ACCOUNTING FOR DEPLETION PROF.B.

RAMOS
Wasting Assets – depletable natural resources. Exploration and evaluation expenditures
Costs of Wasting Assets (DEAR)
Expenditures incurred by an entity in connection with the
exploration for and evaluation of mineral resources before
• Acquisition
the technical feasibility and commercial viability of
extracting a mineral resource are demonstrable.
• Exploration and evaluation
Exploration and evaluation assets
• Development
Exploration and evaluation expenditures recognized as
• Restoration assets in accordance with the entity’s accounting policy.

Exploration for and evaluation of mineral resources Reclassification of Exploration and Evaluation Asset

The search for mineral resources, including minerals, oil,
natural gas and similar non-regenerative resources after
the entity has obtained legal rights to explore in a specific
area, as well as the determination of the technical
feasibility and commercial viability of extracting the
mineral resource.
An exploration and evaluation asset shall no longer be
classified as such when the technical feasibility and
commercial viability of extracting a mineral resource are
demonstrable. Exploration and evaluation assets shall be
assessed for impairment, and any impairment loss
recognized, before reclassification.

Examples of Exploration and Evaluation Activities

Development Cost
• acquisition of rights to explore
• topographical, geological, geochemical and geophysical Intangible
studies e.g. Cost of drilling and construction of wells
• exploratory drilling
• trenching Include in the cost of wasting asset
• sampling
• activities in relation to evaluating the technical Tangible
feasibility and commercial viability of extracting a e.g. Building and machinery and equipment
mineral resource
Recognize as separate asset

Depreciation method:
Same method for other PPE

If the problem is silent

Useful life > Life of WA – Output
Useful life < Life of WA – Straight line

Estimated Restoration Cost

Included when recognized as provision. Therefore the
restoration cost must
• Be a present obligation,
• Represent a probable outflow of economic resources,
and
• Be measurable reliably