Exploration and Evaluation Assets
Costs of searching for minerals, oil or hydro sites before a project is proven, on the Balance Sheet. Used by mining and hydropower companies.
In detail
Exploration and Evaluation Assets holds the cost of looking for mineral, oil, gas or hydropower resources before the project is proven: surveys, test drilling, feasibility studies and the licences to search. NFRS 6 lets these be capitalised while the search continues, and when the resource is proven and development begins they move to Capital Work in Progress or to Plant and Machinery; if the search fails the balance is written off to Impairment Losses. This is a specialised ledger for mining and hydropower companies and sits empty in an ordinary business. Keeping it separate lets a lender see how much of the Balance Sheet rests on unproven projects.
Formula
Balance = Survey, drilling and licence costs capitalised - Amounts transferred on success - Amounts written off on failure.
Accounting entry
| Account | Debit | Credit |
|---|---|---|
| Exploration and Evaluation Assets | Rs 15,00,000 | |
| Bank Account (rename me) | Rs 15,00,000 |
How to record it in BRAccount
- 01Go to Invoicing > Purchase Invoice > New for the survey firm and pick this account as the expense head.
- 02Submit. The entry above posts for a micro-hydro feasibility study.
- 03Keep each project's costs on its own cost center or project dimension.
- 04When the site is proven, transfer the balance to Capital Work in Progress by Journal Entry.
- 05If the project is dropped, write the balance off to Impairment Losses by Journal Entry.
When to use it
Post survey and drilling bills by Purchase Invoice or Journal Entry. Write off if the search fails.
Example from the demo books
Dr Exploration and Evaluation Assets Rs 15,00,000, Cr Bank Account Rs 15,00,000 for a feasibility study on a micro-hydro site.