Francisco, Rica Mikhaela T. Class no.

18
BSA12KA3

 Activities in relation to evaluating the

PFRS 6: EXPLORATION AND EVALUATION OF
technical feasibility and commercial viability
MINERAL RESOURCES
of extracting a mineral resource
Objective: to specify the financial reporting for  General administration costs directly
the exploration and evaluation of mineral resources. attributable to exploration and evaluation
activities
Mineral resources include mineral oils, natural
gas, and similar nonregenerative resources. The exploration and evaluation expenditures may
qualify as exploration and evaluation asset

Exploration and evaluation of mineral Accordingly, an entity must develop its own
resources is defined as the search for mineral resources accounting policy for the recognition of such asset.
after the entity has obtained legal right to explore in a
As a matter of fact, IFRS 6 permits an entity to
specific area as well as the determination of the technical
continue to apply its previous accounting policy
feasibility and commercial viability of extracting the
provided that the resulting information is relevant and
mineral resources.
reliable.
Exploration and evaluation expenditures are
Measurement and classification
expenditures incurred by an entity in connection with the
exploration and evaluation of mineral resources before Exploration and evaluation asset shall be
the technical feasibility and commercial viability of measured initially at cost.
extracting a mineral resource.
After initial recognition, an entity shall apply
Exploration cost is the cost incurred in an either the cost model or the revaluation model.
attempt to locate the natural resource that can
Exploration and evaluation asset is classified
economically be extracted.
either as tangible asset or an intangible asset.
Exploration and evaluation expenditures do not
include expenditures incurred:

 Before an entity has obtained the legal right to

explore a specific area.
 After the technical feasibility and commercial
viability of extracting a mineral resource are
demonstrable

Development cost is the cost incurred to extract the

natural resource that has been located through successful
exploration.

Examples of Exploration and evaluation

expenditures:

 Acquisition of rights to explore

 Topographical, geological, geochemical and
geophysical studies
 Exploratory drilling
 Trenching
 Sampling
Francisco, Rica Mikhaela T. Class no. 18
BSA12KA3

PFRS 8: OPERATING SEGMENTS The management approach means that the operating
segments are identified on the basis of internal reports
Segment reporting - core principle
about components of an entity that are regularly
An entity shall disclose information to enable reviewed by the chief operating decision maker in order
users of financial statements to evaluate the nature and to allocate resources to the segment and to assess its
financial effects of the business activities in which it performance.
engages and the economic environments in which it
Reportable operating segments
operates.
An entity shall report information about an
The purpose of such disclosure is to enable
operating segment that meets any of the following
investors and users make better assessment of each
quantitative thresholds:
business activity leading to the understanding of the
performance of the entity as a whole. 1. The segment revenue, including both sales to
external customers and intersegment sales or transfers, is
Scope of PFRS 8
10% or more of the combined revenue, internal and
PFRS 8 shall apply to the separate or individual external, of all operating segments.
financial statements of an entity, and to the consolidated
2. The absolute amount of profit or loss of the
financial statements of a group with a parent:
segment is 10% or more of the greater in absolute
 Whose debt or equity instruments are traded in a amount of:
public market.
 Combined profit of all operating segments that
 That files or is in the process of filing the
reported a profit.
consolidated financial statements with a securities
 Combined loss of all operating segments that
commission or other regulatory organization for the
reported a loss
purpose of issuing any class of instruments in a public
market. 3. The assets of the segment are 10% or more of
the combined assets of all operating segments.
Operating segment
Aggregation of segments
An operating segment is a component of an entity
 Nature of product or service
 That engages in business activities from which it
 Nature of production process
may earn revenue and incur expenses, including revenue
 Type or class of customers used to distribute the
and expenses relating to transactions with other
 Marketing method or the method product
components of the same entity
 The nature of the regulatory environment
 Whose operating results are regularly reviewed
by the entity's chief operating decision maker to make
Information to be disclosed for each segment
decisions about resources to be allocated to the segment
and assess its performance.
An entity shall disclose the following for each
 And for which discrete financial information is
reportable operating segment:
available.

Identifying operating segments 1. General information about the operating segment

2. Information about profit or loss, including specific
The "management approach" is used in revenue and expenses included in the measure of profit
identifying operating segments. or loss
3. Information about segment assets and segment
liabilities and the basis of measurement
4. Reconciliations of the totals of segment revenue, The entity is not required to disclose the identity
segment profit or loss, segment assets, segment of the major customer or the amount of revenue that
liabilities and other material segment items to each segment reports from that customer.
corresponding items in the entity's financial statements.

Disclosure about general information

An entity shall disclose the following general
information about an operating segment:
a. Factors used to identify the reportable
segments
b. Type of products and services from which
each
reportable segment derives revenue.

Disclosure of profit or loss, assets and liabilities

An entity shall disclose for each reportable
segment a measure of profit or loss, total assets and total
liabilities. An entity shall disclose a measure of profit or
loss under all circumstances.

Entity-wide disclosures
Entity-wide disclosures are additional
information that is required to be disclosed by all entities
if such information is not provided as part of the
reportable segment information.

a. Information about products and services

b. Information about geographical areas
c. Information about major customers

Revenue from products and services

An entity shall disclose the revenue from
external customers for each product and service.

Revenue and assets from geographical areas

An entity shall disclose the following
geographical information:
a. Revenue from external customers in the
entity's country of domicile, and in all foreign operations
in total.
b. Separate disclosure of material revenue from
external customers in an individual foreign country.

Disclosure about major customer

The entity shall disclose the fact of reliance on
major customers, the total amount of revenue from
major
customers and the identity of the segment or segments
reporting the revenue.
 c. It is a derivative, except for a derivative that is
a financial guarantee contract or a designated and an
Francisco, Rica Mikhaela T.
effective hedging instrument
BSA12KA3
Class no. 18

PFRS 9: FINANCIAL INSTRUMENTS

Trading securities are normally classified as current
Initial measurement of financial asset assets.
An entity shall measure a financial asset at fair
value plus, in the case of financial asset not at fair
Equity security
value through profit or loss, transaction costs that are
It encompasses any instrument representing
directly attributable to acquisition of the financial asset.
ownership shares and right, warrants or options to
Transaction costs that are directly attributable
acquire or dispose of ownership shares at a fixed or
to the acquisition of the financial asset shall be
determinable price.
capitalized as cost of the financial asset.
In simple language, equity securities represent
If the financial asset is held for trading or if the
an ownership interest in an entity.
financial asset is measured at fair value through profit or
loss, transaction costs are expensed outright.
Debt security
Subsequent measurement
is any security that represents a creditor
After initial recognition, an entity shall measure a
relationship with an entity. A debt security has a
financial asset at:
maturity
a. Fair value through profit or loss (FVPL)
date and a maturity value.
b. Fair value through other comprehensive
income (FVOCI)
Financial asset at FVOCI
c. Amortized cost
At initial recognition, an entity may make an
Financial assets at fair value through profit or loss
irrevocable election to present in other comprehensive
The following financial assets shall be measured
income or OCI subsequent changes in fair value of an
at fair value through profit or loss:
investment in equity instrument that is not held for
1. Financial assets held for trading or popularly
trading
known as "trading securities”
2. All other investments in quoted equity
Irrevocable approach is designed to impose
instruments
discipline in accounting for nontrading equity
3. Debt investments that are irrevocably
investment
designated on initial recognition as at fair value through
profit or loss
The amount recognized in other comprehensive
4. All debt investments that do not satisfy the
income is not reclassified to profit or loss under any
requirements for measurement at amortized cost and at
circumstances.
fair value through other comprehensive income

Financial asset held for trading However, on derecognition, the amount may be
A financial asset is held for trading if: transferred to retained earnings.
a. It is acquired principally for the purpose of
selling or repurchasing it in the near term. If the investment in equity instrument is held for
b. On initial recognition, it is part of a portfolio trading, the election to present gain and loss in other
of identified financial assets that are managed together comprehensive income is not allowed.
and for which there is evidence of a recent actual pattern
of short-term profit taking. Debt investment at amortized cost
 a. The business model is to hold the financial asset 4. Held for collection of contractual cash flows and for
in order to collect contractual cash flows on sale of the financial asset - at fair value through other
specified date comprehensive income
b. The contractual cash flows are solely payments of
principal and interest on the principal amount 5. Held for collection of contractual cash flows and for
outstanding sale of the financial asset - at fair value through profit
or
loss by irrevocable designation or fair value option
Debt investment at fair value through OCI
a. The business model is achieved both by
collecting contractual cash flows and by selling the
financial asset.
b. The contractual cash flows are solely
payments of principal and interest on the principal
outstanding

SUMMARY OF MEASUREMENT RULES

Measurement of equity investments

1. Held for trading - at fair value through profit or loss

2. Not held for trading - as a rule, at fair value through

profit or loss

3. Not held for trading - at fair value through other

comprehensive income by irrevocable election

4. All other investments in quoted equity instruments –

at profit or loss

5. Investments in unquoted equity instruments - at cost

6. Investments of 20% to 50%-equity method of

accounting

7. Investments of more than 50%-consolidation method

to be taken up in an advanced accounting course.

Measurement of debt investments

1. Held for trading - at fair value through profit or loss

2. Held for collection of contractual cash flows - at

amortized cost

3. Held for collection of contractual cash flows - at fair

value through profit or loss by irrevocable designation
or fair value option