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Deloitte Touche Tohmatsu comments on extractive industries

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09 Oct 2001

We have posted the (PDF 136k).

Click here for Project Information. Our basic position:
  • We strongly support the development of an international accounting standard for mining and oil and gas companies.
  • At the current time, an historical cost concept is more appropriate for accounting for the extractive industries than a model of accounting based on an estimate of the fair values of mineral properties and reserves.
  • Within the context of an historical cost model, there is an urgent need to achieve consistency in recognition, measurement, and subsequent depreciation of extractive industry related assets, particularly pre-production expenditure. We favour the following treatment of pre-production costs:
    • Preacquisition prospecting and exploration: Charge to expense
    • Property acquisition (direct and incidental): Capitalise
    • Post-acquisition exploration: Capitalise
    • Evaluation or appraisal costs: Capitalise
    • Development cost: Capitalise
    • Construction cost: Capitalise
    • All capitalised costs are subject to depreciation and an impairment test based on disposal value of the acquired rights

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