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

In: Australian Accounting Review, 07.08.2021.

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

In: Australian Accounting Review, 07.08.2021.

Research output: Contribution to journalArticlepeer-review

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@article{4d1ea250b88c4fa5a61ff36ef2fc4103,
title = "Towards a solution to the variety in accounting practices of extractive firms under IFRS",
abstract = "Accounting for exploration and evaluation (E&E) costs is one of the last major issues to remain largely unregulated by International Financial Reporting Standards (IFRS), even though extractive firms are an important part of several big stock markets. Under a temporary permissive standard (IFRS 6), which has been 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 distinguishable methods of accounting. Along with this, we discover that disclosures are often 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 then assess the methods in the context of IFRS 6 and other relevant parts of IFRS. We find that nearly all the methods comply with IFRS. This leads us 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.",
keywords = "extractive industry accounting, IFRS 6, oil & gas accounting, mining accounting, international accounting policy choice, intangible assets",
author = "Christopher Nobes and Christian Stadler",
year = "2021",
month = aug,
day = "7",
doi = "10.1111/auar.12348",
language = "English",
journal = "Australian Accounting Review",
issn = "1035-6908",
publisher = "Wiley-Blackwell",

}

RIS

TY - JOUR

T1 - Towards a solution to the variety in accounting practices of extractive firms under IFRS

AU - Nobes, Christopher

AU - Stadler, Christian

PY - 2021/8/7

Y1 - 2021/8/7

N2 - Accounting for exploration and evaluation (E&E) costs is one of the last major issues to remain largely unregulated by International Financial Reporting Standards (IFRS), even though extractive firms are an important part of several big stock markets. Under a temporary permissive standard (IFRS 6), which has been 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 distinguishable methods of accounting. Along with this, we discover that disclosures are often 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 then assess the methods in the context of IFRS 6 and other relevant parts of IFRS. We find that nearly all the methods comply with IFRS. This leads us 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.

AB - Accounting for exploration and evaluation (E&E) costs is one of the last major issues to remain largely unregulated by International Financial Reporting Standards (IFRS), even though extractive firms are an important part of several big stock markets. Under a temporary permissive standard (IFRS 6), which has been 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 distinguishable methods of accounting. Along with this, we discover that disclosures are often 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 then assess the methods in the context of IFRS 6 and other relevant parts of IFRS. We find that nearly all the methods comply with IFRS. This leads us 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.

KW - extractive industry accounting

KW - IFRS 6

KW - oil & gas accounting

KW - mining accounting

KW - international accounting policy choice

KW - intangible assets

U2 - 10.1111/auar.12348

DO - 10.1111/auar.12348

M3 - Article

JO - Australian Accounting Review

JF - Australian Accounting Review

SN - 1035-6908

ER -