AS-10 has excluded the assets , Wasting assets including mineral rights,expenditure on exploration for and extraction of minerals,oil,natural gas and similiar non regenerative resources.
So my question is that if a company has only the business of extraction of minerals and it has taken the land mineral rights for RS.2000 crore then what will be the treatment, in case it has been assumed that it will be beneficial for 7 years? what will be the tratment as as-10 is not applicable?
Rajnikant Vadigoppula
(CA, CS And CMA Final)
(919 Points)
Replied 15 June 2011
AS 10 is not applicable but IND AS - 6 is Applicable -
it will be treated as an asset of rs.2000 crores and written off over a period of 7 years by depreciation under depletion method.
as per IFRS - 6, depreciation is charged based on the following formula
no. of tons mineral extracted / total no. of tons available X cost of asset
example :- if mineral oil mine contains 200 milloin barrel of oil over a period of 7 years and in current year it extracted 20 million barrel of oil.
20/200*2000= 200 crores
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