Technical
Accounting

The discussion paper defines extractive activities as activities undertaken by mining, oil and gas entities when searching for and ultimately extracting minerals, oil and gas. These activities are split into four phases - exploration, evaluation, development and production. The discussion paper seeks to address the following questions:

• How should an entity estimate and classify quantities of minerals, oil and gas discovered?
• How should an entity account for minerals, oil and gas properties?
• How should minerals, oil and gas properties be measured?
• What information about extractive activities should an entity disclose?

How should an entity estimate and classify quantities of minerals and oil and gas discovered?
A common basis for defining ‘reserves' and ‘resources', the terms used to describe the quantities of minerals and oil and gas discovered, would be used. The Committee for Mineral Reserves International Reporting Standards Template for estimating and classifying mineral reserves and resources and the Petroleum Resource Management System, issued by the Society of Petroleum Engineers, for estimating and classifying oil and gas reserves and resources, could be used.

How should an entity account for minerals, oil and gas properties?
The discussion paper proposes that the asset in respect of minerals, oil and gas properties be recognised based on the legal rights to that property. These rights could be exploration or extraction rights. Any information that is obtained during the exploration, evaluation and development phases to access the minerals, oil and gas properties is accounted for as additions to the minerals and oil and gas properties.

How should minerals and oil and gas properties be measured?
The project team proposes that minerals, oil and gas properties should be measured at historical cost, supplemented by detailed disclosures.

What information about extractive activities should an entity disclose?
The Project team proposes that an entity should disclose information that enables users to assess the nature and extent of risks involved in the extractive activities. The disclosures should include information to enable users to evaluate the value of the entity's minerals, oil and gas properties, the contribution that minerals, oil and gas properties make to the entity's performance, and the nature and extent of the risks and uncertainties associated with the entity's minerals, oil and gas properties.

The deadline for comment to the IASB is 30 July 2010.

The IASB press release and snapshot and ED 279 - Discussion Paper on Extractive Activities can be downloaded from the SAICA website.

MARCH 2010 IASB AND IFRIC NEWS

In the March issue of the IASB & IFRIC news, the potential capitalisation and allocation over financial periods of the cost of waste removal for mines is addressed. The IASB has decided to retain tentatively the disclosure principle that an entity should provide information regarding the nature of and changes to the risks associated with the reporting entity's involvement with structured entities. The proposed new standard on presentation will be required to be applied fully retrospectively, but with sufficient lead time to make this requirement practical. IASB & IFRIC News can be downloaded from the SAICA website.

EDITORIAL CORRECTIONS AND CHANGES TO IFRSs

Editorial corrections and changes have been made to IFRIC 19(AC 452) - Extinguishing Financial Liabilities with Equity Instruments and the Bound Volume of IFRS 2010. The editorial corrections and changes can be downloaded from the SAICA website.

REGULATED INDUSTRIES

EXCHANGE CONTROL

The Exchange Control Department of the South African Reserve Bank has issued Exchange Control Circulars No. 12/2010 to 17/2010 advising Authorised Dealers of amendments to Exchange Control Rulings and Regulations.

Replacement pages of the amended Exchange Control Rulings as well as copies of the Exchange Control Circulars can be requested from SAICA through our query system on www.saica.co.za.