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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–
cial statements more relevant to the eco–
nomic decision-making needs of users and
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.
An swer: (e)
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
eva luating the technical feasi bility and
commercial viabilit y of extracting a mineral
resource.
Answe r: (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
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