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IASB issues surface mining clarification

The International Accounting Standards Board (IASB) has issued new requirements for accounting for stripping costs incurred in the production phase of a surface mine. 

The clarification refers to when production stripping – the process of removing waste from a surface mine in order to gain access to mineral ore deposits – should lead to the recognition of an asset and how that asset should be measured, both initially and in subsequent periods. 

Currently the accounting of stripping costs varies widely in practice but under the new interpretation, such costs will be capitalised and recognised in profit or loss over the life of the component of ore body to which the costs relate, if certain criteria are met.

The interpretation will be effective for annual accounting periods beginning on or after 1 January 2013 with earlier application permitted.

In a recent survey conducted by the KPMG International Standards Group, of the 26 mining companies who responded, only 15 disclosed their accounting policy for production stripping costs on their most recent financial statements.

Additionally, of these 15, more than a third expensed such costs as incurred for some or all of their mines.

KPMG’s global head of audit for energy and natural resources Jimmy Daboo noted that the new IASB requirements meant that “only a handful of mining companies will be able to conclude that their current accounting is completely in line with the interpretation.”

“This means not only a change in accounting policy for these companies, but a real need to look at the processes required to capture the relevant data at the mine level,” Daboo said.


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