PFRS 6 ACC FOR EXPLORATION AND EVALUATING OF NATURAL RESOURCES
PFRS 6 addresses the accounting for
expenditures on exploration for and
evaluation of mineral resources.
 Exploration for and evaluation of
mineral resources is " 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.
" ( PFRS 6. Appendix A ).
 Exploration and evaluation
expenditures - are " expenditures
incurred by an entity in connection
with the exploration for and
evaluation of mineral resources
before the technical feasibility and
commercial viability of extracting a
mineral resource are demonstrable
. " ( PFRS 6.Appendix A ).
PFRS 6 applies to expenditures incurred
after the entity has obtained legal rights to
explore in a specific area (it is illegal to
explore for mineral resources without
obtaining first an authorization from the
government) but before the existence of
mineral reserves is in fact established and
the technical feasibility and commercial
viability of extracting mineral resources
are demonstrable . Expenditures incurred
after technical feasibility and commercial
viability are demonstrable are called
development costs . Development costs
are accounted for under other applicable
Standards .
PFRS 6 temporarily exempts an entity
from applying the hierarchy above . PFRS
6 permits entities to develop their own
PFRS 6 ACC FOR EXPLORATION AND EVALUATING OF NATURAL RESOURCES
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 .
Accordingly, an entity may recognize
exploration and evaluation expenditures
as expenses or assets depending on its
chosen accounting policy ( which is
developed based entirely on
management's judgment ) . In making the
judgment, an entity considers the degree
to which the expenditure can be
associated with finding specific mineral
resources.
Initial measurement.
Exploration and evaluation assets are
initially measured at cost .
 Exploration and evaluation assets
evaluation expenditures
recognized as assets in
accordance with the entity's
accounting policy. " (PFRS
6.Appendix A).
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
e. Sampling.
f. Activities in relation to evaluating
the technical feasibility and
commercial viability of extracting a
mineral resource. ( PFRS 6.9 ).
The initial measurement also includes the
present value of any decommissioning
PFRS 6 ACC FOR EXPLORATION AND EVALUATING OF NATURAL RESOURCES

and restoration costs for which the entity
has incurred an obligation as a
consequence of having undertaken the
exploration and evaluation activities.
Expenditures related to the development
of mineral resources are not recognized
as exploration and evaluation assets.
Subsequent measurement.
Exploration and evaluation assets are
subsequently measured using either the
cost model or the revaluation model.
Changes in accounting policies.
An entity may change its accounting
policy for exploration and evaluation
expenditures if the change results in
more relevant and no less reliable, or
more reliable and no less relevant,
information. The entity judges relevance
and reliability using the criteria in PAS 8 .
Classification of exploration and
evaluation assets.
Exploration and evaluation assets are
treated as a separate class of assets and
classified as tangible ( e.g. vehicles and
drilling rigs ) or intangible ( e.g. drilling
rights ) depending on the nature of the.
assets.
their recoverable amount. The entity
applies PAS 36 when making the
assessment, except for the allocation of
impairment loss on assets within cash-
generating units wherein the entity is
allowed to determine its own accounting
policy for the allocation.
Examples of indications that exploration
and evaluation assets need to be
assessed for impairment :.
a. The right to explore has expired or
will expire in the near future and is
not expected to be renewed.
b. Expenditures for further exploration
and evaluation activities are
significantly higher than expected.
c. The exploration and evaluation
activities in a specific area have to
be discontinued because no
mineral resources have been
discovered.
d. Indication exists that, although a
specific area will be developed, the
carrying amount of the exploration
and evaluation asset is unlikely to
be fully recovered .

Reclassification of exploration and

evaluation assets.
When the technical feasibility and
commercial viability of extracting a mineral
resource are demonstrable, the
exploration and evaluation assets are
reclassified in accordance with other
relevant Standards. The exploration and
evaluation assets are assessed first for
impairment before the reclassification.

Impairment Loss.
Exploration and evaluation assets are
assessed for impairment when indication
exists that their carrying amount exceeds
PFRS 6 ACC FOR EXPLORATION AND EVALUATING OF NATURAL RESOURCES