455 / 488
Chapter
38 /
Exploration for and Evaluation ofMineral Resources (IFRS 6)
443
• Sub stanti ve expenditure on further exploration and evaluation activities in the specific area is
neither budgeted nor planned.
• Exploration and eva luation activities in the speci fic area have not led to the discovery of
commercially viable quantities of mineral resources, and the entity has decided to discon–
tinue such act ivities in the specific area.
• Although a development in the specific area is likely to proceed , there is sufficie nt data to
indicate that the carrying amount of the exploration and evaluation asse t is unlik ely to be re–
covered in full from successful developm ent or by sale.
6.3 If such facts or circumstances exist, the ent ity is requi red to perform an impairment test in
accordance with lAS
36,
subject to special requ irement s with respect to the level at which impair–
ment is assessed: In assess ing evaluation and exploration asse ts for impairment , an entity alloca tes
the assets either to cas h-ge nerating units or to groups of cas h-generating unit s. Cas h-ge nerating
unit s are the smallest identifiable group of assets that generate cas h inflows that are largely inde–
pend ent of the cash inflows from other asse ts or groups of asse ts (e.g., an oilfield) . IFRS 6 requires
an entit y to determine an acco unting policy for its alloca tions. In no case wou ld an entity assess
impairment at a level larger than a segment.
7. DISCLOSURE
7.1
IFRS
6
requires an entity to disclo se information that identifies and explains the amounts rec–
ogni zed in its financial statemen ts arising from the exploration for and evaluation of mineral re–
sources . Such disclosures includ e
• Accounting policies for exploration and evaluation expenditures, includ ing the recogniti on of
explorat ion and eva luation assets
• The amounts of assets, liabiliti es, income, and expe nse, and opera ting and investing cas h
flows arising from the exploration for and eva luation of mineral resources
7.2 In addition, an entity is required to make the disclosures required by lAS 16 or lAS 38 con –
sistent with an asset's classificat ion as either tangibl e or intangible.
8. EXCERPTS FROM FINANCIAL STATEMENTS
8.1 BP pic,
Annual
Report
2006
1.
Significant accounting policies
Oil and natural gas exploration and development expenditure
Oil and natural gas exploration and deve lopment expenditure is acco unted for using the successful
efforts method of accounting.
Licence and property acquisition costs
Exploration and property leasehold acquisition costs are capitalized within intangible fixed assets
and amortized on a straight-line basis over the estimated period of exploration. Each property is
reviewed on an annual basis to confirm that drilling activity is planned and it is not impaired. If no
future activity is planned, the remaining balance of the licence and property acquisition costs is written
off. Upon determination of economica lly recoverable rese rves ("proved reserves" or "commercial
reserves"), amortization cease s and the remaining costs are aggrega ted with exploration expe nditure and
held on a field-by-field basis as proved properties awaiting approval within other intangible asse ts.
When development is approved internally, the relevant expe nditure is transferred to property, plant and
equipme nt.
Exploration expenditure
Geological and geophysica l exploration cos ts are charged agains t income as incurred. Costs direc tly
assoc iated with an exp loration well are capitalized as an intangible asset until the drilling of the we ll is
complete and the results have been evaluated. These costs include employee remuneration, materials
and fuel used, rig costs, delay rentals and payments made to co ntractors . If hydrocarbons are not found,
the exploration expenditure is written off as a dry hole. If hydrocarbons are found and, subject to furth er
appraisal activity, which may include the drilling of further wells (exploration or exploratory-type
stratigraphic test wells), are likely to be capable of commercial deve lopment, the costs con tinue to be
carr ied as an asset. All such carried costs are subjec t to techni cal, commerc ial and management review
at least once a year to confirm the continued intent to deve lop or otherw ise extract value from the