Module 4: DEPLETION OF MINERAL RESOURCES

Recognition of Income depends on expenses related from it; government grant

Mineral Resources; depletion
Intangible; amortization
PPE; depreciation

Exploration and Evaluation Expenditures

- Cost in exploring and evaluating mineral resources
- Before
- Process; the search for mineral resources
o Its non regenerative
 Earth alone who can produce such resources
PFRS 6
- Probability that there is a mineral resources]
- Applies only after you acquired legal rights
o Approval
- Before
- After legal rights
- Concern only
Development Costs
- After technical feasibility and commercial viability
- Not scope under PFRS 6
- There is a development costs in PFRS 6
- Costs should not be under PFRS 6
- Before legal rights
Initial Measurement; at cost
Subsequent Measurement; cost or revaluation model
- Separate class of assets
o Depends on the nature of asset
- After PFRS 6; it is already another standard
o Use one standard to another standard
o Depends on the function, purpose, use

Natural Mineral Resources

- Wasting assets
- 2 main features;
o Complete removal of asset
o Act of nature
Cost of Natural Resources
- The cost should be after the legal rights have been obtained; exploration costs
- Disbursements for you to prepare for the mining; development costs
Acquisition Costs
- Price paid to acquire the property
- Impairment; unsuccessful
Exploration Costs
- Not always included as the cost of asset
- Not required by the PFRS 6; by the management judgements
Development Costs
- It depends on the nature of the asset
- Not always capitalizable on the cost of the resource
Tangible Equipment Costs
- Delivery trucks
- Equipment; capitalized as
Intangible
- Capitalized as act of natural resources
Depletion
- Same as depreciation; difference is natural resources is depreciated
Depletion Base; capitalized cost less residual value
Useful life; number of production
- Units of production method; computed
o Depleting an asset based on number of production it has

Asset Retirement Obligation; paid at the end of the process; after extracting all the mineral resources
Accumulated Depletion; contra asset account for mineral resources

Change in Estimates
- Account prospectively; present to the future\
- Chance that it is not accurate
- Every time there is a change you have to update the balance first

Depreciation of Mining Equipment

Movable Tangible Equipment
 - Alternative use
- Leave is as if it is under PPE
Immovable Tangible Equipment
- No other function; only for a certain site
- Depreciated; whichever is shorter
- Useful life of Equipment less than Useful life of natural resources; any depreciation method
- Useful life of Equipment more than Useful life of natural resources; units of production method;
UL life of Natural resources is used