BHP » Topics » (I) Exploration, evaluation and development expenditure

This excerpt taken from the BHP 20-F filed Sep 26, 2007.

(I) Exploration, evaluation and development expenditure

Under IFRS the BHP Billiton Group follows the ‘area of interest’ method in accounting for petroleum exploration and evaluation expenditure. This method differs from the ‘successful efforts’ method followed by some US companies and adopted in this reconciliation to US GAAP, in that it permits certain exploration costs in defined areas of interest to be capitalised.

Under IFRS exploration and evaluation expenditure on mineral properties is charged to the income statement as incurred, except where it relates to an area of interest which was previously acquired in a business combination and measured at fair value on acquisition. Under US GAAP exploration and evaluation expenditure on mineral properties is charged to the income statement as incurred.

Under IFRS and US GAAP, costs of drilling and other associated activities incurred on existing mineral properties (both development properties and producing mines) may be capitalised where their purpose is to extend the reserves by the conversion of mineralised material to proven and probable reserves, or for further delineation of existing proven and probable reserves. The key parameters and criteria which must be satisfied for these costs to be capitalised are:

  - The drilling must occur within the existing physical boundaries of the area defined as the reserve or non-reserve mineralisation;
  - Any extensions to the reserves within the ore body must be capable of being mined under the rights granted by existing leases; and
  - The costs of drilling and other associated activities must be incurred on mineralised material which is economically recoverable.

Other associated activities in the plan to convert mineralised material to reserves include mine planning, metallurgical, environmental, social, legal and economic evaluation.

 

BHP BILLITON 2007 FINANCIAL STATEMENTS    F-90


Table of Contents

Notes to Financial Statements


38 US Generally Accepted Accounting Principles disclosures continued


This excerpt taken from the BHP 20-F filed Sep 25, 2006.

(H) Exploration, evaluation and development expenditure

Under IFRS the BHP Billiton Group follows the ‘area of interest’ method in accounting for petroleum exploration and evaluation expenditure. This method differs from the ‘successful efforts’ method followed by some US companies and adopted in this reconciliation to US GAAP, in that it permits certain exploration costs in defined areas of interest to be capitalised.

Under IFRS exploration and evaluation expenditure on mineral properties is charged to the income statement as incurred, except where it relates to an area of interest which was previously acquired in a business combination and measured at fair value on acquisition, or where a final feasibility study has been completed indicating the existence of commercially recoverable reserves. US GAAP permits exploration and evaluation expenditure on mineral properties to be capitalised where a final feasibility study has been completed, indicating the existence of commercially recoverable reserves at new exploratory ‘greenfield’ properties. In subsequent financial periods, amortisation or write-offs of expenditure previously capitalised, which would have been expensed for US GAAP purposes, is added back when determining the net income according to US GAAP.

This excerpt taken from the BHP 20-F filed Nov 10, 2005.

(I) Exploration, evaluation and development expenditure

 

The BHP Billiton Group follows the ‘successful efforts’ method under UK GAAP in accounting for petroleum exploration, evaluation and development expenditures. This method differs from the ‘successful efforts’ method followed by some US companies and adopted in this reconciliation to US GAAP, in that it permits certain exploration costs in defined areas of interest to be capitalised. Such expenditure capitalised by the BHP Billiton Group is amortised in subsequent years. In respect of minerals properties, the BHP Billiton Group capitalises exploration and evaluation expenditure where it is expected that the expenditure will be recouped by future exploitation or sale and exploration and evaluation activities have identified a mineral resource with sufficient certainty, which permits a reasonable assessment of the existence of commercially recoverable reserves. Under US GAAP, a final feasibility study indicating the existence of commercially recoverable reserves at new exploratory ‘greenfield’ properties serves as the trigger point for capitalisation. US GAAP permits expenditure to be capitalised for the purposes of extending or further delineating existing reserves. In subsequent financial periods, amortisation or write-offs of expenditure previously capitalised under UK GAAP, which would have been expensed for US GAAP purposes, will be added back when determining the profit result according to US GAAP.

 

This excerpt taken from the BHP 20-F filed Oct 3, 2005.

(I) Exploration, evaluation and development expenditure

 

The BHP Billiton Group follows the ‘successful efforts’ method under UK GAAP in accounting for petroleum exploration, evaluation and development expenditures. This method differs from the ‘successful efforts’ method followed by some US companies and adopted in this reconciliation to US GAAP, in that it permits certain exploration costs in defined areas of interest to be capitalised. Such expenditure capitalised by the BHP Billiton Group is amortised in subsequent years. In respect of minerals properties, the BHP Billiton Group capitalises exploration and evaluation expenditure where it is expected that the expenditure will be recouped by future exploitation or sale and exploration and evaluation activities have identified a mineral resource with sufficient certainty, which permits a reasonable assessment of the existence of commercially recoverable reserves. Under US GAAP, a final feasibility study indicating the existence of commercially recoverable reserves at new exploratory ‘greenfield’ properties serves as the trigger point for capitalisation. US GAAP permits expenditure to be capitalised for the purposes of extending or further delineating existing reserves. In subsequent financial periods, amortisation or write-offs of expenditure previously capitalised under UK GAAP, which would have been expensed for US GAAP purposes, will be added back when determining the profit result according to US GAAP.

 

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