Exam 20: Accounting for the Extractive Industries

AASB 6 requires disclosure of information that identifies and explains the amounts recognised in the financial report arising from the exploration for and evaluation of mineral resources.To comply with this prescription,required disclosures include:

Which of the following disclosures is not an example that would form part of the sustainability reports issued by Australian mining companies?

On 1 July 2012 Honies Ltd commenced an operation to extract iron ore from two sites believed to have potential in northern Australia.During the financial period ended 30 June 2013 the following costs were incurred. Site Acquisition costs (\ ) Exploration and evaluation costs (Sm) Total( \m ) Western 9 20 29 Eastern The eastern site is found not to be economically viable and is abandoned in the second half of 2013.Development costs of $10 million are incurred at the western site.The reserves at this site are estimated to be 90 000 tonnes.The market price is currently $900 per tonne.In the financial year ended 30 June 2014,10 000 tonnes are extracted with associated production costs of $1 million and 8000 tonnes are sold at the market price.There are no effective limits on the time over which Honies Ltd may extract the ore.What are the journal entries to record the relevant transactions and events for 2013 and 2014 using the full-cost method (round to the nearest $10 000)?

There are potentially five alternative methods to account for pre-production costs for extractive industries.

Discuss the financial reporting issues associated with minerals,oil and gas reserves and resources that have been identified for consideration by the International Accounting Standards Board.

Which of the following statements is not in accordance with AASB 6 Exploration for and Evaluation of Mineral Resources?

The differences between the treatment that would be most consistent with the AASB Framework and the method required by AASB 6 for the treatment of pre-production costs include:

Which of the following are within the scope of AASB 6 Exploration for and Evaluation of Mineral Resources?

The development phase is described in AASB 1022 as including:

Discuss how an entity accounts for restoration costs and the measurement used.

Where an area of interest contracts in size and subsequently becomes two distinct operations:

Which of the following expenditures is not an example of expenditures that form part of the initial cost of exploration and evaluation assets?

Berrill Ltd is a mining firm incorporated on 1 July 2012 to engage in the exploration of iron ore in southern New South Wales.On 30 June 2013 the records show that the entity had incurred the following exploration and evaluation costs for area of interest A and area of interest B. Area of interest Area of interest B Acquisition costs - mining tenements \ 100000 \ 200000 Exploration costs 300000 200000 Evaluation costs 200000 100000 Total \ 600000 \ 500000 On 30 June 2013 area of interest B was evaluated by the board of directors to be not economically feasible and abandoned the site. What is the effect of the above transactions on the statement of financial position and the statement of comprehensive income of Berrill Ltd using the area-of-interest method?

AASB 6 stipulates that exploration and evaluation assets shall be measured at cost at recognition.

AASB 6 provides guidance to cover costs incurred in the five phases listed in AASB 1022 namely: exploration,evaluation,development,construction and production.

Inventories are covered by which of the following standards?

Discuss the recognition of revenue for the extractive industries.

The full-cost method is permitted in the US despite the fact that it may involve the matching of past costs with future revenue and current period costs against revenue from previously discovered reserves in an entirely different area.

Which of the following statements is correct?

Which of the following statements is correct?