RE:Costs are Costs ? REALLY?4CommonSense,
I fully agree with your observations on the use of acceptable accounting standards GAAP, IFRS, etc. One of the many issues that I personally pay attention to in comparing companies is that the "asset value" of a resource discovered and classified as "Proven" or "Proven plus Probable" can change very significantly in the case of a take-over:
- In an initial case of discovery, the accounting statements value recorded as Book Value (for the reserves in place below surface) will primarily be that of the costs incurred in exploring and identifying the discovery, including land costs, drilling, etc..)
- However, if this asset in its underground state is Taken-Over by another company, the asset value booked on the purchaser's accounting statements will be the purchase cost paid by the buyer, given that the buyer, through due diligence, knows about the discovery and therefore the asset value may be considered to be quite different (higher). Important Point: Book Value for any particular asset Without Any Work to Augment the Asset State, can change very significantly, when that asset passes through a Take-Over process, compared to remaining in an organic development and growth opoeration.
Conclusion: (as an example) When comparing Exploration and Development companies, depending on whether an organization primarily follows organic growth or follows a Take-Over strategy, the Book Value of any particular resource
can be very different, without any additional development investment,
Peace,
Good Decdision-making tyo All,
ElJ