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Exploring the Accounting Treatment of Exploration and Evaluation Activities in the Extraction Industry in South Africa and Australia

Author

Listed:
  • Christa Van der Walt

    (School of Accounting Sciences, North-West University, Potchefstroom, Republic of South Africa.)

  • Banele Dlamini

    (School of Accounting Sciences, North-West University, Potchefstroom, Republic of South Africa)

  • Danie P Schutte

    (School of Accounting Sciences, North-West University, Potchefstroom, Republic of South Africa)

Abstract

The study examines the accounting treatment of exploration and evaluation assets in the extraction industry in South Africa and Australia. This study adopted a qualitative research approach and purposive sampling techniques. Data was collected from 60 entities in the extraction industry that are listed on the Johannesburg Stock Exchange (JSE) and the Australian Securities Exchange (ASX). The study found that South African entities classify exploration and evaluation assets as tangible or intangible assets using International Financial Reporting Standard (IFRS) 6. The study also observed that Australian entities classify exploration and evaluation assets as a separate class of assets using the Australian Accounting Standard Board (AASB) 6. South African entities depreciated or amortized exploration and evaluation assets, while Australian entities did not. The study concluded that even though there is high adoption of IFRS 6 or AASB 6, comparability is compromised in the extraction industry. The study recommended that IFRS 6 not offer a choice between IAS 16 or IAS 38 for the classification of exploration and evaluation assets to improve comparability and aid effective decision-making.

Suggested Citation

  • Christa Van der Walt & Banele Dlamini & Danie P Schutte, 2023. "Exploring the Accounting Treatment of Exploration and Evaluation Activities in the Extraction Industry in South Africa and Australia," International Journal of Economics and Financial Issues, Econjournals, vol. 13(6), pages 30-34, November.
    • Handle: RePEc:eco:journ1:2023-06-4
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    References listed on IDEAS

    as
    1. Cortese, Corinne & Irvine, Helen, 2010. "Investigating international accounting standard setting: The black box of IFRS 6," Research in Accounting Regulation, Elsevier, vol. 22(2), pages 87-95.
    2. Aydin Karapinar & Figen Zaif & Salih Torun, 2012. "Accounting Policies in the Extractive Industry: A Global and a Turkish Perspective," Australian Accounting Review, CPA Australia, vol. 22(1), pages 40-50, March.
    3. Vespestad, May Kristin & Clancy, Anne, 2021. "Exploring the use of content analysis methodology in consumer research," Journal of Retailing and Consumer Services, Elsevier, vol. 59(C).
    4. Sidney J. Gray & Niclas Hellman & Mariya N. Ivanova, 2019. "Extractive Industries Reporting: A Review of Accounting Challenges and the Research Literature," Abacus, Accounting Foundation, University of Sydney, vol. 55(1), pages 42-91, March.
    5. Hafez Abdo, 2016. "Accounting for Extractive Industries: Has IFRS 6 Harmonised Accounting Practices by Extractive Industries?," Australian Accounting Review, CPA Australia, vol. 26(4), pages 346-359, December.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Extraction industry; Exploration and evaluation assets; IFRS 6; AASB 6; Accounting treatment; South Africa; Australia;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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