http://www.ifrs.org/projects/work-plan/
using a residual method, IFRS Interpretations
(accessed 23 August 2018).
Committee Meeting, May 2012.
10 IASB Update, May 2013.
4
IFRIC Update, March 2013.
11 IFRIC Update, January 2012.
5
IASB Update, May 2013.
6
Request
for
Information:
Post-implementation of
IFRS 13 Fair Value Measurement, May 2017.
7
Agenda Paper 7B, Post-implementation
Review of IFRS 13 Fair Value Measurement:
Background–Detailed analysis of feedback
received, IASB meeting, March 2018.
3179
Chapter 39
Extractive industries
1 INTRODUCTION AND BACKGROUND ........................................................ 3189
1.1
Defining extractive industries .......................................................................... 3189
1.1.1
Definition of key terms ...................................................................... 3192
1.2
The development of IFRS 6 – Exploration for and Evaluation of
Mineral Resources .............................................................................................. 3192
1.3
April 2010 Discussion Paper: Extractive Activities ...................................... 3193
1.3.1
Definitions of reserves and resources ............................................ 3193
1.3.2 Asset
recognition
................................................................................
3194
1.3.3 Asset
measurement
............................................................................
3194
1.3.4 Disclosure
.............................................................................................
3194
1.3.5 Publish
What
You
Pay proposals .................................................... 3195
1.3.6 Status
of
Extractive
Activities project ............................................ 3195
1.4
Status of the Statement of Recommended Practice, UK Oil
Industry Accounting Committee, June 2001 (OIAC SORP) ....................... 3196
1.5 Guidance
under
national
accounting standards ........................................... 3197
1.6 Upstream
versus
downstream activities ......................................................... 3198
1.6.1
Phases in upstream activities ........................................................... 3198
2 MINERAL RESERVES AND RESOURCES ...................................................... 3199
2.1
International harmonisation of reserve reporting ........................................ 3201
2.2
Petroleum reserve estimation and reporting ............................................... 3202
2.2.1
Basic principles and definitions ...................................................... 3202
2.2.2
Classification and categorisation guidelines ................................ 3205
2.3
Mining resource and reserve reporting ......................................................... 3206
2.3.1
CRIRSCO International Reporting Template (November
2013) ..................................................................................................... 3207
2.3.1.A
Scope ............................................................................... 3207
2.3.1.B Reporting
terminology
.................................................
3207
2.4
Disclosure of mineral reserves and resources ............................................. 3209
3180 Chapter 39
2.4.1
Oil and gas sector ................................................................................ 3211
2.4.2 Mining
sector
.......................................................................................
3211
2.4.3
Disclosure of the value of reserves ................................................. 3211
2.4.3.A
ASC 932-235-50 – disclosure of standardised
measure of oil and gas ................................................... 3212
3 IFRS 6 – EXPLORATION FOR AND EVALUATION OF MINERAL
RESOURCES .................................................................................................. 3213
3.1
Objective and scope ........................................................................................... 3213
3.1.1
Scope exclusions in other standards relating to the
extractive industries ............................................................................ 3213
3.2
Recognition of exploration and evaluation assets ....................................... 3214
3.2.1
Developing an accounting policy under IFRS 6 ........................... 3214
3.2.2
Options for an exploration and evaluation policy ....................... 3215
3.2.3 Successful
efforts method ................................................................. 3215
3.2.4 Full
cost
method ................................................................................. 3217
3.2.5 Area-of-interest
method
...................................................................
3218
3.2.6
Changes in accounting policies ....................................................... 3220
3.3
Measurement of exploration and evaluation assets ................................... 3220
3.3.1
Types of expenditure in the exploration and evaluation
phase .................................................................................................... 3220
3.3.2
Capitalisation of borrowing costs in the exploration and
evaluation phase ................................................................................ 3223
3.4
Presentation and classification ........................................................................ 3223
3.4.1
Reclassification of E&E assets ........................................................ 3223
3.5
Impairment .......................................................................................................... 3224
3.5.1
Impairment testing ‘triggers’ ............................................................ 3225
3.5.2
Specifying the level at which E&E assets are assessed for
impairment .......................................................................................... 3225
3.5.3 Cash-generating
units
comprising successful and
unsuccessful E&E projects ............................................................... 3226
3.5.4
Order of impairment testing ............................................................ 3226
3.5.5
Additional considerations if E&E assets are impaired ............... 3226
3.5.6
Income statement treatment of E&E write downs –
impairment or exploration expense ............................................... 3227
3.5.7 Reversal
of
impairment losses ......................................................... 3227
3.6
Disclosure ............................................................................................................. 3227
3.6.1
Statement of cash flows.................................................................... 3229
4 UNIT OF ACCOUNT ..................................................................................... 3230
4.1
Unit of account in the extractive industries .................................................. 3231
5 LEGAL RIGHTS TO EXPLORE FOR, DEVELOP AND PRODUCE
MINERAL PROPERTIES ................................................................................ 3233
Extractive
industries
3181
5.1
How does a mineral lease work? .................................................................... 3234
5.2 Concessionary
agreements (concessions) ..................................................... 3235
5.3 Traditional
production
sharing contracts ..................................................... 3236
5.4 Pure-service
contracts
......................................................................................
3239
5.5
Evolving contractual arrangements ............................................................... 3239
5.5.1
Risk service contracts ....................................................................... 3240
5.6
Joint operating agreements ............................................................................... 3241
5.7
Different types of royalty interests ................................................................. 3241
5.7.1
Working interest and basic royalties .............................................. 3241
5.7.2 Overriding
royalties .......................................................................... 3242
5.7.3 Production
payment royalties ......................................................... 3242
5.7.4
Net profits interests ........................................................................... 3242
5.7.5
Revenue and royalties: gross or net? ............................................. 3242
6 RISK-SHARING ARRANGEMENTS .............................................................. 3244
6.1
Carried interests ................................................................................................. 3244
6.1.1
Types of carried interest arrangements ........................................ 3244
6.1.2
Carried interest arrangements in the E&E phase ........................ 3246
6.1.3
Financing-type carried interest arrangements in the
development phase ............................................................................ 3246
6.1.4 Purchase/sale-type
carried
interest arrangements in the
development phase ........................................................................... 3248
6.2
Farm-ins and farm-outs .................................................................................... 3249
6.2.1
Farm-in arrangements in the E&E phase ..................................... 3250
6.2.2 Farm-in
arrangements
outside the E&E phase: accounting
by the farmee ....................................................................................... 3251
6.2.2.A
Farming into an asset .................................................... 3251
6.2.2.B
Farming into a business which is a joint
operation or results in the formation of a joint
operation ........................................................................ 3252
6.2.3
Farm-in arrangements outside the E&E phase: accounting
by the farmor ...................................................................................... 3253
6.3
Asset swaps ......................................................................................................... 3255
6.3.1
E&E assets ........................................................................................... 3255
6.3.2
PP&E, intangible assets and investment property ...................... 3256
6.3.3
Exchanges of E&E assets for other types of assets ..................... 3256
7 INVESTMENTS IN THE EXTRACTIVE INDUSTRIES .................................... 3256
7.1
Joint arrangements .............................................................................................. 3257
7.1.1
Assessing joint control ...................................................................... 3258
7.1.1.A
Relevant activities ......................................................... 3258
7.1.1.B Meaning
of
unanimous consent ................................. 3259
3182 Chapter 39
7.1.2
Determination of whether a manager of a joint arrangement
has control ........................................................................................... 3259
7.1.2.A
Implications of controlling a joint operation ........... 3260
7.1.2.B
Implications of controlling a joint venture ............... 3261
7.1.3
Parties to a joint arrangement without joint control or
control ................................................................................................... 3261
7.1.3.A
Joint operations .............................................................. 3261
7.1.3.B Joint
ventures
.................................................................
3262
7.1.4
Managers of joint arrangements ..................................................... 3262
7.1.4.A
Reimbursements of costs ............................................ 3262
7.1.4.B
Direct legal liability for costs incurred and
contracts entered into .................................................. 3263
7.1.4.C
Joint and several liability ............................................. 3263
7.1.5
Non-operators of joint arrangements ............................................ 3263
7.2
Undivided interests ........................................................................................... 3264
8 ACQUISITIONS ............................................................................................ 3265
8.1
Business combinations versus asset acquisitions ........................................ 3265
8.1.1
Differences between asset purchase transactions and
business combinations ...................................................................... 3265
8.1.2 Definition
<
br /> of
a business .................................................................... 3265
8.2
Business combinations .......................................................................................3267
8.2.1
Goodwill in business combinations ................................................3267
8.2.2
Impairment of assets and goodwill recognised on
acquisition ........................................................................................... 3268
8.2.3
Value beyond proven and probable reserves (VBPP) ................ 3268
8.3
Acquisition of an interest in a joint operation that is a business ............... 3271
8.4 Asset
acquisitions
................................................................................................
3272
8.4.1
Asset acquisitions and conditional purchase consideration ...... 3273
8.4.2 Accounting
for
land acquisitions .....................................................3276
9 FUNCTIONAL CURRENCY ........................................................................... 3276
9.1
Determining functional currency ....................................................................3276
9.2 Changes
in
functional currency ...................................................................... 3278
10 DECOMMISSIONING AND RESTORATION/REHABILITATION ................... 3281
10.1 Recognition and measurement issues ............................................................. 3281
10.1.1
Initial recognition ............................................................................... 3281
10.1.2 Measurement
of
the liability ........................................................... 3282
10.1.3
Decommissioning or restoration costs incurred in the
production phase ................................................................................ 3282
10.2 Treatment of foreign exchange differences ................................................. 3283
10.3 Indefinite
life assets ........................................................................................... 3283
Extractive
industries
3183
11 IMPAIRMENT OF ASSETS ............................................................................ 3284
11.1
Impairment indicators ...................................................................................... 3284
International GAAP® 2019: Generally Accepted Accounting Practice under International Financial Reporting Standards Page 629
