The concrete risk here is accounted twice the cash flow

Mining companies face serious difficulties in the application of international accounting standards IFRS (International Financial Reporting Standards). Several extractive activity-specific factors make the complex material. However, to provide experts from PricewaterhouseCoopers (PwC), many of them have already completed the necessary conversions and published their first annual reports conform to this standard. "The companies concerned have made considerable efforts in several areas of accounting." "There is no doubt that the introduction of IFRS has improved transparency and made comparable financial accounts", summarizes Brian Taylor, responsible for the follow-up to the mining sector for the audit firm who has just spent an exhaustive study on the subject. "However, on specific issues, practices diverge still one business to another", it qualifies.

Among the materials of accounting transcript the toughest, PricewaterhouseCoopers indicates, skelter, financial treatment of reserves and resources mining costs deferred from the extraction of mining waste (recently prohibited under standards US Gaap in force in the United States), the orders related to the construction of sites and their possible cancellations, long term stocks, impairments of goodwill and the choice of the currency of reference for the accounting for transactions.

Different interpretations

Not to mention the problem raised by the application of the standard IAS 39, taking account of the financial instruments, including the contracts for deferred delivery signed by mining groups with clients whose elements can be included in this category (indexation to the prices of market, inflation and exchange parities).

Registration to the financial accounts of these specific elements of the contracts is not easy and lends itself to divergent interpretations. So for the assessment of cash they are supposed to generate. The concrete risk here is accounted twice the cash flow. The theme of exploration and evaluation expenditures is also insufficiently clarified by international standards. Standard IFRS 6, specific to this category of expenditure, leaves the hands free to mining companies to cushion them in whole or in part.

But, as the recall Brian Taylor and Hugh Cameron, authors of the study, IFRS 6 is only a temporary solution, in force until the Group of extractive activities in the International Accounting Standards Board (IASB), master of the IFRS standards, to reach a detailed definition.

Accounting puzzle

That said, then, taking into account costs related to development The mining industry has an industrial cycle among the longest industriel Investment to build new projects extend over many years. The question of the terms of these costs over several years averaging raises urgent.

The standard IAS 16 requires that these expenses appear in the accounts which cover the period of the orders. But often, the State of progress of the work, these periods are elongated or orders may be deleted. In addition, this standard is classified in this category only expenses which are "directly related" to the assets under construction. However, how to distinguish them from the costs associated with production, ask specialists The dividing line between construction, development and production is very difficult to trace.

Finally, how integrate into account reserves and resources of mining companies. For authors, it is the main accounting puzzle because they represent the source of the assessment of firms in the sector. Traditionally, the value of these assets is calculated on the basis of the undiscounted costs, so far below their actual price. More often, the definition adopted for reserves and resources is consistent with the national rules, preventing any correct international comparison.