EITF mining decision affects US IFRS filers

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31 Mar 2005

On 30 March 2005, FASB's Emerging Issues Task Force reached a consensus on the treatment of stripping costs incurred in open pit mines once production commences.

Those costs are to be considered a variable production cost. Deferral of such costs on the balance sheet via a 'life of mine stripping ratio' is no longer permitted under US GAAP. Foreign companies that file with the SEC and use IFRS or other national GAAP, and that decide to retain the practice of deferring post-production stripping costs, will have to include an adjustment in their US GAAP reconciliation going forward. Pre-production stripping was not addressed by the EITF, so the general practice of capitalising such costs as part of mine development costs is not affected. For more information see EITF Issue No. 04-6 Accounting for Stripping Costs in the Mining Industry on FASB's Website.

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