Natural Resources – a guide to Financial Reporting

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Family office

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Introduction

International Financial Reporting Standards (IFRS) provide the basis for financial reporting for the natural resources sector. One of the key challenges of any reporting framework is how best to implement it in the context of a specific company or industry.

IFRS is a principles based framework, short on industry specific guidance. That and the increasing levels of regulation can make it difficult for management to be clear about what it needs to provide to auditors to support their decision making, and also to provide stakeholders with the clarity they require to make informed decisions.

Our Natural Resources Guide to Financial Reporting aims to simplify the complex and provide you with an understanding of the key sector-related accounting issues we see on a daily basis. We look at how these issues should be addressed, what your auditor will require, and what management will need to consider to ensure an effective audit.

The guide is not meant to be fully comprehensive, but to shed light on areas we, as natural resource  experts, see as the core issues. We would encourage management to conduct additional research where necessary and to contact us for any further guidance they might require.

Shedding light on six key sector related accounting issues

Impairments under IFRS 6

IFRS 6 specifies the financial reporting for the exploration for and evaluation of mineral resources. It applies specifically to the treatment of expenditures incurred by entities in the exploration phase. It details specific examples of impairment indicators that companies must consider on an annual basis for their capitalised project costs.

Impairments under IAS 36

IAS 36 prescribes the procedures that an entity applies to ensure that its assets are carried at no more than their recoverable amount. The Standard provides examples of internal and external impairment indicators, however there are various methods available to assess whether an impairment arises, all of which include significant judgement and estimation uncertainty. 

Depletion under the unit of production method

Depletion refers to the process of amortising assets, such as mining properties or developed oil and gas properties, on the basis of actual extraction volumes during the reporting period. The unit of production method is the widely accepted approach for recording depletion expense.

“The combination of the two existing R&D schemes into a single scheme is as anticipated, however we await the detail following the recent consultation regarding this proposal, which received many responses from across the sector.”

Chris Riley| Head of Tax

“The combination of the two existing R&D schemes into a single scheme is as anticipated, however we await the detail following the recent consultation regarding this proposal, which received many responses from across the sector.”

Chris Riley| Head of Tax

Meet the Team

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