Describe the activities involved in the pre-production phase in the production of minerals,oil and gas and the accounting treatments that might be allowed for costs arising from this phase.

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The Answer is The pre-production phase encompasses four types of activities.They comprise exploration of areas that are leased for this purpose,the evaluation of exploration results,the development of the deposit for exploitation,and the possible construction of facilities for extraction,treatment and transportation from the deposit or ﬁeld.EXPLORATION This phase of operations includes the topographical,geological,geochemical and geophysical studies that are usually made over a wide area in order to obtain information that will lead to the acquisition of exploration rights in the most promising areas.EVALUATION After the property rights have been acquired,work is undertaken to determine the technical feasibility and commercial viability of the prospect.The aim of this investigation is to ﬁnd a commercial deposit.The costs of this phase include salaries and wages,supplies,transport,depreciation or rental of equipment,and other expenditure.DEVELOPMENT After the commercial viability of a prospect has been established,the development phase commences.'Development' refers to the activities involved in the establishment of access to the deposit or ﬁeld and other preparation for commercial production.These activities include drilling wells for the production of oil or natural gas,sinking shafts,driving tunnels,the removal of overburden,the development of access roads,and the supply of water and power.CONSTRUCTION A separate phase may be identiﬁed for construction,which includes the establishment of the facilities for extraction,treatment and transportation from the deposit or ﬁeld.

Describe the Activities Involved in the Pre-Production Phase in the Production