E&E Asset Impairment — Licence Abandonment
Writing off exploration assets when a licence area is abandoned after unsuccessful exploration.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Impairment Loss — E&E Assets | Expense (+) | 4,200,000.00 | - |
| Exploration & Evaluation Assets | Asset (-) | - | 4,200,000.00 |
💡 Accountant's Note
When exploration in a licence area is unsuccessful and the entity decides not to proceed, or when the licence expires without renewal, the accumulated E&E asset is written off in full. This is the 'dry hole' cost recognition — the economic risk of exploration. In mining, most exploration programmes ultimately fail to discover economically viable mineral deposits.
Practitioner & Systems Framework
💻 ERP Architecture
E&E impairment is triggered by a formal abandonment decision — recorded as a project closure in the ERP project management module. The closure triggers the impairment assessment and full write-off of the E&E asset balance for that licence. Exploration licence surrender documentation is filed with the relevant mining regulatory authority. The write-off is presented separately in the income statement as an impairment of E&E assets. Any remaining tangible assets at the exploration site (drilling rigs, camp infrastructure) are separately assessed for impairment or disposal.
⚠️ Audit Flags
Auditors test impairment triggers at each reporting date — licence expiry dates, budget decisions, and management communications about exploration intent. The IFRS 6 impairment indicators must be assessed at every reporting date for all active E&E assets. For areas where exploration has stalled (no recent drilling activity, no budget allocation), an impairment indicator likely exists. Confirm that the abandonment decision is documented by management before the write-off is posted — post-period abandonments may be non-adjusting events requiring disclosure.
📄 Required Documentation
Board or management abandonment decision document, exploration licence surrender letter to the regulatory authority, E&E asset balance at impairment date, IFRS 6 impairment indicator assessment, technical report confirming no viable resource was identified, tangible asset disposal plan for remaining exploration infrastructure, and financial statement disclosure of the write-off.
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