One of the major issues for miners is the question of financial reporting for their activities. The IASB (International Accounting Standards Board) is looking now into the issue of unification of reporting standards for “extractive activities”. Interesting issue is, among other “Definitions of minerals and oil and gas reserves and resources”. While you may visit a special “Extractive Activities” Web-site and lean more, here is what Australian Journal of Mining says about:
Input needed on proposed new financial reporting standards
The paper for ‘Extractive Activities’ was recently issued for comment in Australia. The current Australian standard on extractive activities, AASB 6 (IFRS 6) Exploration for and Evaluation of Mineral Resources, was developed as an interim standard in 2004. The discussion paper proposes a single accounting and disclosure model for extractive activities.
Kevin Stevenson, AASB Chairman, said mining, oil and gas entities involved in extractive activities face significant financial reporting challenges that are not addressed in existing IFRSs.
“There are significant uncertainties inherent in extractive activities that distinguish it from other industry sectors, such as the risk that exploration activities might not lead to the discovery of minerals, oil or gas deposits; uncertainty in the quantity of the deposit that can be extracted; uncertainty of commodity prices in a volatile market; and uncertainty in the costs involved in extracting the deposits from remote areas with harsh climates.
“IFRSs do not provide specific guidance for exploration, evaluation, development and production of minerals or oil and gas, which has resulted in entities developing their own policies and so there is diversity of accounting practices.”
He said that some of the practices currently applied are not compatible with the general principles within the IFRSs, which raises questions as to the relevance and quality of those accounting policies.
“Users also need more information about the nature and extent of the risks within an entity’s extractive activities. For example, existing IFRSs do not specifically require the disclosure of information about the entity’s minerals or oil and gas reserves. Some securities regulators and stock exchanges have requirements for the disclosure of this type of information, although the requirements often vary, and consequently entities with similar assets may be disclosing different information,” Stevenson said.
The AASB asks that comments on the ITC are submitted by July 2nd, 2010 to help it formulate a response to the IASB. Comments are due to the IASB by July 30th, 2010.
Based on the feedback, the IASB will decide whether to add the extractive activities project to its agenda, and therefore to develop an exposure draft.
The discussion paper can be accessed via the ‘Comment on a proposal’ section at: www.iasb.org
© 2010 Informa
