The entry to record an obligation for removal and restoration incurred during the exploration and evaluation (E&E) phase of a mining project is:
A) DR E&E asset; CR E&E expense
B) DR Removal and restoration expense; CR E&E asset
C) DR E&E asset; CR Provision for removal and restoration
D) DR E&E expense; CR Provision for removal and restoration

Question

Quizplus · Accepted Answer

During the exploration and evaluation (E&E) phase of a mining project, there might be an obligation for removal and restoration that the company has to incur to comply with environmental regulations. This obligation should be recognized as a provision in the financial statements. The appropriate entry to record the obligation is to debit the E&E asset account (because it is no longer available for use) and credit the provision for removal and restoration account. This is in accordance with IFRS 6, Exploration for and Evaluation of Mineral Resources, which requires companies to recognize provisions for removal and restoration obligations related to E&E activities. Therefore, option C is the correct answer.

The Entry to Record an Obligation for Removal and Restoration