The G100 supports the proposed scope of the project to deal with upstream activities. We believe that the application of disclosure principles to entities engaged in extractive (upstream) activities is appropriate.
 

The G100 supports the objective of preparing a single disclosure model for entities engaged in extractive activities. However, as indicated above, the G100 does not support the development of separate requirements relating to recognition and measurement. If there are difficulties in applying the principles in IFRSs and the conceptual framework to extractive activities then it is appropriate to include further guidance in those Standards or by preparing Interpretations which address specific issues such as is occurring in the IFRIC project on accounting for production stripping costs in the mining industry.
 

The G100 agrees with the proposal to rely on widely used and recognized definitions used in the respective industries that reflect the technical knowledge and expertise not directly available to an accounting standard-setter. A benefit of using these definitions is that the measures used internally by entities will be those used for financial reporting purposes which will contribute towards ensuring greater clarity, understandability and consistency in the information provided to users. However, the reference to these definitions should be such that it refers to the definitions as amended by these bodies from time to time.
 

The G100 does not support the proposed approach. Rather, we believe that the current recognition and measurement requirements in existing standards, for example, IAS 13 'Research and Development Costs'; IAS 16 'Property, Plant and Equipment'; IAS 36 'Impairment of Assets' and IAS 38 'Intangible Assets' should be applied and that application issues be addressed by providing more guidance or issuing an interpretation.
 

The G100 considers that the unit of account should be determined flexibly so as to permit the different facts and circumstances confronting the entity to be taken into account. In this regard we consider that the area of interest approach based on the previous Australian Standard AASB 1022 'Accounting for the Extractive Industries' is an appropriate approach. Under this approach an 'area of interest' means an individual geological area which is considered to constitute a favourable environment for the presence of a mineral deposit or an oil or natural gas field, or has been proved to contain such a deposit or field.

In most cases the area of interest will comprise a single mine or deposit or a separate oil or gas field. It is common for an area to contract in size progressively, as exploration and evaluation lead towards the identification of a mineral deposit or an oil or natural gas field, which may prove to contain economically recoverable reserves.

Under such an approach the unit of account is responsive to the ongoing facts and circumstances.
 

In your view, what measurement basis should be used for minerals and oil and gas properties and why? This could include measurement bases that were not considered in the discussion paper. In your response, please explain how this measurement basis would satisfy the qualitative characteristics of useful financial information.

The G100 supports the application of the current historical cost based approach to measurement. The G100 strongly opposes measurement on a fair value basis which introduces subjectivity and volatility to the measurement process and imposes costs on preparers which are not justified in the face of the acknowledged lack of demand by users.
 

1. write down an exploration property only when, in its judgment, there is a high likelihood that the carrying amount will not be recoverable in full; and
2. apply a separate set of indicators to assess whether its exploration properties can continue to be recognized as assets.

Do you agree with the project team's recommendations on impairment? In not, what type of impairment test do you think should apply to exploration properties?

The G100 believes that entities engaged in extractive activities should apply the requirements of IAS 36 to all activities when assessing whether or not assets are impaired. In this regard the approach would be similar to that applied by entities engaged in research and development activities.
 

1. the value attributable to an entity's minerals or oil and gas properties;
2. the contribution of those assets to current period financial performance; and
3. the nature and extent of risks and uncertainties associated with those assets.

Do you agree with those objectives for disclosure? If not, what should be the disclosure objectives for an IFRS for extractive activities and why?

The G100 believes that relevant disclosures about the activities of entities engaged in extractive activities are important for users to gain an understanding of their risks, uncertainties and performance. It is for this reason that the G100 believes that if there is to be a separate standard relating to these activities it should focus on developing disclosure principles and their application to activities which are consuming finite resources. In this regard the disclosure objectives are appropriate.

However, we believe that requirements in IFRSs should fall within the scope of the audit opinion unless they are part of a guidance document such as that proposed in respect of management commentary.
 

1. quantities of proved reserves and proved plus probable reserves, with the disclosure of reserve quantities presented separately by commodity and by material geographical areas:
2. the main assumptions used in estimating reserves quantities, and a sensitivity analysis;
3. a reconciliation of changes in the estimate of reserves quantities from year to year;
4. a current value measurement that corresponds to reserves quantities disclosed with a reconciliation of changes in the current value measurement from year to year;
5. separate identification of production revenues by commodity; and
6. separate identification of the exploration, development and production cash flows for the current period and as a time series over a defined period (such as five years).

Would disclosure of this information be relevant and sufficient for users? Are there any other types of information that should be disclosed? Should this information be required to be disclosed as part of a complete set of financial statements?

The G100 considers that the proposed disclosures are excessive and require a level of detail and volume that is not justified in comparison with other activities.

Reserve Disclosures: The G100 supports reserve disclosures based on generally accepted and widely used industry definitions of proven and probable reserves such as those discussed in Q3. It is important that the disclosures of reserve quantities clarify the risks and uncertainties involved and show the key assumptions on which they are based. The reporting of reserves and movements during the reporting period is one instance where we consider that a reconciliation of opening and closing amounts provides useful information to users.

Value Disclosures: The G100 believes that the disclosure of current/fair value information about the reserves will result in the incurrence of significant costs and effort with little benefit to users.

The amounts reported are, at best, estimates based on a range of assumptions and are subject to significant uncertainties that impair the relevance and reliability of the information. We believe that it is more appropriate for users to use the reserve quantity information to make their own estimates if that information is important to decision making.
 

No. The G100 believes that entities would incur significant costs to identify and measure such costs and incur practical issues in ensuring comparability of information reported in respect of different jurisdictions. We remain to be convinced that such disclosures would be consistent with the disclosure objective and provide relevant information for decision making by equity holders and capital market participants.