AASB 6 Exploration for and Evaluation of Mineral Resources requires

"Aus7.2 An exploration and evaluation asset shall only be recognised in relation to an area of interest if the

following conditions are satisfied: (a) the rights to tenure of the area of interest are current; and (b) at least

one of the following conditions is also met:

(i) the exploration and evaluation expenditures are expected to be recouped through successful

development and exploitation of the area of interest, or alternatively, by its sale; and

(ii) exploration and evaluation activities in the area of interest have not at the end of the

reporting period reached a stage which permits a reasonable assessment of the existence or

otherwise of economically recoverable reserves, and active and significant operations in, or

in relation to, the area of interest are continuing".

Required

a. Evaluate if the recognition conditions prescribed in para. Aus 7.2 AASB 6 with regard to the exploration

and evaluation asset is consistent with the asset recognition criteria specified in the Conceptual

Framework (5 marks)

b. If a mining company has been the focus of environmental activists' complaint about generating high

levels of profit at the cost of environmental pollution, which of the two options that the company's

management may choose, write-off or carry forward the exploration and evaluation expenditure without

breaching Aus 7.2 AASB requirements? Justify your answer (5 Marks)