should also be noted that explicitly
classifying the inventory composition would be more helpful for the financial users to make
sound financial decisions by discerning if the company has a high inventory turnover, which
abides by paragraph 37 of IAS 2 (IFRS, n.d). Lastly, the company is obliged to disclose the
movement of the inventory, such that the inventory sold should be recognized as an expense,
and it would be measured based on its carrying amount, abiding by paragraphs 34 and 36D of
IAS 2 (IASB, n.d). It also applies to inventories allocated to other assets as a component.

Property, Plant and Equipment

Property, plant, and equipment are long-term or non-current assets vital to business
operations. For an item to be classified under property, plant, and equipment, the following
criteria must be met:
● It should be used for operating activities and not held for sale.
● It should have a physical substance.
● It should be used for more than a year.

Nonetheless, the company has no item dedicated to PPE under the non-current asset portion of
their consolidated statements of financial position, which is unusual since the main activity of
the entity is mine exploration and operation since the company is expected to have at least
machines and equipment that will aid them to have a successful exploration and operation in
mines. While the company does own land in Valenzuela, Bulacan, it is not considered PPE as it is
currently held for capital appreciation; thus, it is classified under investment properties. It is not
disclosed in the entity’s notes to financial statements the reason for the missing item. However,
it may be inferred that the company may have sold them to acquire additional cash to support
their growing expenses and liabilities as they have been greatly affected by the pandemic. In
addition to this, the company may have derecognized its PPE since future economic benefits to
the company are not probable or they need to dispose of the PPE as stated in paragraphs 67A
and 67B of IAS 16 (IFRS, n.d), and any gain or loss from the derecognized PPE should be included
in profit or loss. However, the company did not make any specific disclosure regarding the
missing PPE; thus, it may mean that the company has long sold or derecognized its PPEs, and if
it was the latter, then it can also mean that the company still uses the PPE even if it is fully
depreciated until it can no longer be of use. I would still discuss some provisions and disclosures
needed for reporting property, plant, and equipment.

First, the company has disclosed under the “changes in accounting policies and disclosures” that
the company would follow the amendments to PAS 16 on or after January 2022, which is about
plant and equipment relating to proceeds before intended use. The company also stated that
the future procurement of said standard would not significantly affect its financial statements.
The company could not explain the effects of PAS 16 since they do not have PPE at the moment.
Moving forward, as the company has no disclosure of how they recognize and measure their
PPE, it should be duly included in the second note of the consolidated notes to financial
statements, like how they have included disclosures about debt securities. For instance, the
company should disclose in their notes that PPE should only be realized if it is possible that
future economic benefits from the item will go to the entity or if it can be reliably measured as
stated by paragraphs 7A and 7B of IAS 16 (IFRS, n.d). After this, all PPE items that meet the
requirements should be initially recognized at cost to comply with the fifteenth paragraph of IAS
16 (IFRS, n.d) before the entity can choose to measure the PPE items through cost or
revaluation model to adhere to the twenty-ninth paragraph of IAS 16 (IFRS, n.d).

The initial cost of the PPE, which includes its purchase price, the cost directly attributable to
bringing the asset to the present location, and the estimated expenses in dismantling the item
and restoring it to its original condition, should also be disclosed by the company. Thus, comply
with paragraph 11, which talks about the initial costs of PPE. It also complies with paragraphs
16A, 16B, and 16C of IAS 16, which talks about the fees to be included in recognizing and
measuring PPE. Should their PPE undergo repairs and maintenance, the PPE’s carrying amount
will not absorb the costs; instead, it would be allocated separately to profit or loss to comply
with the twelfth paragraph of IAS 16, which talks about subsequent measures of PPE. The
company should also classify its PPEs according to their nature and use. Thus, they will be able
to comply with the thirty-seventh paragraph of IAS 16. Lastly, the necessary disclosures, as
stated in IAS 16, should also be followed such that the useful life of the PPE is included, the
depreciation methods used, the impairment losses received and reversed in profit or loss, etc.,
for complete transparency and understandability for the benefit of users of financial
information.

Borrowing Costs - PPE

Borrowing costs pertain to other expenses or interest acquired by the entity when borrowing
funds. Borrowing costs arise when companies take loans to finance the construction or
acquisition of a qualifying asset. Qualifying assets are constructed by the entity, which usually
takes quite a long time to build them. In the case of Dizon Copper-Silver Mines, it has not
incurred any borrowing costs as it did not disclose any plans of construction or acquisition of a
qualifying asset. As I did in the previous parts, I would discuss the provisions and disclosures
necessary for the company to abide by.

To comply with paragraph 8 of IAS 23 (IFRS, n.d), the company must capitalize borrowing costs if
they are directly attributable to the construction, acquisition, or production of the qualifying
asset. In contrast, any borrowing costs not attributable to the qualifying asset are expensed
immediately. Therefore, the borrowing cost must be capitalized. The company is also required
to determine the amount eligible borrowing costs for capitalization being the actual borrowing
cost minus any investment income coming from the temporary investment of the borrowings to
comply with the twelfth paragraph of IAS 23 (IFRS, n.d) if the asset is financed through specific
lending. However, the company is required to abide by the fourteenth paragraph of IAS 23 (IFRS,
n.d) if they borrow the funds for general purposes by assessing the eligible amount of
borrowing costs by multiplying the average carrying amount of the asset by the capitalization
rate, which would be the weighted average applied to the outstanding borrowings of the entity
during the period.

The company shall only commence capitalizing its borrowing costs if all three conditions are
met: when expenditures are incurred by the entity for the asset when borrowing costs are
incurred, and when the entity undertakes activities to prepare the asset for its intended use or
sale, as stated in paragraphs 17A, 17B, and 17C of IAS 23 (IFRS, n.d). In times when the
development of the asset is actively interrupted, the entity is required to suspend the
capitalization of its borrowing costs to comply with the twentieth paragraph of IAS 23 (IFRS,
n.d). Though, it should be noted that administrative and technical work, as well as when there is
a temporary delay in preparing the asset, continues the capitalization of borrowing costs as
stated in the twenty-first paragraph of IAS 23 (IFRS, n.d).

After all the necessary activities to prepare the asset for sale or use are complete, the
capitalization of borrowing costs would permanently cease to comply with the twenty-third
paragraph of IAS 23 (IFRS, n.d). Regardless if the asset is finished part by part, if a component
can be utilized while there is an ongoing construction of other elements, the entity is still
required to stop the capitalization of borrowing costs as they have substantially completed the
activities necessary to sell or use the asset. Thus the company would comply with the
twenty-fourth paragraph of IAS 23 (IFRS, n.d). Lastly, additional disclosures regarding borrowing
costs, such as the capitalized amount of borrowing costs and the capitalizable rate used to
determine the eligible amount to be capitalized, should be observed by the company to comply
with 26A and 26B of IAS 23.

Government Grants - PPE

Government grants are government assistance in transferring resources to the entity in
exchange for the entity’s compliance with its operating activities. Currently, the company has no
reports or previous reports of government grants acquired from the Philippine government.
Regardless, this part will still discuss the necessary provisions and disclosures.

The company should only recognize the government grant if it can comply with the conditions
attached, as stated in paragraphs 7A and 8 of IAS 20 (IFRS, n.d). To comply with PAS 20, the
company must recognize the government grant received as income systematically when an
entity incurs expenses to the related costs for which the grant should be able to compensate. In
addition, the entity is not allowed to recognize government grants on a cash basis to avoid
inconsistency with generally accepted accounting practices. Thus, they are recognized as
receivable or on an accrual basis, which also complies with the sixteenth paragraph of IAS 20
(IFRS, n.d). In cases where grants are related to depreciable assets, the company is required to
recognize the grant as an income depending on the periods of the depreciation, which should
also be in proportion to the asset’s depreciation. to comply with the seventeenth paragraph of
IAS 20 (IFRS, n.d). However, if the grant is related to non-depreciable assets, it would require the
company to fulfill specific obligations before being recognized as income depending on the
number of periods to meet the conditions, which is stated in the eighteenth paragraph of IAS 20
(IFRS, n.d). However, if the government grant’s purpose is to give immediate financial assistance
to the company without any related costs, the company should immediately recognize the
government grant as income to comply with the twentieth paragraph of IAS 20 (IFRS, n.d).

At the discretion of the entity, they can choose the presentation of the government grants
through deferred income or as a deduction from the cost of asset, as stated in the
twenty-fourth paragraph of IAS 20 (IFRS, n.d) if the government grant is related to asset (IFRS,
n.d). However, government grants are presented in the income statement if the government
grant is related to income and should be included under the general headings of other income
or is deducted from associated expenses, in compliance with the twenty-ninth paragraph of IAS
20 (IFRS, n.d). Government grants can be repayable due to the company’s non-compliance with
the set conditions. Thus it should be recognized as a change in accounting estimate. If the grant
is related to income, the company is expected to apply it against any unamortized deferred
revenue, and the excess is considered an expense. In contrast, if the grant is related to an asset,
the company is expected to recognize it by increasing the carrying amount of the asset and
decreasing the deferred income balance depending on the amount repaid by the company.
Thus, the company would comply with the thirty-second paragraph of IAS 20.

It is also necessary for the company to disclose any government assistance received by the
company for transparency regardless if it cannot be placed with monetary value or is difficult to
differentiate based on the average trading activities of the company as stated in the
thirty-fourth and thirty-sixth paragraph of IAS 20 (IFRS, n.d). Lastly, the company should also
follow the following disclosures concerning government grants: the accounting policy used and
the company’s method in presenting the government grants in the financial statements,
conditions that are currently unfulfilled about the government assistance recognized, and the
nature and extent in recognition of the government grants, as well as indications in which the
company has directly benefited from the government assistance given in compliance with
paragraphs 39A, 39B, and 39C of IAS 20 (IFRS, n.d).

Depreciation of PPE and Depletion of Wasting Assets

Any property, plant, and equipment, except for land, is usable for several years before
having little value for service or sale. According to Tuovila (2022), depreciation pertains to
systematically allocating the cost of the depreciable amount to the useful life of the asset, as
stated in the fiftieth paragraph of IAS 16 (IFRS, n.d), which makes it more convenient for the
company instead of realizing the entire costs for the year. As stated previously, the company did
not acquire nor have any remaining balance of property, plant, and equipment upon checking
their consolidated statements of financial position. However, the paper will still discuss the
following provisions and disclosures.

First, it should be noted that depreciation immediately begins when the asset is available for
use, and any temporary cessation of operation will not hinder the asset from depreciating, as
stated by the fifty-fifth paragraph of IAS 16 (IFRS, n.d). The company is required to separately
depreciate each item of PPE to comply with the forty-third paragraph of IAS 16 (IFRS, n.d).
Additionally, the depreciation computed should be a part of profit or loss unless it is also a part
of the carrying amount of another, as stated in the forty-eighth paragraph of IAS 16 (IFRS, n.d).
The company can use more than one depreciation method, as the straight-line method is
commonly used due to its simplicity. According to the sixty-second paragraph of IAS 16 (IFRS,
n.d), aside from the straight-line method, the company can also use other ways, such as the
diminishing balance method and units of production method. As there are countless methods
to choose from, it is recommended for the company to disclose what type of depreciation
method they will use that will reflect the pattern of the future economic benefits to be
consumed by the entity, which will be following paragraphs 60 and 73B of IAS 16 (IFRS, n.d).
Concerning this, the company must also give a list of its PPE items and their corresponding
useful life to adhere to paragraph 73C of IAS 16 (IFRS, n.d).

Depletion, on the other hand, pertains to the cost allocation of extraction of natural resources
such as oils, natural gasses, and other nonrenewable resources, which is similar to depreciation;
the only difference is that depreciation is used for property, plant, and equipment. Concerning
this, the company has not incurred any mine exploration and expenditures cost regardless of
whether Dizon Copper-Silver Mines Inc. is included in the mining industry. As stated in the first
note of the company, the current status of the company is concerned with the maintenance and
care of mine sites. While the company incurred administrative and mine site expenses, which
are disclosed in note 10, it is not considered an exploration and expenditure cost. Regardless, I
would still discuss the provisions and disclosures needed for the company to abide by.

According to IFRS 6 (IFRS, n.d), exploration and evaluation of mineral resources are defined as
searching for mineral resources when the entity can obtain the legal rights to explore an area
and successfully determine its technical feasibility and commercial viability of extraction. In
addition, the company must measure them at cost to abide by the eighth paragraph of IFRS 6
(IFRS, n.d). Not to be confused with the exploration and evaluation of mineral sources as well as
exploration and evaluation expenditures, the only difference between them is that the technical
feasibility and commercial viability of extraction are not yet demonstrable. The entity must also
determine the costs included in the exploration and evaluation expenditures to comply with the
ninth paragraph of IFRS 6 (IFRS, n.d). Based on the following examples given by the standard,
the administrative and mine site expenses do not fall within its scope since most of the
expenses incurred are for maintaining the company's mining sites. After initial measurement,
the company can also measure the asset through cost or revaluation model, as stated in the
twelfth paragraph of IFRS 6 (IFRS, n.d). Any expenses related to developing mineral resources
are not counted as exploration and evaluation assets, as stated in the tenth paragraph of IFRS 6
(IFRS, n.d).

The company has no possession of wasting assets, but it will still be discussed in the paper.
Wasting assets are natural resources such as oil, timber, gold, and silver. As stated in its name,
once the asset is used, it cannot be replaced anymore. Thus, the following characteristics define
wasting assets: they are consumed physically and irreplaceable. IFRS has no standard as of the
present moment with accounting for wasting assets. However, wasting assets can be divided
into four categories: acquisition, exploration, development, and restoration costs. Acquisition
cost pertains to the paid property with natural resources, while exploration costs refer to the
costs associated with locating or identifying natural resources that can be extracted (Law
Insider, n.d). The company, should they resume their mine exploration, can opt to disclose the
method they used in accounting for exploration costs: the successful effort method and full cost
method. The successful effort method allows the company only to recognize successful
attempts of discovering natural resources, which in contrast to the full cost method, wherein all
attempts may be successful or not, will be accounted for (Vitalone, 2022).

Development costs, on the other hand, are the costs incurred by the company in extracting
natural resources, in tangible or intangible items, per the fifty-ninth paragraph of IAS 38 (IFRS,
n.d). It should be noted that the company does not recognize development costs as exploration
costs since they are incurred before the technical feasibility and commercial viability of the
extraction of minerals, which is to comply with the tenth paragraph of IFRS 6 (IFRS, n.d). The
company is also expected to restore the environment for having degraded or depleted the
natural resources to counteract the possible negative environmental impact to comply with the
eleventh paragraph of IFRS 6 (IFRS, n.d).

Lastly, depletion is also recognized as the cost of the material used in production, which will
become the final extractive product of the company. Dizon Copper-Silver Mines Inc. has no
depletion in its financial statements as it halted its mining operations and focused on
maintaining its mine sites. Though presenting the amount of depletion, the company can
present the rates used or their basis in computing the depletion of assets. The company should
also separate wasting assets from property, plant, and equipment when giving them in the
financial statements to avoid confusion among financial users.

Revaluation and Impairment of PPE

Property, plant, and equipment are initially measured at cost, and after the PPE has
been acquired, the company has the power to choose whether it would measure the PPE
through the cost model or the revaluation model. As stated previously, the company did not
include property, plant, and equipment under the non-current assets as they currently do not
possess one, nor explicitly disclosed in their notes to financial statements the reason for having
no PPE despite engaging in the mining industry. However, the necessary provisions, as well as
the disclosures, would still be discussed.

If the company would like to reevaluate its PPE, there is no frequency of revaluation as it is
solely dependent on PPE’s fair value changes, mainly if the fair value of the PPE differs
significantly from its carrying value. Thus, if a company owns a PPE that is susceptible to price
changes, it must have an annual revaluation, while some items are not always needed to be
revalued as insignificant changes are only happening in its fair value. However, revaluation can
also be done every three to five years, but not necessary, as stated in the thirty-fourth
paragraph of IAS 16 (IFRS, n.d). If one PPE item is being revalued, it is expected for the company
also to revalue the class that the PPE item is included for uniformity, as well as selective
revaluation of assets to comply with the thirty-sixth paragraph and the thirty-eight paragraph of
IAS 16 (IFRS, n.d). In recording the reassessment of a PPE item, the company can make the
following approaches: the proportional approach focuses on restating the accumulated
depreciation proportionately with the change in the gross carrying amount of the asset as
stated in paragraph 35A of IAS 16 (IFRS, n.d), or the company can use the elimination approach
to which the accumulated depreciation is eliminated against the gross carrying amount of the
asset as stated in paragraph 35B of IAS 16 (IFRS, n.d).

Any increase or decrease in the carrying amount based on the adjustments in the accumulated
depreciation will be accounted for. For instance, if there is an increase in the carrying amount of
the PPE item, it should be recognized in other comprehensive income and be included under
the heading of revaluation surplus. However, the increase will be identified to the extent that it
reverses a decrease in the revaluation of the same asset previously recognized in the profit or
loss to comply with the thirty-ninth paragraph of IAS 16 (IFRS, n.d). In an instance of a decrease
recognized, it will be automatically recorded in profit or loss. However, the decrease will only be
realized in other comprehensive income to the extent that a particular asset has an existing
credit balance. In contrast, the decrease will also reduce the accumulated amount of equity
under the revelation surplus heading to comply with the fortieth paragraph of IAS 16 (IFRS, n.d).

Impairment, on the other hand, refers to a significant reduction in the value of the company’s
assets (Tuovila, 2022). Tuovila (2022) also mentioned that the volatility of a country’s economy,
legal circumstances, or unforeseen disasters is one of the leading causes of impairment, which is
also stated in the twelfth paragraph of IAS 36 (IFRS, n.d). Since, as previously stated, the
company has no property plant and equipment included in their financial statements, I would
be instead discussing the necessary provisions and disclosures to be observed by the company
should they acquire PPE and would evaluate it for impairment.

An entity should assess at each reporting period if there is a possibility of impairment in their
assets, and they shall estimate the recoverable amount of the asset if an indication exists as
stated in the ninth paragraph of IAS 36 (IFRS, n.d), which should also be included in the
“summary of significant accounting policies” of the notes of the company. If the company can
determine that there will be an impairment for a PPE item, they should first disclose any
evidence for impairment and how it arose and affected the PPE item, whether it may be an
internal or external factor, for transparency purposes. Thus, the company must get its
recoverable amount. However, the recoverable amount should be between the fair value less
cost of disposal or value in use, whichever is higher. An impairment loss recognized should be
recorded in the profit or loss unless the asset is valued at the revalued amount under another
standard as stated in the sixtieth paragraph of IAS 36 (IFRS, n.d). However, if the impairment
loss is greater than the carrying amount of the asset, the entity should recognize a liability if it is
required by another standard to comply with the sixty-second paragraph of IAS 36 (IFRS, n.d).
Afterward, the remaining depreciation charge would be allocated to the asset’s new carrying
amount systematically to comply with the sixty-third paragraph of IAS 36 (IFRS, n.d).

An impairment loss recognized can be reversed if the recoverable amount of the asset is higher
than the current carrying amount of the asset; thus, the asset’s carrying amount would be
increased to a new recoverable amount, which would comply with paragraph 114 of IAS 36
(IFRS, n.d). However, the asset’s carrying amount should not exceed the determined carrying
amount if the impairment was not recognized to comply with paragraph 117 of IAS 36 (IFRS,
n.d). By IAS 36, the recoverable amount of an asset should be determined individually. However,
in such cases that it is impossible to estimate the individual assets’ recoverable amount, the
company would then base on the recoverable amount of the cash-generating unit where the
PPE item belongs to comply with the sixty-sixth paragraph of IAS 36 (IFRS, n.d). In such cases,
the company should disclose the following information and reasons for not determining the
asset’s recoverable amount. When the company allocates impairment loss for cash-generating
units, the impairment loss of a cash-generating unit must be recognized if the unit’s carrying
amount is greater than the recoverable amount to comply with paragraphs 104 and 105 of IAS
36 (IFRS, n.d). Additionally, any goodwill acquired by the company should be allocated to each
cash-generating asset to comply with the eightieth paragraph of IAS 36 (IFRS, n.d). Concerning
this, goodwill is also included in testing the cash-generating unit for impairment annually or
whenever there is an indication of impairment of the cash-generating unit to comply with the
ninetieth paragraph of IAS 36 (IFRS, n.d).

In conclusion, the entity could adequately observe the following provisions and disclosures in
debt securities regardless of currently having no possession of such. However, the company
needs more information on the following topics: inventories, property, plant, and equipment,
government grant, borrowing costs, depreciation and depletion of wasting assets, and
revaluation and impairment of PPE. Therefore the following information stated in each topic is
only provisions and disclosures that the company should follow if they acquire the following.
References

Corporate Finance Institute. (2022, October 11). Debt security. Corporate Finance Institute.
Retrieved from
https://corporatefinanceinstitute.com/resources/fixed-income/debt-security/

IFRS. (n.d.-a). IAS 2 - Inventories. IFRS. Retrieved from

https://www.ifrs.org/content/dam/ifrs/publications/pdf-standards/english/2021/issued/
part-a/ias-2-inventories.pdf

IFRS. (n.d.-b). IAS 16 - Property, Plant and Equipment. IFRS. Retrieved from
https://www.ifrs.org/content/dam/ifrs/publications/pdf-standards/english/2022/issued/
part-a/ias-16-property-plant-and-equipment.pdf?bypass=on

IFRS. (n.d.-c). IAS 20 - Accounting for Government Grants and Disclosure of Government
Assistance. IFRS. Retrieved from
https://www.ifrs.org/content/dam/ifrs/publications/pdf-standards/english/2021/issued/
part-a/ias-20-accounting-for-government-grants-and-disclosure-of-government-assistanc
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IFRS. (n.d.-d). IAS 23 - Borrowing Costs. IFRS. Retrieved from

https://www.ifrs.org/content/dam/ifrs/publications/pdf-standards/english/2022/issued/
part-a/ias-23-borrowing-costs.pdf?bypass=on

IFRS. (n.d.-e). IAS 36 - Impairment of Assets. IFRS. Retrieved from

https://www.ifrs.org/content/dam/ifrs/publications/pdf-standards/english/2021/issued/
part-a/ias-36-impairment-of-assets.pdf

IFRS. (n.d.-f). IAS 38 - Intangible Assets. IFRS. Retrieved from

https://www.ifrs.org/content/dam/ifrs/publications/pdf-standards/english/2021/issued/
part-a/ias-38-intangible-assets.pdf
IFRS. (n.d.-g). IFRS 6 - Exploration for and Evaluation of Mineral Resources. IFRS. Retrieved from
https://www.ifrs.org/content/dam/ifrs/publications/pdf-standards/english/2022/issued/
part-a/ifrs-6-exploration-for-and-evaluation-of-mineral-resources.pdf?bypass=on

IFRS. (n.d.-h). IFRS 9 Financial Instruments. IFRS. Retrieved from

https://www.ifrs.org/issued-standards/list-of-standards/ifrs-9-financial-instruments/#sta
ndard

Law Insider. (n.d.). Exploration costs definition. Law Insider. Retrieved from
https://www.lawinsider.com/dictionary/exploration-costs

Tuovila, A. (2022a, August 24). What does impairment mean in accounting? with examples.
Investopedia. Retrieved from https://www.investopedia.com/terms/i/impairment.asp

Tuovila, A. (2022b, June 27). What is depreciation, and how is it calculated? Investopedia.
Retrieved from https://www.investopedia.com/terms/d/depreciation.asp

Vitalone, J. (2022, January 28). The difference between successful-efforts and full-cost
accounting. Investopedia. Retrieved from
https://www.investopedia.com/articles/fundamental-analysis/08/oil-gas.asp
 APPENDICES

Appendix A: Consolidated Statements of Financial Position

Appendix B: Consolidated Statements of Comprehensive Income
Appendix C: Consolidated Statements of Cash Flows
Appendix D: Consolidated Statement of Changes in Equity
Appendix E: Note 1 - Corporate Information and Status of Operations
Appendix F: Note 2 - Changes in Accounting Policies and Disclosures (1)
Appendix G: Note 2 - Changes in Accounting Policies and Disclosures (2)
Appendix H: Note 2 - Financial Instruments
Appendix I: Note 2 - Subsequent Measurement of Debt Instruments

Appendix J: Business Model Assessment

 Appendix K: SPPI Test

Appendix L: Disclosure on Financial Asset - AC Subsequent Measurement

Appendix M: Derecognition of Financial Assets

Appendix N: Impairment of Financial Assets

 Appendix O: Explanation of Administrative and Mine Expenses

Appendix P: Note 6 and 7 - Other Noncurrent Assets and Investment Properties

Appendix Q: Note 8 - Financial Assets at FVOCI (equity instruments) and Accounts Payable
Appendix R: Note 10 - Administrative and Mine Site Expenses

Appendix S: Note 11 - Related Party Transactions

Appendix T: Note 11 - Continuation of Related Party Transactions