6 December 2010
Sir David Tweedie
International Accounting Standards Board
30 Cannon Street
London EC 4M 6XH
Dear Sir David
Stripping costs in the production phase of a surface mine
The Group of 100 (G100) is an organization of chief financial officers from Australia's largest business enterprises with the purpose of advancing Australia's financial competitiveness. The G100 is pleased to provide comments on this draft interpretation.
As indicated in our submission on the Discussion Paper 'Extractive Activities' the G100 considers that recognition and measurement requirements in IFRSs should be applicable to entities engaged in extractive activities and, accordingly, the principles in IAS 16 'Property, Plant and Equipment' should apply in respect of mining stripping costs as part of a mine asset.
Definition of a stripping campaign
Do you agree that the proposed definition satisfactorily distinguishes between a stripping campaign and routine waste clearing activities? If not, why?
No. The G100 believes that the definition does not distinguish activities with sufficient clarity to reduce the differences identified in current practice. The proposals result in three types of stripping costs being identified for accounting purposes, each requiring a different accounting treatment. The manner of distinguishing between these three categories is not clear and is likely to result in further inconsistencies in practice because of different interpretations of how to make a distinction and an increase in complexity. For example, the incurrence of routine stripping costs may enable indirect access to lower ore bodies in which case it is questionable whether all these costs should be expensed as incurred.
Allocation to the specific section of the ore body
Is the requirement to provide disclosures required for the existing asset sufficient? If not, why not, and what additional specific disclosures do you propose and why?
The G100 considers that disclosure in relation to these costs should be consistent with the disclosures relating to mining assets under IAS 16 'Property, Plant and Equipment.
Entities would be required to apply the proposed Interpretation to production stripping costs incurred on or after the beginning of the earliest comparative period.
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