Question 1

Inventories are covered by which of the following standards?
A) AASB 138
B) AASB 6
C) AASB102
D) AASB 116

Accepted Answer

AASB 102 is the standard specifically dedicated to the accounting for inventories. It outlines the accounting treatment for inventories, including the measurement at lower of cost and net realizable value, and the recognition of an expense, typically as the inventory is consumed or sold.

Question 2

Which of the following expenditures is not an example of expenditures that form part of the initial cost of exploration and evaluation assets?
A) acquisition of rights to explore
B) exploratory drilling
C) construction of roads and tunnels to the mine site
D) activities in relation to evaluating the technical feasibility and commercial viability of extracting a mineral resource

Accepted Answer

Construction of roads and tunnels to the mine site is an example of expenditures that form part of the development cost of the mine, not the initial cost of exploration and evaluation assets. The initial cost includes expenses for acquiring rights to explore, exploratory drilling, and evaluation activities.

Question 3

Which of the following costs is not an element of cost of exploration for and evaluation of mineral assets in AASB 6 Exploration for and Evaluation of Mineral Resources?
A) costs of acquiring leases or other rights of tenure in the area of interest that are included in the cost of the exploration and evaluation asset if they are acquired as part of the exploration for and evaluation of mineral resources
B) charges for depreciation of equipment used in exploration and evaluation activities
C) general and administrative costs directly attributed to the operational activities in the area of interest to which the exploration and evaluation asset relates
D) salaries and other expenses of general management allocated by head office to the area of interest

Accepted Answer

Salaries and other expenses of general management allocated by head office to the area of interest are not considered an element of the cost of exploration for and evaluation of mineral assets in AASB 6, as they are not directly attributable to the exploration and evaluation activities.

Question 4

AASB 6 differs from its predecessor (AASB 1022)in that the former restricts its coverage to the first two phases of an extractive operation.Explain the accounting treatment for the other phases of an extractive operation now that these are no longer covered in AASB 6.

Accepted Answer

The answer of AASB 6 differs from its predecessor (AASB...

Question 5

Discuss the disclosure requirements of AASB 6 for entities engaged in exploration for and evaluation of mineral resources.

Accepted Answer

The answer of Discuss the disclosure requirements of AASB 6...

Question 6

While AASB 6 prefers the area-of-interest method among other alternatives to account for pre-production costs,is there scope for managers to manipulate their accounting policy to adopt an alternative method?
 Discuss.

Accepted Answer

The answer of While AASB 6 prefers the area-of-interest method...

Question 7

Which of the following disclosures is not an example that would form part of the sustainability reports issued by Australian mining companies?
A) emission levels
B) environmental audits
C) offshore operating policies
D) external auditor findings

Accepted Answer

External auditor findings typically relate to financial audits and are not specific to sustainability reports, which focus on environmental and social impacts.

Question 8

Discuss the circumstances that indicate the need to test exploration and evaluation assets for impairment.

Accepted Answer

The answer of Discuss the circumstances that indicate the need...

Question 9

Discuss the recognition of revenue for the extractive industries.

Accepted Answer

The answer of Discuss the recognition of revenue for the...

Question 10

Discuss how an entity accounts for restoration costs and the measurement used.

Accepted Answer

The answer of Discuss how an entity accounts for restoration...

Question 11

Recent developments in the industry show a number of entities recognising the need to also be accountable for social and environmental performance in addition to financial performance.What reporting innovations have been observed in the industry to support triple-bottom-line reporting?

Accepted Answer

The answer of Recent developments in the industry show a...

Question 12

Explain why firms do not restate its recoverable reserves to fair value?
 In your response consider the findings of Mirza and Zimmer (1999).

Accepted Answer

The answer of Explain why firms do not restate its...

Question 13

Which of the following measurements is unlikely to form part of any new accounting standard for the extractive industries?
A) historical
B) fair value
C) present value
D) market value

Accepted Answer

Historical cost is less likely to be a focus in new accounting standards for the extractive industries because these standards tend to emphasize current or future values (like fair value, present value, or market value) to better reflect the economic realities of these industries. Historical cost does not provide information on current or future economic benefits or risks.

Question 14

When moving from the exploration and evaluation phase to subsequent phases of operations,the reclassified costs are labelled:
A) mining expenses.
B) assets under construction.
C) costs of goods sold.
D) amortised costs.

Accepted Answer

When moving from the exploration and evaluation phase to subsequent phases, costs incurred during the exploration and evaluation phase are reclassified as assets under construction. These costs will be capitalized and amortized over the life of the mine. Therefore, option B, assets under construction, is the best choice.

Question 15

Discuss the financial reporting issues associated with minerals,oil and gas reserves and resources that have been identified for consideration by the International Accounting Standards Board.

Accepted Answer

The answer of Discuss the financial reporting issues associated with...

Quiz 20: Accounting for the Extractive Industries

Inventories are covered by which of the following standards?

Which of the following expenditures is not an example of expenditures that form part of the initial cost of exploration and evaluation assets?

Which of the following costs is not an element of cost of exploration for and evaluation of mineral assets in AASB 6 Exploration for and Evaluation of Mineral Resources?

AASB 6 differs from its predecessor (AASB 1022)in that the former restricts its coverage to the first two phases of an extractive operation.Explain the accounting treatment for the other phases of an extractive operation now that these are no longer covered in AASB 6.

Discuss the disclosure requirements of AASB 6 for entities engaged in exploration for and evaluation of mineral resources.

While AASB 6 prefers the area-of-interest method among other alternatives to account for pre-production costs,is there scope for managers to manipulate their accounting policy to adopt an alternative method? Discuss.

Which of the following disclosures is not an example that would form part of the sustainability reports issued by Australian mining companies?

Discuss the circumstances that indicate the need to test exploration and evaluation assets for impairment.

Discuss the recognition of revenue for the extractive industries.

Discuss how an entity accounts for restoration costs and the measurement used.

Recent developments in the industry show a number of entities recognising the need to also be accountable for social and environmental performance in addition to financial performance.What reporting innovations have been observed in the industry to support triple-bottom-line reporting?

Explain why firms do not restate its recoverable reserves to fair value? In your response consider the findings of Mirza and Zimmer (1999).

Which of the following measurements is unlikely to form part of any new accounting standard for the extractive industries?

When moving from the exploration and evaluation phase to subsequent phases of operations,the reclassified costs are labelled:

Discuss the financial reporting issues associated with minerals,oil and gas reserves and resources that have been identified for consideration by the International Accounting Standards Board.