Comparing and Contrasting AASB6 and AASB Conceptual Framework

This report provides an in-depth analysis of the differences and similarities between the Australian Accounting Standards Board (AASB) 6, which focuses on the exploration for and evaluation of mineral resources, and the broader AASB conceptual framework. The report highlights how AASB6 aligns with the core principles of the AASB framework while also differentiating itself in terms of applicability, scope, and specific guidance. It examines the 'area of interest' concept, impairment testing, and the treatment of expenses related to mineral resource exploration. The report emphasizes that while the AASB framework offers general guidelines for financial reporting, AASB6 provides detailed instructions for the measurement, recognition, and reporting of activities specific to mineral resource exploration. The conclusion summarizes the key differences, emphasizing that the AASB framework is a broader concept applicable to all Australian companies, whereas AASB6 has a more focused application within the mineral resource sector.

Running head: ADVANCED FINANCIAL ACCOUNTING
Advanced Financial Accounting
Name of the Student:
Name of the University:
Author’s Note:

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Executive Summary:
This report aims at analyzing and understanding the differences between the AASB6 and AASB
framework. AASB6 is an Australian accounting standard, applicable for Exploration for and
Evaluation of Mineral Resources, and the AASB framework is the set of guidelines for financial
accounting and reporting. As AASB6 is an accounting standard governing a particular segment
of accounting and the AASB framework is the overall guiding principle of accounting, there are
certain similarities between these two. In this report, all those similarities and differences have
been outlined briefly.

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Table of Contents
Introduction:....................................................................................................................................3
Similarities between AASB6 and AASB Conceptual Framework:.................................................3
Differences between AASB6 and AASB Conceptual Framework:................................................4
Conclusion:......................................................................................................................................5
References and bibliography:..........................................................................................................6

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Introduction:
The Australian accounting standard board has issued a framework for financial
accounting and reporting, which is known the AASB framework. AASB Framework covers all
the conceptual aspects of financial accounting and reporting. AASB 6 is an accounting standard
issued by the Australian accounting standards board, which is applicable for companies engaged
in extraction, exploration and evolution of mineral resources (Woese 2017). Every accounting
standard has to follow certain common accounting concepts and reporting criteria, various
similarities can be cited between the AASB6 and the AASB Conceptual Framework, in the
following paragraphs those similarities and dissimilarities cane be outlined briefly.
Similarities between AASB6 and AASB Conceptual Framework:
The accounting standard AASB6 and the AASB conceptual framework both are aimed at
making the accounting treatment of business transaction accurate and bring a harmonization in
recording and reporting of business transaction for the Australian companies. The Accounting
standard AASB6 follows basic guidelines and principles of AASB conceptual framework. In
addition, the reporting requirement of AASB6 is in line ad in consistent with the reporting and
disclosure r principles of AASB conceptual framework. Both the accounting standard and
conceptual framework is applicable for Australian companies only. As the conceptual framework
requires, the AASB6 also requires the business organization to apply the ‘area of interest’
concept for the recognition of incomes and expenses. As suggested by the AASB conceptual
framework, the AASB6 also mandates the application of impairment testing for certain class of
assets, when there is inconsistency between the recoverable amount and the carrying value of an
asset (Russell 2017). The mineral resources are the main explore able asset in this type of

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industry, the AASB6 permits the impairment testing of such assets, which is satisfying the
requirement of AASB conceptual framework and the AASB1022.
Differences between AASB6 and AASB Conceptual Framework:
Despite having various similarities between the AASB6 and the AASB conceptual
framework of reporting, there are still some dissimilarities and differences between these two.
First of all, in terms of applicability, the AASB Conceptual framework is applicable for all the
reporting organization in Australia irrespective of their nature of business or business activity.
On the other hand, the AASB6 is mandatorily applicable for those Australian companies or
organizations who are engaged in exploration of mineral resources and evolution of such
resources. Therefore, the AASB conceptual framework is mandatorily applicable for most of the
companies in Australia who are having some public responsibility and interests, but the AASB6
is applicable for only some selected class of business organization. The AASB conceptual
framework is an overall reporting principle and guidelines, which do not differentiate the nature
or activities of business, but the AASB6 is strictly classifying and applicable for those classified
business organization only (Zhou, Birt & Rankin 2015). Its applicability is in the sense of
activity of business organization. The AASB6 requires the expenses incurred to acquire the
extractable or explore able mineral resources as an asset in the books of accounts. It also requires
to apply the impairment testing for such assets periodically and to record any impairment gain or
loss periodically at a specified frequency. The AASB6 specifically addresses all the points and
issues related with the recognition of such assets, assets, incomes and gains in the books of
accounts for an organization having some mineral resources exploration activities. On the other
hand, the AASB conceptual framework, only describes and emphasis on the reporting of such
activities in the financial records and statements of the organization (Macve, 2015).

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The AASB conceptual framework does not addresses the measurement principles and
recognition principles in details for the expenses incurred in relation to the activities of mineral
resources extraction and exploration, while the AASB6 gives a detailed guideline and solution
foe measurement and recognition of such expenses. Lastly, the disclosure requirements though
satisfies the basic requirements of AASB conceptual framework, it still gives greater emphasis
on the reporting of financial transaction, write offs and any other related transaction more clearly
and specifically (Macve 2015).
Conclusion:
From the above discussion, it can be concluded that, the AASB Conceptual framework is
a wider concept and guideline for reporting of financial transaction applicable for Australian
companies irrespective of their nature of activities. The AASB6 addresses the requirements and
issues relating to the measurement, recognition and reporting of mineral resources extraction and
exploration activates in the financial books of accounts and financial statement of an
organization.

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References and bibliography:
Barth, M. E. (2013). Measurement in financial reporting: The need for concepts. Accounting
Horizons, 28(2), 331-352.
Macve, R. (2015). A Conceptual Framework for Financial Accounting and Reporting: Vision,
Tool, Or Threat?. Routledge.
Murphy, T., & O’Connell, V. (2013). Discourses surrounding the evolution of the IASB/FASB
Conceptual Framework: What they reveal about the “living law” of
accounting. Accounting, Organizations and Society, 38(1), 72-91.
Russell, M. (2017). Management incentives to recognise intangible assets. Accounting &
Finance, 57, 211-234.
Woese, C. (2017). Accounting for Extractive Activities(Doctoral dissertation, Universität St.
Gallen).
Zhou, T., Birt, J., & Rankin, M. (2015). The value relevance of exploration and evaluation
expenditures. Accounting Research Journal, 28(3), 228-250.