INVESTMENT PROPERTY
Investment property is property (land or a building-or part of a building-or both) held (by
the owner or by the lessee under a finance lease) to earn rentals or for capital
appreciation or both, rather than for:
(a) use in the production or supply of goods or services or for administrative purposes; or
(b) sale in the ordinary course of business.
Owner-occupied property is property held (by the owner or by the lessee under a finance
lease) for use in production or supply of goods or services or for administrative purposes.
The production or supply of goods or services generates cash flows that are attributable
not only to property, but also to other assets used in the production or supply process.
Recognition
An owned investment property shall be recognized as an asset when, and only when:
(a) it is probable that the future economic benefits that are associated with the investment
property will flow to the entity; and
(b) the cost of the investment property can be measured reliably.
An entity evaluates under this recognition principle all its investment property costs at the
time they are incurred. These costs include costs incurred initially to acquire an
investment property and costs incurred subsequently to add to, replace part of, or a
service property.
Measurement at Initial Recognition
An investment property shall be measured initially at its cost. Transaction costs shall be
included in the initial measurement. The cost of purchased investment property comprises
its purchase price and any directly attributable expenditure (includes professional fees for
legal services, property transfer taxes and other transaction costs).
Exclusions from Capitalized Cost
The following do not constitute part of capitalized cost if an investment property:
(a) startup costs
(b) operating losses incurred before the investment property achieves the planned level of
occupancy; and
(c) abnormal accounts of wasted material, labor or other resources incurred in the
constructing or developing property.
Measurement Subsequent to Initial Recognition
An entity may:
(a) choose either the fair value model or the cost model for all investment property backing
liabilities that pay a return linked directly to the fair value of, or returns from, specified
assets including that investment property; and
(b) choose either the fair value model or the cost method for all other investment property,
regardless of the choice made in (a).
Disposal Of Investment Property
An investment property shall be derecognized (eliminated from the statement of financial
position) on disposal or when the investment property is permanently withdrawn
from use and no future economic benefits are expected form its disposal.
Gains or losses arising from the retirement or disposal investment property shall be
determined as the difference between the net disposal proceeds and the carrying
amount of the asset and shall be recognized in profit or loss ( unless IFRS 16
requires otherwise on a sale and leaseback ) in the period of the retirement or
disposal.
Compensation from third parties for investment property that was impaired , lost or given
up shall be recognized in profit or loss when the compensation becomes receivable.
EXPLORATION FOR AND EVALUATION OF MINERAL RESOURCES ASSETS
Introduction
PFRS 6 Exploration for and Evaluation of Mineral Resources specifies the financial
reporting for the exploration for and evaluation of mineral resources that an entity
incurs. The standard does not apply to the following expenditures incurred:
(1) before the exploration for and evaluation for mineral resources such as expenditures
incurred before the entity has obtained the legal right to explore the specific area ;
and
(2) after the technical feasibility and commercial viability of extracting a mineral
resources are demonstrable.
Measurement of Exploration and Evaluation Assets
Measurement of Initial Recognition
Exploration and evaluation assets shall be measured at cost. (part 8)
Elements of Cost of Exploration and Evaluation Assets
The entity shall considered the degree to which the expenditures can be associated with
finding specific mineral resources in determining the accounting policy to be
adopted in the recognition of the exploration and evaluation assets.
The following are examples of expenditures that might be included in the initial
measurement of exploration and evaluation assets.
(a) Acquisition of right to explore;
(b) Topographical ,geological ,geochemical, and geophysical studies;
(c) Exploratory drilling;
(d) Trenching;
(e) Sampling; and
(f) Activities in relation to evaluating the technical feasibility and commercial viability of
extracting a mineral resources. ( part 9)
In some cases, general and administrative and overhead costs directly attributable
to exploration and evaluation activities might also qualify for recognition as
exploration and evaluation assets.
Expenditures related to the development of mineral resources shall not be
recognized as exploration and evaluation assets. The Framework and PAS 38
Intangible Assets provide guidance on the recognition of assets arising from
development.
In accordance with PAS 37 Provisions, Contingent Liabilities and Contingent Assets
an entity recognizes any obligation for removal and restoration that are incurred
during a particular period as a consequences of having undertaken the exploration
for and evaluation of mineral resources.
Subsequent Measurement
After recognition, an entity shall apply either the cost model or the revaluation model
to the exploration and evaluation assets. If the revaluation model is applied (either
the model in PAS 16 Property, Plant and Equipment or the model in PAS 38
Intangible Assets ) it shall be consistent with the classification of the assets.
Two common accounting methods in the oil and gas industry are the “full-cost”
method and the “successful efforts” method.
Under the full-cost method, all cost incurred in acquiring, exploring, and developing
within a broadly defined cost center (e.g., a country or group of countries )are
capitalized and amortized. Under this method, cost are capitalized even if a specific
project in the cost center was a failure.
Under the successful efforts method, many cost are capitalized and amortized.
Unlike the full-cost method, however, costs of unsuccessful acquisition and
exploration activities are charged to expense. Costs whose outcome is unknown are
either expensed or capitalized.
Changes in Accounting Policies
An entity may change its accounting policies for exploration and evaluation
expenditures if the change makes the financial statements more relevant to the
economic decision-making needs of users and no less reliable, or more reliable and
no less relevant to those needs.
An entity shall change an accounting policy only if the change:
(a) Is required by a PFRS; or
(b) Result in the financial statement providing reliable and more relevant information
about the effects of transactions, other events or conditions on the entity’s
financial position, financial performances or cash flows.
Financial Statement Presentation
Classification of Exploration and Evaluation Assets
An entity shall classify exploration and evaluation assets tangible or intangible according
to the nature of the assets acquired and apply the classification consistently.
Some exploration and evaluation assets are treated as tangible (e.g., drilling rights),
whereas others are tangible (e.g., vehicles and drilling rigs). To the extent that tangible
asset is consumed in developing an intangible asset, the amount reflecting that
consumption is part of the cost of the intangible asset.
However, using a tangible asset to develop an intangible asset does not change a tangible
asset into a intangible asset.
Reclassification of Exploration and Evaluation Assets
An exploration and evaluation assets shall no longer be classified as such when the
technical feasibility and commercial viability of extracting a mineral resources are
demonstrable. Exploration and evaluation assets shall be assessed for impairment, and
any impairment loss recognized, before reclassification.
Impairment
Exploration and evaluation assets shall be assessed for impairment when facts and
circumstances suggest that the carrying amount of an exploration and evaluation asset
may exceed its recoverable amount. When facts and circumstance suggest that the
carrying amount exceeds the recoverable amount, an entity shall measure, present and
disclose any resulting impairment loss.
