Ind AS 106
Active
Exploration for and Evaluation of Mineral Resources
Prescribes the recognition and measurement of exploration and evaluation expenditures for mineral resources, mirroring IFRS 6 almost exactly, with the main Indian-specific context relating to the Mines and Minerals (Development and Regulation) Act.
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Conceptual Framework Linkage
Identical rationale to IFRS 6 – a deliberately narrow, transitional standard
Ind AS 106 applies the IDENTICAL rationale as IFRS 6 – exploration and evaluation (E&E) expenditure sits in a uniquely uncertain position under the Conceptual Framework, and rather than resolving this immediately, Ind AS 106 (like IFRS 6) permits CONTINUATION of existing accounting policies for a narrow group of pre-Ind-AS E&E accounting practices.
HOW IND AS 106 MAPS TO THE FRAMEWORK
Recognition uncertainty – E&E expenditure often cannot be reliably assessed against normal asset recognition criteria until far more geological data is available – IDENTICAL reasoning to IFRS 6 Cost constraint on standard-setting – the MCA, like the IASB, chose NOT to develop comprehensive extractive industries guidance immediately, preserving existing Indian mining company practice instead A modified impairment trigger – Ind AS 106 provides the SAME E&E-specific impairment indicators as IFRS 6, tailored to the extractive industry rather than IAS 36/Ind AS 36's general indicators alone
Ind AS 106 is another example (alongside Ind AS 105) of a standard converged NEAR-VERBATIM with its IFRS counterpart – the underlying rationale for IFRS 6's narrow, permissive approach applies EQUALLY to the Indian context.
The IAS 8/Ind AS 8 carve-out – identical to IFRS 6
StageTreatment
Initial recognitionAt COST – a firm requirement, identical to IFRS 6
Subsequent measurementEntity develops its OWN accounting policy, exempted from Ind AS 8's normal hierarchy – identical to IFRS 6
This UNIQUE Ind AS 8 carve-out is REPRODUCED identically from IFRS 6's own equivalent exemption from IAS 8.
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Scope & Applicability
What Ind AS 106 covers
Ind AS 106 applies to EXPLORATION AND EVALUATION EXPENDITURES – IDENTICAL scope to IFRS 6, covering the same narrow "window" between obtaining exploration rights and demonstrating technical feasibility/commercial viability.
India's SIGNIFICANT mining sector (coal, iron ore, bauxite, and other minerals) makes this standard genuinely relevant for numerous large Indian public sector and private mining companies.
Key definitions you must know
Exploration and evaluation assets
E&E expenditures recognised as assets per the entity's own accounting policy – IDENTICAL definition to IFRS 6.
MMDRA
The Mines and Minerals (Development and Regulation) Act, 1957 – India's principal mining sector legislation, governing mining lease/licence grants, operating ALONGSIDE Ind AS 106's accounting requirements.
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Recognition – A Deliberately Permissive Standard (with worked example)
Identical unique freedom to IFRS 6
Ind AS 106 permits an entity to develop an E&E accounting policy WITHOUT specifically considering Ind AS 8's normal policy-selection hierarchy – IDENTICAL to IFRS 6's own carve-out.
Example 1: An Indian coal mining company continuing its E&E policy
An Indian coal mining company previously capitalised ALL exploration drilling costs under its pre-Ind AS accounting policy, regardless of whether individual boreholes proved commercially successful. On Ind AS transition, it wishes to CONTINUE this policy.
Ind AS 106 EXPLICITLY permits this continuation, WITHOUT needing to justify it against Ind AS 8's normal hierarchy – an IDENTICAL outcome to how the equivalent situation would be handled under IFRS 6.
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Measurement – Initial Cost & Accounting Policy Choice
Identical to IFRS 6
E&E assets are measured at COST at initial recognition, with the entity's OWN accounting policy determining exactly which expenditures qualify – followed by EITHER the cost model or revaluation model subsequently, IDENTICAL to IFRS 6.
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Reclassification of E&E Assets
Identical sequencing to IFRS 6
An E&E asset is reclassified once technical feasibility and commercial viability are demonstrable, with a MANDATORY impairment assessment BEFORE reclassification – IDENTICAL sequencing rule to IFRS 6.
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Impairment – A Modified Trigger (with worked example)
Identical E&E-specific indicators to IFRS 6
Exploration right expiring soon and not expected to be renewed No further exploration expenditure budgeted/planned No commercially viable quantities discovered, activities discontinued Sufficient data indicates carrying amount unlikely to be recovered in full
Example 2: An expiring Indian mining lease
An Indian mining company holds an E&E asset of ₹4 crore relating to a specific mining lease area under the MMDRA framework. The lease is due to expire in 3 months, and renewal has been rejected by the state government mining authority.
This is a CLEAR impairment indicator (lease expiring, renewal rejected) requiring an IAS 36/Ind AS 36 recoverable amount assessment – IDENTICAL analysis to how IFRS 6 would treat the equivalent global scenario, with the Indian-specific detail being the STATE GOVERNMENT MINING AUTHORITY as the relevant licensing body under Indian mining law.
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Indian Mining Regulatory Context – MMDRA
Legal framework alongside, not replacing, Ind AS 106
India's Mines and Minerals (Development and Regulation) Act, 1957 (as amended, including the 2015 auction-based reforms) governs the GRANT of mining leases/licences, royalty payments, and district mineral foundation contributions – a REGULATORY/LEGAL framework operating ALONGSIDE Ind AS 106's accounting treatment. Ind AS 106 governs HOW exploration expenditure is accounted for; MMDRA governs WHETHER and under what terms the underlying mining rights are legally held.
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Presentation – Tangible vs Intangible
Identical classification approach to IFRS 6
E&E assets are classified as tangible or intangible according to their nature, applied consistently – IDENTICAL to IFRS 6, with mining LICENCES/RIGHTS typically classified as intangible, and physical exploration equipment as tangible.
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Disclosure Requirements
Identical disclosure requirements to IFRS 6
Accounting policies for E&E expenditures Amounts recognised from E&E activities (assets, liabilities, income/expense, cash flows) E&E assets treated as a separate class, with Ind AS 16/38-equivalent disclosures
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Critical Judgments & Estimates
Where management judgement matters most
SIGNIFICANT JUDGEMENTS
Which expenditures qualify for capitalisation under the entity's own policy Whether technical feasibility/commercial viability is demonstrable
SIGNIFICANT ESTIMATES
Recoverable amount when an E&E-specific impairment indicator arises The appropriate level for impairment testing
For Indian mining companies, MINING LEASE renewal risk (under MMDRA's regulatory framework) is a particularly common and significant trigger for the E&E impairment assessment.
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Ind AS 106 vs IFRS 6 – Full Comparison
Comprehensive comparison table
FeatureIFRS 6Ind AS 106
Accounting policy flexibilityDeliberately broad, IAS 8 carve-outIDENTICAL – Ind AS 8 carve-out reproduced verbatim
Impairment indicatorsE&E-specific indicators, larger CGU grouping permittedIDENTICAL
Regulatory licensing frameworkVaries by jurisdiction (e.g. mining codes in Australia, Canada)India's Mines and Minerals (Development and Regulation) Act, 1957 – a SPECIFIC, distinct Indian legal framework operating alongside the accounting standard
Ind AS 106's accounting SUBSTANCE is essentially IDENTICAL to IFRS 6 – the meaningful Indian-specific context relates entirely to the SEPARATE regulatory/legal mining licensing framework (MMDRA), not to any divergence in the accounting standard itself.
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Statement Mapping
Comprehensive event-to-statement mapping table
Event / transactionStatement(s) affectedNotes
E&E expenditure meeting capitalisation policyBalance SheetRecognised at cost, identical to IFRS 6
Impairment indicator identified (mining lease expiry etc.)P&L Balance SheetInd AS 36 recoverable amount test
Reclassification out of E&E scopeBalance SheetImpairment tested first, then reclassified
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Related Standards
Cross-reference map
StandardConnection
IFRS 6The GLOBAL counterpart standard, converged near-identically
Ind AS 8Its normal hierarchy is explicitly carved out for E&E accounting policy development
Ind AS 16 / Ind AS 38Govern tangible/intangible E&E assets once classified, and post-reclassification accounting
Mines and Minerals (Development and Regulation) Act, 1957Governs the LEGAL licensing/lease framework underlying Indian mining E&E activities
Quick-reference glossary
MMDRA
Mines and Minerals (Development and Regulation) Act, 1957 – India's principal mining sector legislation.
Mining lease
A legal right granted under Indian mining law to extract minerals from a specified area, whose expiry/renewal status is a key Ind AS 106 impairment indicator.
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Quick-Reference Glossary
Exploration and evaluation assets
E&E expenditures recognised as assets per the entity's own accounting policy – IDENTICAL definition to IFRS 6.
MMDRA
The Mines and Minerals (Development and Regulation) Act, 1957 – India's principal mining sector legislation, governing mining lease/licence grants, operating ALONGSIDE Ind AS 106's accounting requirements.
Mining lease
A legal right granted under Indian mining law to extract minerals from a specified area, whose expiry/renewal status is a key Ind AS 106 impairment indicator.
Financial statement key
BS Balance sheet
IS Income statement
SE Statement of changes in equity
OCI Other comprehensive income
SCF Statement of cash flows