Extractive Activities

The extractive activities project is a comprehensive research project that forms the first step towards the development of an acceptable approach to resolving accounting issues that are unique to upstream extractive activities. The ultimate objective of this project is to develop an International Financial Reporting Standard (IFRS) on accounting for extractive activities. This IFRS will supersede IFRS 6 Exploration for and Evaluation of Mineral Resources, which the Board released in December 2004 as an interim measure pending completion of the comprehensive project.

Project scope

Upstream extractive activities cover all aspects of the search for, finding, and extraction of minerals, oil and gas. The primary focus of the research project is to consider financial reporting issues associated with reserves and resources (including the exploration for reserves and resources) – in particular whether and how to define, recognise, measure and disclose reserves and resources.

Is this project part of the Memorandum of Understanding?

No. The MoU sets out a Roadmap for Convergence between IFRSs and US GAAP 2006-2008.

Click here for more information on the MoU.

Next due process step

The next due process step is the release of a Discussion Paper. Based on current planning, the discussion paper will be published by the end of 2008.

Due process steps completed

Stage 1: Setting the agenda

The IASB’s predecessor organisation, the International Accounting Standards Committee (IASC), established a Steering Committee in 1998 to carry out work on accounting and financial reporting by entities engaged in extractive activities. The Steering Committee published an Issues Paper Extractive Industries in November 2000.

In July 2001, the Board announced that it would restart the project when agenda time permitted. In September 2002, the Board decided it was not feasible to complete a comprehensive project addressing accounting for extractive activities generally in time for the many entities that will adopt IFRSs in 2005. However, the Board decided it was necessary to provide guidance on the treatment of exploration and evaluation costs for entities applying IFRSs in 2005 and, consequently in December 2004, it released IFRS 6 Exploration for and Evaluation of Mineral Resources as an interim measure pending completion of the comprehensive project.

The research stage of the comprehensive project commenced in April 2004, after the Board and liaison national standard setters agreed on the research project plan.

Stage 2: Project planning

At the Board’s request, a project team comprising representatives from the national standard setters of Australia, Canada, Norway and South Africa are undertaking the research project. An advisory panel has also been established to provide advice to the project team and the Board throughout the research project. The advisory panel consists of analysts and other users of financial reports, individuals from entities engaged in extractive activities (both mining and oil & gas), auditors, and securities regulators. The advisory panel is also geographically diverse with members drawn from Africa, Asia-Pacific, Europe and North America.

Click here for a list of advisory panel members..

It is expected that the extractive activities project will be a ‘modified joint’ project. Under this approach, the Board, via the project team, will initially develop and publish a discussion paper. The US Financial Accounting Standard Board (FASB) will then issue an Invitation to Comment containing the discussion paper. The FASB will consider the responses in deciding whether to add to its agenda a joint project with the IASB to develop a comprehensive standard on accounting for extractive activities.

Estimated project completion

After publication of the discussion paper, the Board must make a decision about adding the project to its active agenda. Once that decision has been made, the project team estimates that an exposure draft would take at least 18 months to develop and that a final IFRS would take at least another 12 months to develop.

Further information:

• Click here for the full project summary.
• Click here for a list of participants in the research project’s Advisory Panel
• Click here to access the observer notes from the Board’s education sessions