AASB 6 Defines Economically Recoverable Reserves to Be

question 44

Multiple Choice

AASB 6 defines economically recoverable reserves to be:

• A) The only source of revenue for firms in the extractive industries.
• B) The quantity of product that can be extracted before the firm makes a loss.
• C) The quantity of product that can be extracted, processed and sold at a profit based on past economic conditions.
• D) Any reserves that can be extracted and will provide a future economic benefit to the entity.
• E) The estimated quantity of the product in the area-of-interest that can be expected to be profitably extracted and sold under current and foreseeable economic conditions.

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Definitions:

Discount Rate

The interest rate used to determine the present value of future cash flows, or the rate at which central banks lend to financial institutions.

Net Present Value

The difference between the present value of cash inflows and the present value of cash outflows, used in capital budgeting to assess the profitability of an investment.

Profitability Index

A capital budgeting tool used to measure the relative profitability of an investment, calculated by dividing the present value of future cash flows by the initial investment cost.

Accounting Rate

The accounting rate, or rate of return, measures the profitability of investments or projects, expressed as a percentage.