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IFRS 6

Exploration for and Evaluation of Mineral Resources

IFRS 6 makes limited, interim improvements to the accounting for exploration and evaluation expenditure, permitting an entity to continue applying whatever accounting policy it used immediately before adopting IFRS 6 (including expensing, or capitalising in whole or part), subject to a specific impairment test and disclosure regime, pending a more comprehensive future review of extractive activities accounting. [S1]

Effective 2006-01-01Related: IAS 16 · IAS 38 · IAS 36 · IAS 8

Overview

IFRS 6 was deliberately designed as a narrow, interim standard: because exploration for minerals, oil, natural gas and similar non-regenerative resources was excluded from IAS 16 and IAS 38's general scope, and no other IFRS addressed it directly, entities faced genuine diversity in practice. [S1] Rather than mandate a single approach immediately, IFRS 6 exempts an entity's accounting policy for exploration and evaluation assets from the general requirement (in IAS 8) to consider the hierarchy of other IFRS requirements and the Conceptual Framework when no Standard specifically applies, allowing entities to retain their existing policy (whether full capitalisation, successful efforts, or full cost expensing) applied consistently, while introducing specific impairment indicators and disclosure requirements tailored to this activity. [S2]

Why it matters

For Nigeria's substantial oil, gas and solid minerals sectors, exploration expenditure is often incurred years before any commercially viable discovery is confirmed, and how that spend is accounted for (expensed as incurred, or capitalised as an exploration and evaluation asset pending a future viability decision) can materially affect reported results and asset values during a company's exploration phase, when it typically has no production revenue at all. IFRS 6's flexibility (continuing a pre-existing policy) is unusual within IFRS and means extractive companies operating in Nigeria may legitimately apply quite different approaches to similar exploration spend, making the specific accounting policy disclosure especially important for comparability.

Scope

Applies to exploration and evaluation expenditures an entity incurs, defined as expenditures incurred in connection with the exploration for, and evaluation of, mineral resources before the technical feasibility and commercial viability of extracting a mineral resource are demonstrable. It does not apply to expenditures incurred before the entity has obtained the legal right to explore a specific area (which are not exploration and evaluation expenditure under IFRS 6 at all), nor to expenditures incurred after technical feasibility and commercial viability have been demonstrated, at which point development-phase accounting under other Standards (typically IAS 16 or IAS 38) applies instead.

Key definitions

term: Exploration for and evaluation of mineral resources
definition: The search for mineral resources, including minerals, oil, natural gas and similar non-regenerative resources, after the entity has obtained legal rights to explore a specific area, and the determination of the technical feasibility and commercial viability of extracting the mineral resource.
term: Exploration and evaluation assets
definition: Exploration and evaluation expenditures recognised as assets in accordance with an entity's accounting policy.
term: Exploration and evaluation expenditures
definition: Expenditures incurred in connection with the exploration for and evaluation of mineral resources before the technical feasibility and commercial viability of extracting a mineral resource are demonstrable.

Recognition

An entity determines its own accounting policy specifying which expenditures are recognised as exploration and evaluation assets, and applies that policy consistently; IFRS 6 exempts the entity, for this specific policy, from the general IAS 8 requirement to consider the hierarchy of other Standards and the Conceptual Framework, recognising the genuine diversity of established practice in the extractive sector. Examples of expenditures that might be included (the list is not exhaustive) are: acquisition of rights to explore; topographical, geological, geochemical and geophysical studies; exploratory drilling; trenching; sampling; and activities related to evaluating the technical feasibility and commercial viability of extraction. Expenditure related to the development of mineral resources (once technical feasibility and commercial viability are demonstrated) is not recognised as an exploration and evaluation asset.

Initial measurement

Exploration and evaluation assets are measured at cost, comprising whatever elements the entity's own accounting policy specifies as included, applied consistently. IFRS 6 does not prescribe a single required composition of cost, reflecting its interim, policy-choice-driven approach.

Subsequent measurement

After recognition, an entity applies either the cost model or the revaluation model to exploration and evaluation assets, in accordance with IAS 16 or IAS 38 respectively, depending on the nature of the assets acquired (tangible or intangible) and consistent with the entity's own classification policy. Exploration and evaluation assets are classified as tangible or intangible according to the nature of the assets acquired, and that classification is applied consistently. Exploration and evaluation assets are no longer classified as such once the technical feasibility and commercial viability of extracting a mineral resource are demonstrable, at which point they are reclassified and assessed for impairment before reclassification.

Presentation

Exploration and evaluation assets are presented as their own separate class of asset, distinguished from other assets, with the relevant disclosures required under IAS 16 or IAS 38 provided for whichever classification (tangible or intangible) applies. This separate presentation reflects the unusual, judgement-driven nature of these assets and the fact that their value depends heavily on future exploration success rather than established productive use.

Disclosure checklist

The accounting policies for exploration and evaluation expenditures, including the recognition of exploration and evaluation assets.
The amounts of assets, liabilities, income and expense, and operating and investing cash flows, arising from the exploration for and evaluation of mineral resources.
Information that identifies and explains the amounts recognised in the financial statements arising from the exploration for and evaluation of mineral resources.
For exploration and evaluation assets tested for impairment, an assessment against the specific IFRS 6 impairment indicators (rather than the general IAS 36 indicators), and the resulting impairment loss (if any).

Practical treatment

The practical discipline is documenting a clear, consistently applied accounting policy for exploration and evaluation expenditure at the outset, since IFRS 6's flexibility is a policy choice, not a case-by-case judgement to be revisited project by project. Entities should also apply IFRS 6's specific impairment indicators (rather than IAS 36's general indicators) when assessing exploration and evaluation assets for impairment, and should reassess the level (cash-generating unit or group of units) at which impairment is tested, since this can be no larger than an operating segment determined under IFRS 8. The transition point — when technical feasibility and commercial viability become demonstrable — is itself a judgement that should be documented, since it determines when IFRS 6's specific regime stops applying and development-phase accounting under IAS 16 or IAS 38 begins.

Common mistakes

Applying inconsistent capitalisation policies to similar exploration expenditure across different projects, rather than a single, documented, consistently applied policy.
Applying the general IAS 36 impairment indicators to exploration and evaluation assets instead of IFRS 6's specific indicators (expiring exploration rights, no further exploration planned, no commercially viable resources found, or the carrying amount unlikely to be recovered even if development proceeds).
Continuing to classify expenditure as exploration and evaluation once technical feasibility and commercial viability have been demonstrated, rather than transitioning to development-phase accounting under IAS 16 or IAS 38.
Failing to test exploration and evaluation assets for impairment immediately before reclassification out of the IFRS 6 category.
Assessing exploration and evaluation asset impairment at a cash-generating unit level larger than an operating segment, which IFRS 6 does not permit.

Links with other standards

code: IAS 16
relationship: Exploration and evaluation assets classified as tangible are subsequently accounted for under IAS 16's cost or revaluation model, and, once reclassified out of IFRS 6 at the point of demonstrated technical feasibility and commercial viability, continue under IAS 16 for development and production-phase assets.
code: IAS 38
relationship: Exploration and evaluation assets classified as intangible are subsequently accounted for under IAS 38's cost or revaluation model, subject to IAS 38's own restriction that the revaluation model can only be used where an active market exists.
code: IAS 36
relationship: IFRS 6 substitutes its own specific impairment indicators for the general IAS 36 indicators when assessing exploration and evaluation assets, though IAS 36's measurement approach for recoverable amount and impairment loss recognition still applies once an indicator is identified.
code: IAS 8
relationship: IFRS 6 provides a specific, temporary exemption from IAS 8's general hierarchy for developing an accounting policy in the absence of a directly applicable Standard, permitting continuation of an entity's pre-existing exploration and evaluation accounting policy.

CFO checklist

Document a clear, single accounting policy for exploration and evaluation expenditure recognition, and apply it consistently across all projects and periods.
Classify exploration and evaluation assets consistently as tangible or intangible based on the nature of the underlying expenditure.
Apply IFRS 6's specific impairment indicators (not IAS 36's general indicators) when assessing exploration and evaluation assets for impairment.
Test for impairment immediately before reclassifying an asset out of the exploration and evaluation category once technical feasibility and commercial viability are demonstrated.
Confirm the cash-generating unit level used for impairment testing does not exceed an operating segment determined under IFRS 8.
Coordinate exploration and evaluation asset accounting with the specific licensing and regulatory framework (NUPRC for petroleum, the Mining Cadastre Office for solid minerals) governing the underlying exploration rights.

FAQs

q: Can we choose to expense all our exploration costs rather than capitalise any of them?
a: Yes. IFRS 6 permits an entity to continue whatever policy it used before adopting the Standard, including full expensing of exploration and evaluation costs as incurred, provided the chosen policy is applied consistently and disclosed.
q: When do we stop applying IFRS 6 to our exploration and evaluation assets?
a: Once the technical feasibility and commercial viability of extracting the mineral resource are demonstrable, at which point the assets are reclassified out of the exploration and evaluation category (after being tested for impairment immediately before reclassification) and accounted for under the development-phase requirements of IAS 16 or IAS 38, as applicable.
q: Do we use the same impairment indicators as for our other property, plant and equipment?
a: No. IFRS 6 provides specific indicators tailored to exploration and evaluation assets (such as an expiring exploration right with no expectation of renewal, no further exploration expenditure planned, no commercially viable resources found and a decision to discontinue exploration, or evidence that the carrying amount is unlikely to be fully recovered even if development proceeds), which should be applied instead of IAS 36's general indicators for these specific assets.

Nigeria application notes

Regulatory overlay

IFRS 6 applies in full to Nigerian public interest entities engaged in mineral exploration under the FRCN Act 2011 mandate. [S3] Nigeria has two parallel regulatory frameworks governing exploration rights depending on the resource: solid minerals exploration and mining is governed by the Nigerian Minerals and Mining Act 2007, administered through the Mining Cadastre Office, which grants reconnaissance permits, exploration licences and mining leases; petroleum exploration (oil, gas and related hydrocarbons) is governed by the Petroleum Industry Act 2021, with upstream licences and leases administered by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC). [S4][S5] In both cases, the IFRS 6 exploration and evaluation expenditure period begins only once the entity has obtained the relevant legal exploration right, not before.

Tax interaction (Nigeria)

Nigerian tax treatment of exploration and evaluation expenditure follows sector-specific statutory rules (for petroleum, historically linked to petroleum profits tax and now the hydrocarbon tax framework under recent reforms; for solid minerals, the general companies income tax and capital allowance rules under the Nigeria Tax Act 2025), which do not automatically mirror the entity's own elected IFRS 6 accounting policy for capitalising or expensing exploration costs; the tax-deductible timing of exploration expenditure should be confirmed separately against current NRS and sector-specific guidance. [S6][S_TAX1][S_TAX2] Nigerian rates, thresholds, exemptions, incentives and filing rules referenced in this file (including CIT, VAT, withholding tax categories, sector-specific regulatory capital and licensing requirements, and the small-company threshold) should be independently verified against the Nigeria Tax Act 2025, the Nigeria Tax Administration Act 2025, NAICOM/NUPRC/Mining Cadastre guidance, and current NRS practice at the reporting or filing date, since thresholds, rates and reliefs are subject to periodic revision and to sector- or entity-specific qualifying conditions. This file does not constitute legal or tax advice. [S_TAX1][S_TAX2]

FX considerations

Nigerian and international companies exploring for oil, gas and solid minerals in Nigeria frequently incur exploration costs (rig hire, specialist geological and geophysical services, imported equipment) in foreign currency; where exploration and evaluation assets are recognised and measured at cost in the entity's functional currency, foreign-currency-denominated exploration costs are translated at the spot rate at the transaction date under IAS 21, and, once recognised, remain non-monetary items not subsequently retranslated for exchange rate movements, though naira volatility directly affects the cash cost of ongoing exploration programmes funded or partly funded in naira.

SME practical note

IFRS 6 is most relevant to Outliers' clients in the junior mining, indigenous oil and gas, and solid minerals exploration space, many of which are smaller, exploration-stage entities with no production revenue; Outliers recommends establishing a clear, documented exploration and evaluation accounting policy (and confirming the entity actually holds the relevant Mining Cadastre or NUPRC exploration right before treating any expenditure as falling within IFRS 6 at all) as an early deliverable for any client in this sector.

Common Nigerian pitfalls

Capitalising exploration expenditure incurred before the entity actually holds a valid Mining Cadastre exploration licence or NUPRC exploration right, when such pre-right expenditure falls outside IFRS 6 entirely.
Applying inconsistent capitalisation policies across different licence areas or projects within the same entity.
Assuming petroleum profits tax, hydrocarbon tax, or companies income tax treatment of exploration costs automatically mirrors the entity's chosen IFRS 6 accounting policy.
Failing to reassess whether technical feasibility and commercial viability have become demonstrable for a specific licence area, leaving assets misclassified as exploration and evaluation long after they should have transitioned to development-phase accounting.

FRC pronouncements

No FRCN pronouncement specific to IFRS 6 accounting has been identified; the relevant Nigerian regulatory context is the sector-specific Mining Cadastre Office and NUPRC licensing frameworks governing the underlying exploration rights, operating alongside FRCN's general IFRS compliance mandate. [S3][S4][S5]

Worked examples

Capitalising exploration expenditure under an entity's elected policy

A Nigerian indigenous oil exploration company holds a valid NUPRC exploration licence for an onshore block. During the year, it incurs ₦300,000,000 on geological and geophysical surveys and exploratory drilling, which its documented accounting policy specifies as capitalisable exploration and evaluation expenditure. Technical feasibility and commercial viability of extraction have not yet been demonstrated.

Facts

Workings

Since the entity holds the relevant legal exploration right and its documented policy capitalises this type of expenditure, the full ₦300,000,000 is recognised as an exploration and evaluation asset at cost.

Journal entries

Capitalise exploration and evaluation expenditure incurred under the entity's elected accounting policy.

Account	Dr (₦)	Cr (₦)
Exploration and evaluation assets	300,000,000
Cash / payables		300,000,000

Impairment of an exploration and evaluation asset

A Nigerian solid minerals exploration company holds an exploration and evaluation asset with a carrying amount of ₦120,000,000 relating to a specific licence area. During the year, exploratory drilling results indicate no commercially viable mineral resources have been found, and management decides to discontinue exploration in that area, allowing the exploration licence to lapse without renewal.

Facts

Workings

These facts meet two of IFRS 6's specific impairment indicators: no commercially viable mineral resources found with a decision to discontinue exploration, and an expiring exploration right not expected to be renewed.

Since no future economic benefit is expected from the asset, its full carrying amount of 120,000,000 is impaired.

Journal entries

Recognise the impairment loss on the exploration and evaluation asset following confirmation that no commercially viable resources were found and the exploration licence will not be renewed.

Account	Dr (₦)	Cr (₦)
Impairment loss on exploration and evaluation assets (profit or loss)	120,000,000
Exploration and evaluation assets		120,000,000

Sources & citations

[S1]IFRS 6 Exploration for and Evaluation of Mineral Resources — IFRS Foundationaccessed 2026-07-18
[S2]IFRS 6 Exploration and Evaluation of Mineral Resources — IFRS in Brief — Moore Globalaccessed 2026-07-18
[S3]IFRS - Use of IFRS Standards by jurisdiction: Nigeria — IFRS Foundationaccessed 2026-07-18
[S4]An Overview Of The Nigerian Minerals And Mining Act 2007 — Mondaqaccessed 2026-07-18
[S5]Nigeria: Energy - Oil & Gas — Country Comparative Guides — Legal 500accessed 2026-07-18
[S6]Nigeria - Corporate - Taxes on corporate income — PwC Worldwide Tax Summariesaccessed 2026-07-18
[S_TAX1]Nigeria Tax Act, 2025 has been signed – highlights — EY Globalaccessed 2026-07-18
[S_TAX2]Nigeria's 2025 Tax Reform Acts Explained: Key Changes — Baker Tilly Nigeriaaccessed 2026-07-18

Last reviewed 2026-07-18 · Reviewer: Rafiu Olawuyi, FCA (Author / Technical Reviewer)