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.
