Exploration & Evaluation Asset — IFRS 6 Capitalisation
Capitalizing exploration and evaluation costs under the company's IFRS 6 accounting policy.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Exploration & Evaluation Assets (E&E) | Asset (+) | 3,500,000.00 | - |
| Cash / Accounts Payable | Asset/Liability (-) | - | 3,500,000.00 |
💡 Accountant's Note
Under IFRS 6, entities with an accounting policy to capitalise exploration and evaluation expenditure record drilling costs, sampling, assaying, technical studies, and directly attributable overhead as E&E assets. E&E assets are held on the balance sheet until a resource is proved (transferred to development assets) or the area is abandoned (impaired and expensed). E&E assets are not amortised — they are tested for impairment when indicators arise.
Practitioner & Systems Framework
💻 ERP Architecture
E&E assets are recorded in the intangible or non-current asset module of the ERP by licence or project area. Each drilling programme, assay campaign, and technical study is captured against the relevant licence code. The ERP maintains the cumulative E&E expenditure per licence — this is the balance subject to impairment testing. The transition from E&E to development assets (when technical and commercial viability is established) is a manual reclassification requiring Board or investment committee approval. Some companies maintain E&E assets as intangibles (pre-development) and PPE (for tangible drilling assets).
⚠️ Audit Flags
Auditors test the capitalisation of E&E costs against the company's stated accounting policy. Confirm that all capitalised costs are directly attributable to exploration activities in the specific licence area (general overhead that cannot be attributed to a specific licence is expensed). Test E&E assets for impairment indicators — the IFRS 6 impairment triggers include: the licence period expiring without renewal, the decision to discontinue exploration in a specific area, or the absence of budgeted expenditure for the area in future periods. Confirm the reclassification from E&E to development assets is properly documented and authorised.
📄 Required Documentation
IFRS 6 accounting policy, exploration licence register (area, term, renewal status), E&E asset roll-forward by licence (additions, reclassifications, impairments), drilling programme invoices and completion reports, resource estimate (JORC/NI 43-101) supporting the technical viability assessment, Board approval for reclassification to development, and impairment indicator assessment.
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