IFRIC 20 — Stripping Costs in the Production Phase of a Surface Mine
- Conceptual Framework for Financial Reporting
- IAS 1 Presentation of Financial Statements
- IAS 2 Inventories
- IAS 16 Property, Plant and Equipment
- IAS 38 Intangible Assets
- IFRS Interpretations Committee Agenda. Click for Project Page
- IFRIC DI/2010/1 issued 26 August 2010 (comment deadline 30 November 2010). Click for Press Release (PDF 35k)
- Near Final Draft of IFRIC 20 published 10 August 2011
- IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine issued 19 October 2011 (IASB press release)
- Effective date: annual periods beginning on or after 1 January 2013 (earlier application permitted)
- IFRS in Focus Newsletter — IFRS Interpretations Committee issues Final Interpretation on Stripping Costs in the Production Phase of a Surface Mine
- Deloitte Comment Letter on Draft IFRIC Interpretation DI/2010/1 Stripping Costs in the Production Phase of a Surface Mine
Summary of IFRIC 20
In surface mining operations, entities may find it necessary to remove mine waste materials ('overburden') to gain access to mineral ore deposits. This waste removal activity is known as 'stripping'. There can be two benefits accruing to the entity from the stripping activity: usable ore that can be used to produce inventory and improved access to further quantities of material that will be mined in future periods.
IFRIC 20 considers when and how to account separately for these two benefits arising from the stripping activity, as well as how to measure these benefits both initially and subsequently.
IFRIC 20 only deals with waste removal costs that are incurred in surface mining activity during the production phase of the mine ('production stripping costs').
Overview of requirements
IFRIC 20 requires:
- The costs of stripping activity to be accounted for in accordance with the principles of IAS 2 Inventories to the extent that the benefit from the stripping activity is realised in the form of inventory produced
- The costs of stripping activity which provides a benefit in the form of improved access to ore is recognised as a non-current 'stripping activity asset' where the following criteria are met:
- it is probable that the future economic benefit (improved access to the ore body) associated with the stripping activity will flow to the entity
- the entity can identify the component of the ore body for which access has been improved
- the costs relating to the stripping activity associated with that component can be measured reliably
- When the costs of the stripping activity asset and the inventory produced are not separately identifiable, production stripping costs are allocated between the inventory produced and the stripping activity asset by using an allocation basis that is based on a relevant production measure
- A stripping activity asset is accounted for as an addition to, or as an enhancement of, an existing asset and classified as tangible or intangible according to the nature of the existing asset of which it forms part
- A stripping activity asset is initially measured at cost and subsequently carried at cost or its revalued amount less depreciation or amortisation and impairment losses
- A stripping activity asset is depreciated or amortised on a systematic basis, over the expected useful life of the identified component of the ore body that becomes more accessible as a result of the stripping activity. The units of production method is used unless another method is more appropriate.
Application and transition
IFRIC 20 applies to annual periods beginning on or after 1 January 2013. Earlier application is permitted.
The Interpretation applies to production stripping costs incurred on or after the beginning of the earliest period presented. Any 'predecessor stripping asset' at that date is required to be reclassified as a part of the existing asset to which the stripping activity is related (to the extent there remains an identifiable component of the ore body to which it can be associated), or otherwise recognised in opening retained earnings at the beginning of the earliest period presented.