Towards a solution to the variety in accounting practices of extractive firms under IFRS. / Nobes, Christopher; Stadler, Christian.

In: Australian Accounting Review, 06.07.2021.

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Abstract

Accounting for exploration and evaluation (E&E) costs is one of the last major issues that is largely unregulated by IFRS, even though extractive firms are important on several big stock markets. Under a temporary permissive standard (IFRS 6), in place since 2004, firms use a wide range of accounting policies for E&E costs, thus undermining comparability. We review the IFRS annual reports of a large number of firms, looking for different policies. We identify many methods of accounting, and disclosures that are confusing, partly because of the lack of definitions in IFRS 6. To aid insight into this complexity, we prepare a classification of these methods and give real examples of each. We find that nearly all the methods comply with IFRS 6 and other relevant parts of IFRS. This leads to a proposal for narrowing the variety of practice by withdrawing IFRS 6, and putting E&E costs within the scope of IAS 38 (Intangible Assets). As part of this, IAS 38 could be further revised to extend the scope of capitalisation of other development costs, thereby addressing one of the criticisms of current reporting practice and bringing IAS 38 more into line with the latest version of the Conceptual Framework.
Original languageEnglish
JournalAustralian Accounting Review
Publication statusAccepted/In press - 6 Jul 2021

ID: 42618890