The need for an accounting standard

Notes

The need for an accounting standard

Expenditure on the exploration for, and evaluation of, mineral resources is not covered by:

  • IAS 16 – Property, Plant and Equipment

  • IAS 38 – Intangible Assets.

This has meant that, entities should determine their accounting policies for exploration and evaluation expenditures in accordance with the general requirements of IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors.

The Drawbacks:

  1. Diversity of the acc. policies
    This could lead to divergence of practice.

  2. Comparison
    It is difficult to compare the financial statements with the competitors since they use different accounting policies.

The IASB issued IFRS 6 – Exploration for and Evaluation of Mineral Resources – to achieve some level of standardisation of practice in this area.

Notes