Key issues in accounting for entities in the extractive industries include:
A) determining the size of the deposits of natural substances in the area of interest.
B) determining whether an asset has been acquired through the expenditures associated with exploration, evaluation and development.
C) allocating revenues to the periods in which they are earned.
D) determining the cost of capital in such a high-risk industry.

Question

Quizplus · Accepted Answer

One of the key issues in accounting for entities in the extractive industries is determining whether an asset has been acquired through the expenditures associated with exploration, evaluation, and development. This is because the cost of acquiring and developing the asset is a significant portion of the total value of the asset, and it is important to accurately account for these costs in financial statements.

Options A, C, and D are also relevant to accounting for extractive industries, but they are not as critical as determining the acquisition cost of the asset. A is important for estimating the value of the asset, C for recognizing revenue, and D for calculating the return on investment, but they are not the primary considerations in the accounting process.

Key Issues in Accounting for Entities in the Extractive Industries