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ARTICLE · 22 NOVEMBER 2012

Recent Interpretation Reveals Assets In Surface Mines

Grant Thornton LLP
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On Oct. 19, 2011, the IFRS Interpretations Committee (IFRIC) issued IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine, to address diverse practices around the world in the accounting for the cost of stripping operations incurred by mining companies after a surface mine begins production.

United StatesAccounting and Audit
Gary Illiano
Gary Illiano
Sheri Fabian
Sheri Fabian
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On Oct. 19, 2011, the IFRS Interpretations Committee (IFRIC) issued IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine, to address diverse practices around the world in the accounting for the cost of stripping operations incurred by mining companies after a surface mine begins production. Some companies recognize these costs as expenses, while other companies capitalize them as assets, using a variety of allocation methods.

Background

Stripping costs are costs incurred when removing waste material in a surface mine, which allows companies to access the more valuable minerals below the surface. Stripping costs are incurred not only in the development phase of a surface mine (before production begins), but also during the production phase and throughout the life of the mine. Currently, companies account for stripping costs incurred during the development phase as assets that are typically capitalized as part of building, developing and constructing

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