This free, guided checker walks your finance team through the key decision points for IFRS 6 Exploration and Evaluation Assets. Answer a few questions to see the likely treatment and the evidence to document.
Answer a few quick questions below. It is private - nothing is submitted or stored - and takes about a minute.
This tool is a high-level IFRS screening aid for general information only and is not accounting, audit or legal advice. Conclusions require entity-specific evidence and judgement - confirm the treatment with your advisor.
Here is what the checker asks and why each step matters. Prefer to talk it through? Contact us and we will help directly.
IFRS 6 applies only between two boundaries: after the entity obtains the legal rights to explore a specific area and before the technical feasibility and commercial viability of extraction are demonstrable (IFRS 6.5; IFRS 6 Appendix A). Typical exploration and evaluation activities include acquiring exploration rights, topographical and geological studies, exploratory drilling, trenching, and sampling. The common trap is capitalising costs incurred before the legal rights are held, or continuing to apply IFRS 6 after a development decision, both of which fall outside the standard.
Apply IAS 16, IAS 38, or expense treatment; IFRS 6 does not cover spend before legal rights are obtained or after technical feasibility and commercial viability are demonstrable (IFRS 6.5).
Official guidance: IFRS issued standards
IFRS 6 permits capitalization or immediate expense as a policy choice; the policy must be applied consistently to each class of exploration and evaluation asset.
Document and approve an IFRS 6 capitalisation or expense policy before period-end close (IFRS 6.6-6.7).
Official guidance: IFRS issued standards
Capitalized amounts typically include licence fees, drilling, sampling, and directly attributable overhead while activities remain in the exploration and evaluation phase.
Charge exploration and evaluation expenditure to profit or loss as incurred under the entity's IFRS 6 policy (IFRS 6.9).
Official guidance: IFRS issued standards
Exclude general and administrative costs, costs incurred before obtaining legal rights to explore, and expenditure on areas where rights have expired unless renewal is virtually certain.
Remove non-qualifying costs and reclassify or expense amounts that do not meet the IFRS 6.9 definition of an exploration and evaluation asset.
Official guidance: IFRS issued standards
Drilling and site preparation are typically tangible; licence and concession rights may be intangible; classification drives subsequent measurement and disclosure presentation.
Classify each exploration and evaluation asset as tangible or intangible before balance sheet presentation (IFRS 6.15).
Official guidance: IFRS issued standards
After recognition, elect either the cost model or the revaluation model from IAS 16 (for tangible exploration and evaluation assets) or IAS 38 (for intangible ones) and apply it consistently to each class (IFRS 6.12). Confirm the model chosen matches the tangible or intangible classification made in the previous step, because the two decisions are linked. The revaluation model is rarely used for these assets and, where elected, requires reliable fair value measurement and the full IAS 16 or IAS 38 revaluation disclosures, so most entities default to cost.
Select and apply the cost or revaluation model consistently to each class of exploration and evaluation asset (IFRS 6.12).
Official guidance: IFRS issued standards
IFRS 6.18 requires impairment testing when indicators exist; this is a trigger-based test rather than annual amortization because assets are not yet in production.
Perform the IFRS 6.18 indicator assessment before recognising capitalised exploration assets at period-end.
Official guidance: IFRS issued standards
Common indicators include expiry of exploration rights without renewal, substantive expenditure not budgeted, disappointing drilling results, and development not being commercially viable.
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Official guidance: IFRS issued standards
Measure recoverable amount as the higher of fair value less costs of disposal and value in use; allocate impairment to the relevant exploration and evaluation asset or cash-generating unit.
Measure recoverable amount and recognise any impairment loss before period-end sign-off (IFRS 6.18; IAS 36.59).
Official guidance: IFRS issued standards
Upon demonstrating technical feasibility and commercial viability, reclassify exploration assets to development or mine properties and apply depreciation or amortization prospectively.
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Official guidance: IFRS issued standards
Disclose the capitalization policy, amounts capitalized and expensed, impairment losses, and the accounting judgements applied to exploration and evaluation assets.
IFRS 6 exploration and evaluation accounting appears complete, with policy, impairment assessment, and disclosures in place (IFRS 6.24). Complete the IFRS 6.24 note disclosures before financial statement authorisation.
Official guidance: IFRS issued standards
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