Oil Sands Ltd is a company involved in the search for, production of and sale of oil and gas resources. The company has been following an accounting policy of expensing its exploration and evaluation costs as incurred since adoption of AASB 6/IFRS 6. However, its most significant competitor follows a policy of capitalising such costs on an area of interest basis. This makes the competitor’s profit look better in most years than Oil Sands Ltd’s profit.

Required 

Discuss whether Oil Sands Ltd can change its accounting policy to capitalise its exploration and evaluation costs to match its competitor’s accounting policy.