caseforest
ORDER NEW SOLUTIONS
 
     
Exploration & Evaluation
 
Should Exploration and Evaluation be recognised as an asset or expense?

1. define asset

Firstly, in determining whether e&e should be recognised as an asset, we need to look at what is defined as an assets under the AASB framework, that is:

“An asset is a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity” [Paragraph 49 a]

2. list recognition criteria

Additionally, the framework also provides a broad view of the recognition criteria items need to satisfy before they are considered to be assets. The framework states:

   a) it is probable that future economic benefits associated with the time will flow to or from the entity ; and
   b) the item has a cost or value that can be measured with reliability.

3. Mention e&e have low prob so management can use the following methods to capitalise as an asset

The implications involved with exploration and evaluation is that the industry is associated with low probability and any activities do not guarantee any future economic benefits nor can it be measured reliably.

The pre production costs of exploration and evaluation can be categorised as development and construction. Close examination of development costs suggests that they should be considered as assets under the framework. Development costs provide an establishment of access to the deposit and other activities for commercial production thus they provide future economic benefits.

However, it is difficult to determine the costs associated with construction (establishing and commissioning facilities) will lean towards being an asset as it does not have a cost or value that can be measured reliab ...
 
Please login to view the full paper
Word (s) : 813
Pages (s) : 4
View (s) : 357
Rank : 0
   
Report this paper
 
Ease You MBA Workload By
» Becoming Our Member» Ordering a Solution To Case     Study That You Cannot Find     Anywhere
 
 
» Forgot Password?
» Create an account. click here
 
 
Your search for case study solution ends here. If you don’t find the solution here, then probably you will not find it anywhere in the internet.
 
 
Order New Solution

Want a brand new solution for the case study? We have got it all right here.
Recent Topics
New Entries
Most Recent Request
Join Now
Ease your MBA workload and get more time for yourself