Problem 5: Multiple choice- Theory

__1. Exploration for and evaluation of mineral resources is

1. The search for mineral resources before the entity has obtained legal rights to explore in a specific area.
2. The research for mineral resources after the entity has obtained legal rights to explore in a specific area.
3. The search for mineral resources before the entity has obtained legal rights to explore in a specific area up to the date when mineral resources are actually confirmed to exist in the area.
4. The search for mineral resources after the entity has obtained legal rights to explore in a specific area up to the date when commercial operations begin.

__2. Exploration and evaluation assets are initially measured at

1. Cost
2. Revalued amount
3. Fair value
4. a or b

__3. Exploration and evaluation assets are exploration and evaluation expenditures recognized as

1. Assets in accordance with the entitys accounting policy
2. Expenses in accordance with applicable PFRSs
3. Assets in accordance with (a) above, subject to the limitations provided under PAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
4. Any of these

__4. After recognition, exploration and evaluation assets are accounted for under the

1. Cost model
2. Revaluation model
3. Fair value method
4. a or b

__5. According to PFRS 6 Exploration for an Evaluation of Mineral Resources, an entity may change its accounting policies for exploration and evaluation expenditures if

1. The change makes the financial statements more relevant and more reliable
2. Other PFRSs do not prohibit the change
3. The change makes the financial statements more relevant and no less reliable, or more reliable and no less relevant.
4. a or b

__6. Information needed to compute a depletion charge per unit includes the

1. Estimated total amount of resources available for removal
2. Amount of resources removed during the period
3. Cumulative amount of resources removed
4. Amount of resources sold during the period

__7. Which of the following depreciation method is computed in the same way as depletion?

1. Straight-line
2. Sum-of-the-years-digits
3. Double-declining-balance
4. Productive-output

__8. Is an entity ever required or permitted to change its accounting policy for exploration and evaluation expenditures?

1. Yes, entities are required to change their accounting policy for these expenditures if the change would result in more useful information for users of financial statements
2. Yes, entities are free to change accounting policy for these expenditures as long as the selected policy in information that is relevant and reliable
3. Yes, but only if the change makes the financial statements more relevant to the economic decision-making needs of users and no less reliable, or more reliable and no less relevant to those needs.
4. No, entities would be permitted to change accounting policy only on adoption of a new or revised Standard that replaces the existing requirements in PFRS 6

__9. Which of the following facts or circumstances would not trigger a need to test an evaluation and exploration asset for impairment?

1. The expiration-or expected expiration in the near future-of the period for which the entity has the right to explore in the specific area, unless the right is expected to ve renewed
2. The absence of budgeted or planned substantive expenditure on further explanation and evaluation activities in the specific area.
3. A decision to discontinue exploration and evaluation activities in the specific area when those activities have not led to the discovery of commercially viable quantities of mineral resources.
4. Lack of sufficient data to determine whether the carrying amount of the exploration and evaluation assets is likely to be recovered in full from successful development or by sale

__10. Which of the following is not a disclosure required by PFRS 6?

1. Information about commercial reserve quantities
2. Accounting policies for exploration and evaluation expenditures, including the recognition of exploration and evaluation assets
3. The amounts of assets, liabilities, income and expense, and operating and investing cash flows arising from the exploration for an evaluation of mineral resources
4. Information that identifies and explains the amounts recognized in the financial statements arising from the exploration for and of mineral resources.