IFRS PRACTICAL IMPLEMENTATION GUIDE AND WORKBOOK

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Wiley l FRS: Practicallmplementation Guide and Workbook

MULTIPLE·CHOI CE QUESTIONS I. IFRS 6 applies to expe nditures incurred (a) When searching for an area that may war– rant detailed exploration . even though the entity has not yet obtained the legal rights to explore a specific area. (b) When the legal rights to explore a specific area have been obtained. but the technical feasibility and commercial viability of ex– tracting a mineral resource are not yet de– monstrable. (c) When a specific area is being developed and preparations for commercial extraction are being made. (d) In extracting mineral resources and process– ing the resource to make it marke table or transportable. Answer: (b) 2. Does IFRS 6 require an entity to recognize ex– ploration and eva luation expenditure as assets? (a) Yes. but only to the extent such expenditure is recoverable in future periods. (b) Yes. but only to the extent the technical fea– sibility and commercial viability of extract– ing the associated mineral resource have been demonstrated. (c) Yes. but only to the extent required by the entity's acco unting policy for recognizing exploration and eva luation assets. (d) No. such expenditure is always expensed in profit or loss as incurred. Answer: (c) 3. What is an entity required to consider in develop– mg accounting policies for exp loration and evaluation activities? (a) The requirement s and guidance in Standards and Interpretations dealing with similar and related issues. (b) The definiti ons. recogniti on criteria. and measure ment concepts for assets. liabilities. income. and expenses in the Framework. (c) Recent pronouncements of standard-setting bodies. acco unting literature. and accepted industry practices. (d) Whether the accounting policy results in in- formation that is relevant and reliable. Answer: (d) 4. Is an ~nti ty eve r required or permitted to change Its accounnng policy for exploration and evaluation expenditures? (a) Yes. entit ies are required to change their ac– counting policy for these expenditures if the change wou ld result in more useful infor– mation for users of financial statements. (b) Ye~. entiti es are free to change accounting policy for these expe nditures as long as the selected policy results in information that is relevant and reliable. (c) Yes. but only if the change makes the finan–

no less reliable. or more reliable and no less relevant to those needs. (d) No. entities would be permitt ed to change accounting policy only on adoption of a new or revised Standard that replaces the existing requi rements in IFRS 6. 5. Which of the following expenditures would never qualify as an exploration and evaluation asset? (a) Expenditure for acquisition of rights to ex– plore. (b) Expenditure for exploratory drilling. (c) Expenditures related to the de velopment of mineral resources. (d) Expenditure for activities in relation to An swer: (e) ~. Which measurement model applies to explora– non and evaluation asse ts subsequent to initial recognition? (a) The cost model. (b) The revaluation model. (c) Either the cost model or the revaluation model. (d) The recoverable amount model. Answer: (e) 7. Which of the following facts or circumstances wou ld not trigger a need to test an evaluation and explorat ion asset for impairment? (a) The expiration-s-or expected expiration in the near future---{)f the period for which the entity has the right to explore in the specific area. unless the right is expected to be re– newed. (b) The absence of budgeted or planned sub– stantive expenditure on further exploration and evaluation activities in the specific area. (c) A decis ion to discontinue exploration and evaluation activities in the specific area when those activities have not led to the dis– covery of commercially viable quantities of mineral resources. (d) Lack of sufficient data to determine whether eva luating the technical feasi bility and commercial viabilit y of extracting a mineral resource. Answe r: (e)

the carrying amount of the exploration and evaluation asset is likely to be recovered in full from successful development or by sale.

Answer: (d)

8. Which of the following is not a disclosure re– quired by IFRS 6? (a) Information about commercial reserve quan– tities. (b) Accounting policies for exploration and evaluation expe nditures. including the rec– ognition of exploration and eva luation as– sets. (c) The amou nts of asse ts. liabilities. income and expense. and operating and investing

cial statements more relevant to the eco– nomic decision-making needs of users and