Larger resource companies are more likely to use the successful efforts method of capitalizing exploration costs.

Question

Quizplus · Accepted Answer

Larger resource companies generally have more established operations and are able to accurately predict which exploration projects will yield positive results. Therefore, they prefer to expense unsuccessful exploration costs and only capitalize successful ones, which is the basis of the successful efforts method. Smaller companies that have limited resources may not be able to afford such targeted exploration and may choose to use the full cost method, which capitalizes all exploration costs.

Larger Resource Companies Are More Likely to Use the Successful