Australian-Financial-Accounting-7th-Edition-Test-Bank-Deegan_14to22

Chapter 20 Key

1. Australian companies who voluntarily adopt the Australian Minerals Code for Environmental Management are required to report their performance against specifically nominated environmental performance indicators, such as greenhouse gas emissions.

TRUE

Chapter – Chapter 20 #1
Difficulty: Medium
Section: 20.14 Other developments in extractive industry reporting

2. Positive accounting theory predicts that large sized entities will choose not to capitalise their exploration and evaluation expenditures to reduce likelihood of violating debt covenants.

FALSE

Chapter – Chapter 20 #2
Difficulty: Easy
Section: 20.13 Research on accounting regulation of preproduction expenditures

3. Positive accounting theory predicts that large sized entities will choose not to capitalise their exploration and evaluation expenditures to reduce political costs.

TRUE

Chapter – Chapter 20 #3
Difficulty: Easy
Section: 20.13 Research on accounting regulation of preproduction expenditures

4. AASB 6 Exploration for and Evaluation of Mineral Resources requires exploration and evaluation assets be measured at fair value at recognition.

FALSE

Chapter – Chapter 20 #4
Difficulty: Easy
Section: 20.03 Alternative methods to account for preproduction costs

5. AASB 6 Exploration for and Evaluation of Mineral Resources allows an entity to apply either the cost model or the revaluation model to the exploration and evaluation assets.

TRUE

Chapter – Chapter 20 #5
Difficulty: Easy
Section: 20.03 Alternative methods to account for preproduction costs

6. Exploration and evaluation assets are depreciated when facts and circumstances suggest that the carrying amount of an exploration and evaluation asset may exceed its recoverable amount.

FALSE

Chapter – Chapter 20 #6
Difficulty: Easy
Section: 20.07 Impairment and amortisation of costs carried forward

7. Firms engaged in the extractive industries are solely engaged in the search for natural substances of commercial value.

FALSE

Chapter – Chapter 20 #7
Difficulty: Easy
Section: 20.02 Extractive industries defined

8. Costs in the exploration phase are incurred to discover economically recoverable reserves, while costs in the evaluation phase are incurred to prepare the areas of interest for effective exploitation of the reserves.

FALSE

Chapter – Chapter 20 #8
Difficulty: Medium
Section: 20.02 Extractive industries defined

9. AASB 6 provides guidance to cover costs incurred in the five phases listed in AASB 1022 namely: exploration, evaluation, development, construction and production.

FALSE

Chapter – Chapter 20 #9
Difficulty: Easy
Section: 20.02 Extractive industries defined

10. The costs incurred in the development and construction phases require more judgment in determining whether or not they constitute an asset for the entity than other stages in the operation.

FALSE

Chapter – Chapter 20 #10
Difficulty: Medium
Section: 20.02 Extractive industries defined