Possible Future Developments For Accounting For Extractive Activities

There are some possible future developments related to the accounting for extractive activities. For example, in 1998, the International Accounting Standards Committee (IASC), the predecessor organization of the IASB, formed a Steering Committee to deal with financial reporting in the extractive industries. This resulted in the release of an issues paper Extractive Industries Issues Paper in 2000. The project was put on hold as the IASB did not believe it could complete it in time for the 2005 adoption of IFRSs by many parts of the world. IFRS 6 was released by the IASB as an interim measure pending completion of a comprehensive project dealing with the accounting for extractive activities.

In 2004 the IASB set up an international project team comprising staff from the national standard-setters in Australia, Canada, Norway and South Africa to undertake a thorough assessment of accounting for extractive activities. The project team’s findings and recommendations research are presented in the staff Discussion Paper Extractive Activities, which was published in April 2010. Although the Discussion Paper is a lengthy document running to some 180 pages, it is significantly narrower in scope than many commentators had predicted it would be when the project was initiated. The IASB has discussed the project team’s findings at public meetings but has not developed preliminary views on any of the project team’s recommendations or made any related technical decisions.

The objective of the project is to create a single accounting and disclosure model that applies to extractive activities in both the minerals and oil and gas industries. It addresses financial reporting issues associated with exploring for and finding minerals, oil and natural gas deposits; developing those deposits; and extracting the minerals, oil and natural gas. These are referred to as either extractive activities or, alternatively, as upstream activities. The Discussion Paper includes:

•    Definitions of reserves and resources for use in accounting
•    Initial recognition and measurement of extractive assets
•    Subsequent accounting for those assets (including impairment and depreciation)
•    Disclosure of information (including reserves and resources information)

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