IFRS 6

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AII
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Joined: 30 Jan 2021, 05:25

IFRS 6

Post by AII »

Good morning/Good after noon/Good evening where ever you are

Our company has land to extract minerals like pumice, lime stone, sand stone. My question is how to recognize these land. is this right use of land (IFRS 16) or Exploration for and Evaluation of Mineral Resource (IFRS 6). When and at which point can I apply IFRS 6. If possible with any supporting paragraph stating this matter.


Appreciate your prompt response with this regard
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exIFRS
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Re: IFRS 6

Post by exIFRS »

What is the nature of your right? Did you lease the land then have to get regulatory approval to extract the minerals or did you lease the rights to extract the minerals?
AII
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Joined: 30 Jan 2021, 05:25

Re: IFRS 6

Post by AII »

First of all thank u.

We have obtained the land from the government just for the sake of extracting minerals . that means both (the land and the right to extract the minerals).
JRSB
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Re: IFRS 6

Post by JRSB »

Presumably it's for a fixed period of time? Did you pay cash up front, or 'free' plus a royalty from extraction?
AII
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Re: IFRS 6

Post by AII »

The company obtained the land some fifteen years ago and is paying annual rent (operating lease) and royalty for extraction.

Thank you
JRSB
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Re: IFRS 6

Post by JRSB »

So you obtained it 15 years ago, is there a fixed period that the agreement runs for, eg 5 more years? Or is it own permanently? I would guess it's for a fixed period of time?
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exIFRS
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Re: IFRS 6

Post by exIFRS »

It doesn't sound like IFRS 6 really applies? You seem to be beyond the E&E phase?
IFRS 6 Para 5: An entity shall not apply the IFRS to expenditures incurred... after the technical feasibility and commercial viability of extracting a mineral resource are demonstrable.
and before we say, ahh at the time we were doing E&E:
IFRS 6 para 17: An exploration and evaluation asset shall no longer be classified as such when the technical feasibility and commercial viability of extracting a mineral resource are demonstrable. Exploration and evaluation assets shall be assessed for impairment, and any impairment loss recognised, before reclassification.
Reclassification to what you might say. Well the standard is a bit light on detail, but reclassification under the most appropriate other standard.
AII
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Joined: 30 Jan 2021, 05:25

Re: IFRS 6

Post by AII »

Due to frequent electrical interruption in my area I could not be on line and sorry for that

It is not fixed. Unless the government take back the land, it is permanent.
JRSB
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Re: IFRS 6

Post by JRSB »

Wondering if it approaches a government grant ... is it 'market rent' and 'market royalty'...?
AII
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Joined: 30 Jan 2021, 05:25

Re: IFRS 6

Post by AII »

The government gave the land to the company and the company is paying annual rent as operating lease.
JRSB
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Re: IFRS 6

Post by JRSB »

If the government 'gave' the land, there wouldn't be any rent....
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