The International Accounting Standards Board has published the results of an international research project on how to account for extractive activities in the oil, gas, and mineral industries.
The discussion paper could lead to a possible future International Financial Reporting Standard on the subject. A research team comprising members of the Australian, Canadian, Norwegian and South African accounting standard-setters analyzed and discussed accounting for extractive activities with a wide range of people to identify a possible approach to a standard.
The discussion paper only contains the views of the project team, but does not represent the views of the IASB. However, the IASB is soliciting feedback, and after considering the responses received, the board will decide whether to add the project to its active agenda.
Extractive activities are the activities undertaken by entities when searching for, and ultimately extracting, minerals, oil or natural gas. The area of extractive industries poses specific challenges resulting from the uncertainties faced by entities pursuing extractive activities, including assessing the quantities that may be found and the costs involved in accessing and extracting the resources.
The current standard, IFRS 6, Exploration for and Evaluation of Mineral Resources, was issued in 2004 as an interim standard pending completion of this research project. Existing standards do not specifically address the accounting for the development and production of minerals or oil and gas properties, and do not include specific disclosure requirements that would help users to assess the nature and extent of the risks involved in the extractive activities. Because of the lack of guidance on these issues, the accounting and disclosure practices of entities engaged in extractive activities often vary by industry, by jurisdiction, and by the size of the company.
Mining and oil and gas companies are among the largest public companies in the world, and it is important for users and preparers alike that the accounting in this area is transparent and comparable, said IASB member Robert Garnett in a statement.
The discussion paper is open for comment until July 30, 2010. It can be accessed via the Comment on a proposal section on www.iasb.org.
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