Accounting standards provide flexibility in the treatment of mineral exploration costs. These costs can be expensed or capitalized at the discretion of the company (IFRS 6). Mineral exploration costs have similarities with research costs (IAS38) but are afforded the privilege of being capitalized.
Required:
Identify and discuss four reasons for allowing mineral exploration costs to be capitalized despite the fact they are similar to research expenditures (which must be expensed).