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Notes-INTERM 2-Module 4-Depletion of Natural Resources

This document discusses accounting for mineral resources under Philippine Financial Reporting Standards (PFRS) 6. It covers the costs of exploration, evaluation, and development of mineral resources. Depletion of mineral resources is similar to depreciation and is based on the capitalized cost less residual value over the estimated units of production. Estimates of depletion may be changed prospectively. Mining equipment can be depreciated normally if movable, but immovable equipment is depreciated over the shorter of its useful life or the life of the mineral resources using a units of production method.

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Leonoramarie Bernos
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79 views

Notes-INTERM 2-Module 4-Depletion of Natural Resources

This document discusses accounting for mineral resources under Philippine Financial Reporting Standards (PFRS) 6. It covers the costs of exploration, evaluation, and development of mineral resources. Depletion of mineral resources is similar to depreciation and is based on the capitalized cost less residual value over the estimated units of production. Estimates of depletion may be changed prospectively. Mining equipment can be depreciated normally if movable, but immovable equipment is depreciated over the shorter of its useful life or the life of the mineral resources using a units of production method.

Uploaded by

Leonoramarie Bernos
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Module 4: DEPLETION OF MINERAL RESOURCES

Recognition of Income depends on expenses related from it; government grant


Mineral Resources; depletion
Intangible; amortization
PPE; depreciation

Exploration and Evaluation Expenditures


- Cost in exploring and evaluating mineral resources
- Before
- Process; the search for mineral resources
o Its non regenerative
 Earth alone who can produce such resources
PFRS 6
- Probability that there is a mineral resources]
- Applies only after you acquired legal rights
o Approval
- Before
- After legal rights
- Concern only
Development Costs
- After technical feasibility and commercial viability
- Not scope under PFRS 6
- There is a development costs in PFRS 6
- Costs should not be under PFRS 6
- Before legal rights
Initial Measurement; at cost
Subsequent Measurement; cost or revaluation model
- Separate class of assets
o Depends on the nature of asset
- After PFRS 6; it is already another standard
o Use one standard to another standard
o Depends on the function, purpose, use

Natural Mineral Resources


- Wasting assets
- 2 main features;
o Complete removal of asset
o Act of nature
Cost of Natural Resources
- The cost should be after the legal rights have been obtained; exploration costs
- Disbursements for you to prepare for the mining; development costs
Acquisition Costs
- Price paid to acquire the property
- Impairment; unsuccessful
Exploration Costs
- Not always included as the cost of asset
- Not required by the PFRS 6; by the management judgements
Development Costs
- It depends on the nature of the asset
- Not always capitalizable on the cost of the resource
Tangible Equipment Costs
- Delivery trucks
- Equipment; capitalized as
Intangible
- Capitalized as act of natural resources
Depletion
- Same as depreciation; difference is natural resources is depreciated
Depletion Base; capitalized cost less residual value
Useful life; number of production
- Units of production method; computed
o Depleting an asset based on number of production it has

Asset Retirement Obligation; paid at the end of the process; after extracting all the mineral resources
Accumulated Depletion; contra asset account for mineral resources

Change in Estimates
- Account prospectively; present to the future\
- Chance that it is not accurate
- Every time there is a change you have to update the balance first

Depreciation of Mining Equipment


Movable Tangible Equipment
- Alternative use
- Leave is as if it is under PPE
Immovable Tangible Equipment
- No other function; only for a certain site
- Depreciated; whichever is shorter
- Useful life of Equipment less than Useful life of natural resources; any depreciation method
- Useful life of Equipment more than Useful life of natural resources; units of production method;
UL life of Natural resources is used

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