It is the responsibility of mining firms to maintain records of the exploration assets they use in the course of their business. There are tangible and intangible search assets. You can learn more about them from this article.
The very first step in the production cycle of mineral mining firms is to find places where there are mineral deposits and assess the feasibility of mining in a particular location. During exploration, firms use prospecting assets. They represent the costs that the company incurred to find plots of land and evaluate them.
Exploration assets of a material nature
Tangible exploration assets are objects that a firm uses in the course of finding and evaluating deposits and mineral exploration. These include:
- Structures (for example, a pipeline system);
- Special equipment (for example, drills and pumps);
- Specialist. transport.
Accounting for such assets is carried out on a separate sub. account to account No. 08. In the bay. in the balance sheet they are displayed in line 1130.
Exploration assets of an intangible nature
Intangible assets include:
- Information that was obtained based on the results of land surveys;
- Results of sampling;
- The right to carry out mining activities;
- Results of test drilling;
- Other geological information about the earth;
- Conducting an analysis of the feasibility of obtaining minerals in a specific location.
Asset recognition
Expenditures incurred to search for minerals are commonly called exploration assets. The company has the right to determine certain types of expenses that will relate to exploration assets. She should definitely reflect this in her accounting policy. In most cases, the specific list of expenses will directly depend on the specifics of the mining organization’s activities. However, when dividing the costs between search assets and other expenses, the following nuances must be taken into account:
- The plots of land on which the search is carried out, as well as special vehicles and special equipment that are used during mining, in all cases are tangible assets.
- The results of the search, evaluation, analyzes performed and the feasibility of mining in a certain location are always intangible assets.
All mining firms should reflect these provisions in their accounting policies.
Primary accounting
From the moment the company incurs the costs of searching for minerals, the costs must be taken into account in accounting. balance sheet, in the debit of account No. 08. This account requires you to consolidate expenses for:
- Purchase of a plot of land on which exploration, evaluation and production will be carried out;
- Purchase of necessary special equipment and special transport;
- Cost of services of general contractors for on-site installation and setup of special equipment;
- Cost of intermediary services (if the property was purchased through third parties);
- Information and consulting services related to exploration and assessment of a plot of land;
- Cost of laboratory services for studying found samples;
- Purpose of the article: display of material costs associated with the search, analysis and exploration of deposits, analysis of minerals.
- Line number in the balance sheet: 1140.
- Account number according to the chart of accounts: debit balance of the subaccount .12 minus the credit balance of the account. (in terms of depreciation and impairment of these objects).
Tangible exploration assets mean non-current assets on the balance sheet of an organization that have a tangible form. The main characteristic of this type of object is the purpose of use. According to the current legislation, the costs incurred when using assets in the process of searching for, analyzing mineral deposits, as well as exploration of minerals in a certain subsoil area are regulated.
Note from the author! This type of costs includes non-current assets used by the enterprise in subsoil areas until there is official documentary evidence of the commercial feasibility of extracting minerals in a given deposit, subject to the technical equipment and availability of resources of the enterprise. Recognition of exploration expenses as non-current assets of the company is carried out, as a rule, if there is a license in a certain subsoil area where exploration activities are carried out.
Material exploration assets are the company’s expended material resources associated with the acquisition or formation of objects with a tangible form, namely:
- systems of structures (for example, gas pipelines, etc.);
- specialized equipment (drill, pumps, etc.);
- units of transport.
Acceptance of costs in company accounting
The company independently decides on the types of costs included in non-current assets. All other costs are written off in accounting as expenses for ordinary activities.
In accounting, tangible search assets are taken in the amount of all actual costs incurred for their creation and use in the company’s activities.
Composition of actually incurred costs included in the cost of a non-current exploration asset:
- cost of goods and services of suppliers according to the contract;
- the cost of work performed under construction contracts and other agreements;
- payment of a bonus to intermediary counterparties through whom the search asset was purchased;
- payment for information and consulting services;
- payment of mandatory customs duties;
- taxes and duties, the further reimbursement of which is not possible;
- the amount of accrued depreciation of other non-current assets of the company used in the formation of a new exploration asset;
- remuneration of employees involved in the process of creating an asset;
- fulfilled obligations of the company in relation to environmental protection, liquidation of buildings and structures related to the implementation of prospecting and exploration activities in the subsoil, as well as mineral exploration;
- other costs incurred in creating or purchasing a search asset.
Note from the author! If an enterprise plans to use these non-current assets in activities after completion of exploration activities at a certain subsoil site, the assets can be transferred and included in the company’s fixed assets (Dt01 Kt08.12).
Line 1140 of the balance sheet contains information about the actual costs of creating assets, taking into account adjustments for revaluation and the amount of depreciation as of December 31 of the reporting year, the previous one and the previous one.
Impairment risk assessment
According to PBU, the company is required to monitor at each reporting date in order to identify possible signs of impairment of exploration assets. The following factors should be analyzed:
- validity period of the license for prospecting, evaluation of deposits and exploration of mineral resources (expiration within a year after the reporting period in the absence of plans to issue an extension of license permits);
- discrepancy between planned costs and actual expenditures of funds for the implementation of activities for the search and analysis of deposits, as well as resource exploration;
- making a final decision by the company to terminate prospecting and exploration work in this area;
- The monitoring carried out indicates the impossibility of paying off the costs of searching and evaluating deposits in full.
Case Study
A joint-stock company engaged in the search and development of oil fields attracted Solnyshko LLC to drill a well. The cost of the work amounted to 5 million rubles, including VAT of 762.7 thousand rubles. The data analysis revealed that oil production in this area was inappropriate, and the well was abandoned.
Business transactions in the accounting of JSC:
- Dt08 Kt60
4.2 million rubles - the cost of the contractor’s work excluding VAT.
- Dt19 Kt60
762.7 thousand rubles. - VAT included.
- Dt68 Kt19
762.7 thousand rub. - acceptance of VAT for deduction.
- Dt91.2 Kt08
4.2 million rubles. - write-off of a exploration asset due to the inexpediency of further oil production activities.
Normative base
Data on the material resources expended during the search and analysis of deposits must be reflected in accordance with PBU 24/2011, approved by order of the Ministry of Finance of the Russian Federation dated October 6, 2011 No. 125n.
Common entries for accounting for tangible exploration assets
- Formation of the initial accounting price of a material exploration asset in accounting.
Dt08.12 Kt60 - payment to suppliers.
Dt08.12 Kt70 - remuneration of employees involved in the creation process.
Dt08.12 Kt10 - materials used.
Note! Postings with accounts 69,02,96, etc. can also be generated.
- Impairment of a tangible exploration asset.
Dt91.02 Kt08.12 - recognition of loss.
Dt02 Kt91.1 - adjustment of accrued depreciation.
- Transfer of existing material search facilities to the main equipment section.
Dt01 Kt08.12.
- Write-off of incurred costs due to the futility of their further use in the company's activities (for example, due to damage).
- Purpose of the article: reflection of information on intangible costs incurred in the activities of prospecting and exploration work in fields, as well as exploration of minerals in certain areas of the subsoil.
- Line number in the balance sheet: 1130.
- Account number according to the chart of accounts: debit balance of subaccount 08.11 minus credit balance of account 05 (in terms of depreciation).
Exploration assets mean investments of an organization’s funds in the search, exploration and development of deposits, as well as exploration of minerals in the subsoil. All assets are divided into tangible (costs incurred for the creation or acquisition of tangible objects) and intangible (all other costs associated with search and exploration activities).
According to PBU, the company’s intangible assets in this case include:
- the right to carry out prospecting and exploration activities, as well as activities for the analysis of mineral deposits;
- information on studies of a predetermined area (for example, topographic analysis of the territory);
- results of ongoing exploration drilling;
- results of analysis of collected samples;
- geological conclusions about the state of the subsoil of a certain area;
- analysis of benefits and making a final decision on the commercial viability of extracting resources in a certain area.
Acceptance of costs in company accounting
The organization independently decides on the distribution of costs incurred between intangible exploration assets and ordinary activities. The decision made must be recorded in the company's accounting policies.
In the accounting of a company, legal acts are accepted at the cost of all actual costs incurred for their creation, namely:
- the cost of goods and services of suppliers according to the contract of sale and purchase of legal acts;
- the cost of work performed under construction contracts and other agreements;
- payment for information and consulting services;
- payment of mandatory customs duties;
- taxes and duties, the further reimbursement of which is not possible;
- the amount of depreciation charges in the company’s non-current assets used in the formation of a new intangible exploration asset;
- remuneration of employees involved in the process of forming legal acts;
- fulfilled obligations of the company in relation to environmental protection, liquidation of buildings and structures related to the implementation of prospecting and exploration activities in the subsoil, as well as mineral exploration;
- funds spent on acquiring a license to perform work on intangible exploration assets.
Line 1130 of the balance sheet contains information about the actual costs of creating intangible assets, taking into account depreciation charges as of December 31 of the reporting year, the previous one and the previous one, i.e. The balance sheet line reflects the residual value of intangible exploration assets as part of the company's non-current assets. An increase in the indicator, as a rule, indicates a positive trend.
Recognizing the commercial viability of resource extraction
If the analysis of exploration data shows positive results and there is documentary evidence of the economic feasibility of production, the company must perform certain actions:
- Transfer existing intangible exploration assets to intangible assets.
Note! In some situations, the price of an intangible exploration asset may influence the formation of the value of the firm's main assets. For example, the costs of geological work for specific wells may form the actual price of the well itself when it is recognized as part of the company's fixed assets.
- Stop accounting for subsequent costs incurred in this subsoil area as part of intangible exploration assets.
Normative base
Information on intangible expenses incurred related to the search and evaluation of deposits, as well as mineral exploration, is displayed in accounting in accordance with PBU 24/2011, approved by order of the Ministry of Finance of the Russian Federation dated October 6, 2011 No. 125n.
Case Study
In November of the reporting period, Bereza Joint Stock Company bought the exclusive right to explore an oil field. The price of the rights was 400 thousand rubles. (including VAT 61 thousand rubles). The cost of consulting a specialist amounted to 12,000 rubles (excluding VAT).
Business transactions
Dt08.11 Kt60
338,983 rubles - displaying the receipt of the right to intelligence activities.
61,017 rubles - input VAT included.
Dt08.11 Kt76
12000 - the cost of consulting services is taken into account.
61017 - VAT is accepted for deduction.
Common transactions for accounting of legal entities
- Formation of the initial accounting value in accounting.
Dt08.11 Kt60 - payment for services of suppliers.
Dt08.11 Kt70 - remuneration of workers involved in the process of creating intangible exploration assets.
Note! Additionally, postings can be generated with accounts 69,02,96, etc.
- Transfer of existing intangible search assets to the NMA section for their further use.
Dt04 Kt08.11.
- Write-off of incurred costs due to the futility of their further use in the company's activities.
In accordance with current legislative norms, it is necessary to reflect all transactions of a commercial and economic nature in special accounting.
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This also applies to various types of assets – including intangible search assets. This issue is addressed in the legislation in force in the Russian Federation. If possible, you should familiarize yourself with the most significant points in advance.
This way it will be possible to reduce the likelihood of a large number of difficulties and other difficulties associated with the process of conducting audits by tax authorities.
Inappropriately registered intangible assets will lead to fines and other difficulties.
General points
Intangible assets are the property of a company, which is expressed not as tangible property, but as intellectual or some other property.
There are many different types of intangible assets. The regulatory documents reflect their complete list. It is worth familiarizing yourself with all the nuances in advance.
Issues that should be considered in advance include:
- what it is?
- what is their role?
- current standards.
What it is?
Today, on line 1130, intangible search assets must be designated in accordance with legal regulations. But first of all, you should understand the very concept of intangible assets.
Typically, such assets are present in the accounting and tax reporting of an organization that is engaged in the following activities:
- deals with resource discovery;
- carries out development.
This issue is discussed in as much detail as possible in. In this case, the distribution of this type of assets is carried out by the enterprise independently, without outside participation.
Distribution is carried out between the following types of assets:
- intangible search engines;
- for other types of activities.
We should also not forget that the choice made must be reinforced accordingly in the enterprise.
This is necessary to maintain proper accounting and tax records. The issue is covered in detail in. A complete list of search-type intangible assets is reflected in the same document.
What is their role
Reflecting assets of this type directly in accounting and tax reporting allows you to implement standard tasks.
These today include the following:
The organization directly receives quite significant benefits from the use of search-type intangible assets. Since they mean information or the right related to the extraction of useful resources.
Moreover, the right to production is often exclusive. There is also depreciation of the type of asset in question.
This question is also worth revealing to yourself in advance. This way you can avoid some difficulties when preparing financial statements.
Current standards
At the moment, there is a fairly large number of various documents directly related to the reflection of intangible exploration assets in reporting.
An equally significant effect is the reflection of their depreciation. The main regulatory document regulating this issue is - it regulates the application.
PBU 14/2007 includes the following:
The process of reflecting information about assets in financial statements must also comply with the regulatory document. The main one is
This legislative act includes the following main sections:
Federal Law No. 402-FZ of December 6, 2011 includes the following main sections:List of objects reflected in the financial statements Lists the persons who are required to maintain accounting records How is accounting carried out? The process of choosing accounting policies and the features of each type are considered. What are the primary accounting documents? What are accounting registers How an inventory of liabilities as well as assets is performed The procedure for monetary measurement in this type of accounting What are the requirements for financial reporting? What is meant by the composition of financial statements What is the reporting period, as well as the date of reporting Reporting procedure for Reporting procedure during the procedure Internal control Basic principles related to accounting regulation A list of documents required in this case is indicated. It is important to remember the need to comply with standards regarding the reflection of search-type intangible assets. Since it is often with their help that all sorts of corruption schemes are implemented.
Therefore, the tax service pays the closest possible attention to all this when conducting audits.
In some cases, concealing intangible search assets leads to quite serious disciplinary consequences.
Features of search intangible assets
The intangible search assets themselves have a large number of features and nuances. You should definitely deal with all of them in advance. This will significantly reduce the likelihood of making any mistakes.
Significant issues related to this topic, familiarization with which is strictly necessary, include the following:
- What are intangible search assets?
- How are they reflected in accounting?
- value in tax accounting.
What does this mean?
For 2019, the list of intangible exploration assets includes the following:
Exclusive or joint right to perform a certain list of works - search and assessment of the location of various types of minerals;
- exploration of the presence of minerals of a certain type;
- availability of appropriately designed to carry out the above work
Information that was obtained as a result of conducting a certain type of intelligence work - drilling;
- taking any samples during field development;
- geological information about the subsoil was obtained using an alternative method;
- commercial feasibility assessment
It is important to remember that the actual costs of search assets must include:
- amounts that are paid in accordance with the agreements of the contractor, which is the supplier;
- amounts charged to a specific contractor for performing a volume of work on a special basis;
- a certain commission or other remuneration accrued to the intermediary who provided the opportunity to purchase intangible exploration assets;
- all customs duties without exception, as well as;
- state, patent duties;
- amounts of taxes paid that are not subject to reimbursement;
- depreciation of current as well as non-current assets;
- rewards to employees who directly contribute to the creation of a specific type of asset.
There is also a certain list of actual costs that are not included in the list of those related to the costs of acquiring such assets:
- reimbursement of tax fees;
- general expenses;
- costs that occurred during the process of obtaining a license or are directly related to the process of registering exploration assets.
The points outlined above have the most significant role related to the reflection of information in accounting and tax reporting. It is important to remember that there is no room for error. This can lead to quite serious problems.
How are they reflected in accounting?
It is also worth familiarizing yourself in advance with what kind of account this is – intangible search assets. For these purposes, line No. 1130 is always used.
The reflection process looks like this:
In the case of reflecting depreciation in accounting, the organization must do this starting from the 1st day of the month that follows the month in which the obligation to take into account arose.
Typically the following accounts are used for this:
It is important to remember to take into account all the different types of search costs. They are recognized as non-current assets. This rule applies to all search assets used.
Before you begin to reflect information in tax and accounting, you should carefully understand all the nuances.
Importance in tax accounting
Assets of this type are taken into account when calculating tax for the use of natural resources. There is a separate section of the Tax Code of the Russian Federation that regulates this issue.
The tax rates are set. A significant factor is the type of mineral. The algorithm for calculating the rate is reflected on the official website of the Federal Tax Service.
There is a fairly large number of different difficulties associated with the process of reflecting intangible search assets.
An important factor is the accounting policy chosen by the enterprise itself. Based on this, the tax base is calculated and other actions are implemented.
Attention!
- Due to frequent changes in legislation, information sometimes becomes outdated faster than we can update it on the website.
- All cases are very individual and depend on many factors. Basic information does not guarantee a solution to your specific problems.
This line is filled in by organizations that incur costs for the search, evaluation of mineral deposits and exploration of minerals in a certain subsoil area. Such organizations take into account intangible exploration assets (IPA) in accordance with the norms of the Accounting Regulations “Accounting for Costs for the Development of Natural Resources” (PBU 24/2011), approved by Order of the Ministry of Finance of Russia dated October 6, 2011 N 125n. Accounting for non-current assets is kept in a separate sub-account to account 08 “Investments in non-current assets” (clause 9 of PBU 24/2011).
Line 1130 provides information on the amount of actual costs for the acquisition (creation) of legal acts, taking into account revaluation, depreciation and impairment (clause 35 of PBU 4/99, clause 28 of PBU 24/2011). Data are provided as of the reporting date, as of December 31 of the previous year and as of December 31 of the year preceding the previous one.
Regulatory legal acts include search costs recognized as non-current assets and not related to the acquisition (creation) of an object that has a tangible form. At the same time, prospecting costs mean the costs of searching, assessing mineral deposits and exploring mineral resources in a certain subsoil area, which are incurred before the commercial feasibility of production in relation to this subsoil area is established and documented (clauses 2, 4, 6 PBU 24/2011).
Examples of legal acts are (clause 8 of PBU 24/2011):
— the right to carry out work on the search, evaluation of mineral deposits and (or) exploration of mineral resources, confirmed by the presence of an appropriate license;
— information obtained as a result of topographical, geological and geophysical studies;
— results of exploratory drilling;
— results of sampling;
— other geological information about the subsoil;
— assessment of the commercial feasibility of production.
Legal acts objects are accepted for accounting in a separate subaccount to account 08 “Investments in non-current assets” in the amount of actual costs for their acquisition (creation), which is determined in the manner established by paragraphs 13 - 15 of PBU 24/2011. Subsequent assessment of intangible assets (including depreciation, revaluation and impairment recognition) is carried out in the manner established by PBU 14/2007 for intangible assets (clause 16 of PBU 24/2011). In this case, the features given in paragraphs 17 - 20 of PBU 24/2011 should be taken into account. In particular, if there are signs of impairment, legal assets must be tested for impairment in accordance with IAS 36 “Impairment of Assets”, (IFRS) 6 “Exploration and Evaluation of Mineral Reserves”.
The amounts of accrued depreciation, as well as the amounts of impairment, can be recorded, for example, in separate subaccounts to account 05 “Amortization of intangible assets.”
This line of the Balance Sheet indicates the residual value of legal acts (actual costs taking into account the revaluations made, less accumulated depreciation and impairment). This value is determined as the difference between the balances of the corresponding analytical accounts of synthetic accounts 08 and 05 (taking into account revaluation and impairment).
Line 1130 “Intangible exploration assets” = Debit balance on account 08 (analytical account of legal assets) - Credit balance on account 05 (analytical account for depreciation and impairment of legal assets)
In general, the indicators in line 1130 “Intangible exploration assets” as of December 31 of the previous year and as of December 31 of the year preceding the previous year are transferred from the Balance Sheet for the previous year.
The “Explanations” column provides an indication of the disclosure of this indicator (paragraph 2 of clause 28 of PBU 4/99).
Example of filling line 1130"Intangible search assets"
In 2014, the organization took into account the right to geological study, exploration and production of minerals (coal) in a certain subsoil area, confirmed by the presence of an appropriate license, as part of the regulatory legal acts.
The license was obtained in 2012, the cost of obtaining it amounted to 680,000,000 rubles. In 2014, the license was transferred to the NMA in connection with the establishment of the commercial feasibility of production.
Fragment of the Balance Sheet for 2013
Solution
A fragment of the Balance Sheet in Example 1.3 will look like this.
