Pre-project expenses on oil exploration drills

Question

Can we capitalize the expenses incurred on an oil exploration project before we obtained the legal rights for drilling? The expenses were mainly incurred in recruiting the experts required for this project. Is this permitted by IFRS 6 Exploration for and Evaluation of Mineral Assets?

Answer 1

No you can not. You can not capitalize expenses incurred before you obtained legal right to drill. Such expenses need to be charged to income statement as per IFRS 6 - Exploration for and Evaluation of Mineral Assets