Learning objectives assessed:

This assessment task is designed to test your achievement of learning objectives 1, 2, 3 and 4. It is designed to assist you in demonstrating your knowledge of, and ability to critically assess a contemporary issue in financial reporting and disclosure. It also provides you with an opportunity to further enhance your research, judgement and written communication skills.

Issue to be investigated: Accounting for Exploration and Evaluation Costs

The diversity of methods to account for Exploration and Evaluation Costs in the extractive industries has been one of the most controversial issues in international financial reporting. Initially issued in 2004 as an interim standard, IFRS 6 Exploration for and Evaluation of Mineral Resources does not specify particular methods of accounting for such costs. Despite the potential problems that could arise from the application of diverse methods, in September 2021, the IASB tentatively decided not to reduce this diversity. A member of the IASB outlines the reasons behind the board’s decision in a January 2022 Project Update document which includes the following personal reflection:1

“My initial view, when I heard about the diversity in accounting policies for exploration and evaluation expenditure, was that we should do something about this. However, when I was participating in meetings with investors, there wasn’t a clear message from them that this was something we should resolve. Instead, many investors said they would prefer us to improve the disclosure requirements rather than address the diversity in accounting policies.” (p. 2)

Considering the size of the extractive industries in the Australian economy, and the inclusion of Australia-specific paragraphs in AASB 6 (the Australian version of IFRS 6), the AASB plays an important role in this area of financial reporting.

You have recently been appointed as an Analyst at a large Australian superannuation fund that has significant domestic and international investments in the extractive industries. You are currently

reporting to the Chief Investment Officer (CIO). The CIO has been asked to update the board of directors on the reporting of Exploration and Evaluation Costs in the extractive industries, and has asked for your assistance in this task. As part of the task, the CIO has requested that you examine the 2020 Annual Reports of three companies: BHP Billiton, Emerald Resources, and EVRAZ. The aim of this task is to inform the fund’s position on whether any changes to accounting standards on this matter should be enacted to provide more decision-useful information.

You are to research and comment on these issues and present your findings as follows:                *A business report to update the CIO and the board of directors on the reporting of Exploration  and  Evaluation  Costs, which will  assist the superannuation fund  in  its engagement with the IASB and the AASB.

Your business report needs to be concise and informative. In preparing your report, you should investigate a range of issues:

(i) Critically evaluate the recent IASB decision to maintain the diversity of accounting methods for Exploration and Evaluation Costs. Consider this in light of the objective of general purpose financial reporting, the qualitative characteristics of relevance and comparability,  and the definition  criteria for assets.  Support your discussion  using academic journal articles, and where relevant high-quality professional articles and newspapers.

(ii) Provide two explanations to the CIO and the board of directors on why international

companies may select a certain accounting policy for Exploration and Evaluation Costs. Each explanation  must  be  informed  by a different theory covered  in this  unit  (not including the conceptual framework). Support your discussion using academic journal articles, and where relevant high-quality professional articles and newspapers. Each explanation  must go  beyond  information that  may be  present  in  annual  reports or relevant accounting standards, and does not need to refer to specific companies. Note: This part is NOT asking for explanations on why choice should be permitted; rather, it is asking   for   theoretically-informed   explanations   on   what   motivates   international companies to choose a particular way to account for Exploration and Evaluation Costs.

(iii) Provide a description of the accounting policies for Exploration and Evaluation Costs

adopted by BHP Billiton, Emerald Resources, and EVRAZ. This description is to include a discussion on the usefulness of the related information reported by each company for the superannuation fund’s investment decisions.  In addition, provide a comparative description of the conservativeness of the three accounting policies. Note: To do this you need to refer to the 2020 annual reports for BHP Billiton, Emerald Resources, and EVRAZ.

(iv) Provide a recommendation to the CIO and the board of directors on the future direction

the IASB and the AASB should take with regard to the reporting of Exploration and Evaluation Costs in the extractive industries.

Part 1: Assessment Criteria:

A rubric outlining the assessment criteria and how your work will be assessed against these criteria will be provided on Moodle. This will assist you in completing the assessment task and to see the allocation of marks.

For more information on appropriate report writing, formatting and referencing, please see the ‘LearnHQ' resources and the section on ‘Approaches to assignments in your Faculty'.

Groups must submit a properly referenced assignment. Groups who submit an assignment without in-text referencing (and reference list) will have their assignment returned to them and receive zero marks. These groups may choose to re-submit their assignment with appropriate referencing, however groups will only be eligible to receive half of the total available marks (i.e. a maximum of 15 out of a total possible 30 marks).

Turnitin:

All reports must be run through Turnitin software that will indicate the same or similar pieces of work. Your Turnitin report must accompany your report. Please refer to the following for information on Turnitin at the following link:https://guides.lib.monash.edu/turnitin/using-turnitin

Additional Information:

In preparing your business report, you must refer to relevant theories covered in this unit,

academic journal articles  and, where  relevant,  high-quality  newspaper and  professional articles.

A word count must be included. Groups exceeding the word limit by more than 10% will

incur a mark penalty.

You must keep an electronic copy for your records until the final results have been published. Assignments will be returned to you, together with both general and specific feedback, during

SWOT VAC.

Working in Groups:

Groups will consist of 3 students from the same tutorial.

Groups will be formed in Week 4. Students will self-select into a group of 3 on Moodle and your Tutor will be advised of each group and its members by the end of Week 4. Management of the group is in the hands of the individual group members.

It is important for team members to develop collaborative working relationships which includes the following behaviours:

encouraging and acknowledging contributions by being respectful and open to others’ ideas

and perspectives;

listening carefully to the ideas of team members and seeking clarification where appropriate; noting non-verbal behaviours and feelings;

ensuring a balance in contribution by encouraging less talkative members and controlling

more talkative members.

It is up to students to maintain communication with group members and make sure that all group members contribute equitably to the final product. For effective management, all members should ensure that they have each other's contact details: i.e. email address, phone numbers, and that regular contact is maintained between all group members.

In the case of disputes between group members it is hoped that initially the group members can work together to resolve the issues. If this is not possible, the Chief Examiner should be contacted for assistance. Once the Research Assignment has been completed, the Chief Examiner and other teaching staff will not be available for such assistance. Therefore, disputes arising must be dealt with as soon as possible and well before the due date.

It  is  recommended  that  team  members  keep  an  individual  log  of their work  or  some  other appropriate ‘paper trail’ to provide evidence of work completed and interaction with their teammates (this can be in the form of emails, group chats, meeting minutes, etc.). This evidence will be useful in case of disagreements and inconsistencies.

Submitting Part 1 of the Assessment:

Each group must assign only one member to click to upload the report to

Moodle. This group member will need to click “Submit Assignment” and accept the student statement.

Next, it is the responsibility of all other group members to sign off on the final report by clicking the “Submit Assignment” button for the Research assignment in Moodle and accepting the student