Deloitte comment letter on the discussion paper on extractive activities
Jul 30, 2010
Deloitte's IFRS Global Office has submitted a letter of comment to the IASB on Discussion paper DP/2010/1 'Extractive Activities'.
...We agree with the view expressed in the Discussion Paper that the use of a market-based measure is not justifiable on cost-benefit grounds and is not supported by industry participants, analysts and other users of the financial statements.
We agree with the project team's recommendation with respect to the definitions of reserves and resources to be used in any IFRS on extractive activities and the need for common definitions for all extractive activities within the scope of any future IFRS. However, we believe that it is important that the definitions ultimately chosen are accepted by industry and consistent across all jurisdictions to avoid the need for multiple reserve and resource determinations and reconciliations. Therefore, we urge the Board to cooperate closely with national standard-setters, securities markets regulators and industry bodies to ensure acceptance and consistency in definitions.
In our view, the Discussion Paper does not articulate clearly the nature of the asset arising from extractive activities. Further research is required to determine the nature of the asset(s) and the justification for capitalising subsequent expenditures within the context of the Conceptual Framework. We also believe that further research is necessary to develop an appropriate impairment model for such assets.
We agree with the overall disclosure objectives proposed by the Discussion Paper, provided that those objectives do not lead to a requirement to disclose fair values. However, we have significant concerns about the nature and extent of the disclosures proposed, in particular the level of disaggregation required, the need for sensitivity analyses and the cost of preparing the proposed disclosures.