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Evaluation of asset and exploration: Specification of the level at which assets evaluation and exploration are evaluated for impairment: 4 Measurement of asset and exploration

   

Added on  2021-06-14

11 Pages2727 Words188 Views
Running head: ADVANCED FINANCIAL ACCOUNTINGAdvanced financial accountingName of the UniversityName of the studentAuthors note

1ADVANCED FINANCIAL ACCOUNTINGTable of ContentsIntroduction:....................................................................................................................................2Discussion:.......................................................................................................................................2Evaluation of asset and recognition of exploration:........................................................................4Measurement of assets at recognition:.............................................................................................4Specification of the level at which assets evaluation and exploration are assessed for impairment:.........................................................................................................................................................5Evaluation of the compatibility between the asset definition and recognition criteria as per generareporting framework and AASB 6 rules for exploration and evaluation of mineral resources:......6Conclusion:......................................................................................................................................8References list:.................................................................................................................................9Introduction:The purpose of the study is to provide detail explanation of the AASB 6 with respect tothe evaluation and exploration of expenditures. Explanation concerning this particular

2ADVANCED FINANCIAL ACCOUNTINGaccounting standard is elaborated in terms of definition and recognition criteria for the assets thathave been specified in the AASB framework. The consistency between the definition andrecognition criteria that have been specified in the framework and the accounting rules has beenexplained. Study further elucidates on the existence of any inconsistencies between such criteriaand the AASB 6 rules. The objective of this particular standard is to make the specification offinancial reporting for evaluation and explanation of mineral resources (Abdo 2016). As per thisstandard, limited improvement is required in the existing accounting practices for evaluation andexploration of expenditures. This particular standard is applicable by entities for evaluation andexploration of expenditures incurred by it. Any other aspects of accounting by entities engagedin exploration and evaluation of mineral resources is not addressed by AASB 6. Discussion:The accounting standard AASB 6 deals with the treatment of expenditures that isassociated with evaluation of and exploration for mineral resources. This particular standardrequires allows reporting entity to develop their own accounting policies for treating suchexpenditures without complying with the paragraph 12 and 11 of AASB 108 accounting policies.The accounting policies are required to be consistent with the approach of area of interest as perAASB 6. It is required by the standard to conduct the impairment testing of evaluationexpenditures and capitalized exploration. The circumstances and facts that are specified by thisparticular standard are consistent with the factors that are used for determination whether anentity is capable of continuing to make recognition of evaluation of expenditures and capitalizedexploration under AASB 1022. Furthermore, as per paragraph 5 a) of AASB 6 and the definitionon the evaluation and exploration of mineral resources, a distinction between the pre explorationand exploration activities are drawn (Zhang and Andrew 2014). In addition to the disclosure of

3ADVANCED FINANCIAL ACCOUNTINGassets, income and expenses amounts, it is required by AASB 6 to make disclosure of theoperating, liabilities amount and investing cash flow amount. As per the framework of AASB for the presentation and preparation of financialstatements, assets are defined as the entity possession that helps in future economic benefits thatis controlled as the consequence of past events or past transactions. When the assets arecontrolled by entity is indicative of the fact that entity’s capacity for benefitting from assets inpursuit of objective of entity and such benefits would not be accessed by others. As per theaccounting standard AASB 6, evaluation and exploration of assets are done by entities forassessing such assets for impairment and the measurement of impairment of such assets are donein accordance with the ASSB 136 for dealing with impairment of assets. The amount of assetsthat arises from the evaluation and exploration of mineral resources is required to be disclosed asper the standard. This would assist financial statements users in understanding the timing,amount and certainty of future cash flows from such exploration along with recognition ofevaluated assets. The framework of AASB dealing with recognition criteria of assets depict thatthe available incidence forms the basis of assessment of certainty degree that is attached to futureeconomic benefits in any specific situation (Iddon et al. 2015). An organization cannot use this particular standard for treating the expenditures if suchexpenditures are incurred after the commercial viability and technical feasibility for extractingmineral resources. Standard is also not applicable before the mineral resources are evaluated andexplored such as the expenditures that have been incurred before the legal right for exploring anyarea is obtained by reporting entity.

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