Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
 
 
 
 
Popular Search: list of goods taxed at 4% :: VAT RATES :: form 3cd :: cpt :: ARTICLES ON INPUT TAX CREDIT IN VAT :: TDS :: TAX RATES - GOODS TAXABLE @ 4% :: VAT Audit :: ACCOUNTING STANDARDS :: due date for vat payment :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: empanelment :: Central Excise rule to resale the machines to a new company :: articles on VAT and GST in India :: ACCOUNTING STANDARD
 
 
News Headlines »
 GST Council fails to break deadlock over indirect tax regime, next meet on Dec 11 and 12 to hammer out differences
 Invoking Writ Jurisdiction For Income Tax Matters
 How to file income-tax returns online
 How Income Tax Returns Are Scrutinised
 All About New Income Disclosure Scheme to make Demonetisation successful
 Your deposit may draw income tax notice
 Accepting payment under IDS 2016
 New disclosure scheme could see 50% tax and 4-year limit on cash use for unaccounted deposits
 Pay 50% tax on unaccounted deposits, or 85% if caught, says Modi government
 Deadline to pay property tax in old currency extended
 Cabinet clears amendments to Income Tax Act

Exposure Draft of the Striping Costs in the Production Phase of a Surface Mine (Amendments to Ind AS 16) (corresponding to IFRIC 20) (Comments to be received by September 15, 2014)
August, 25th 2014
               Exposure Draft


     Stripping Costs in the Production
          Phase of a Surface Mine
        (Amendments to Ind AS 16)




(Last date for Comments: September 15, 2014)




                   Issued by
          Accounting Standards Board
 The Institute of Chartered Accountants of India
                                                                Exposure Draft
                                           Stripping Costs in the Production
                                                Phase of a Surface Mine
                                                               (Amendments to Ind AS 16)


 Following is the Exposure Draft of Stripping Costs in the Production Phase of a Surface Mine
(Amendments to Ind AS 16) issued by the Accounting Standards Board of The Institute of
Chartered Accountants of India, for comments. The Board invites comments on any specific
aspect of the Exposure Draft. Comments are most helpful if they indicate the specific paragraph
or group of paragraphs to which they relate, contain a clear rationale and, where applicable,
provide a suggestion for alternative wording.


Comments should be submitted in writing to the Secretary, Accounting Standards Board, The
Institute of Chartered Accountants of India, ICAI Bhawan, Post Box No. 7100, Indraprastha
Marg, New Delhi 110 002, so as to be received not later than September 15, 2014. Comments
can also be sent by email to commentsasb@icai.in





(The Exposure Draft of the Indian Accounting Standard includes paragraphs set in bold type and
plain type, which have equal authority. Paragraphs in bold type indicate the main principles.
(This Exposure Draft of the amendments Indian Accounting Standard should be read in the
context of its objective and the Preface to the Statements of Accounting Standards1)


Question for respondents

       Paragraphs 2 and 14 refer to `units of production' method as the appropriate method for
       amortisation of Striping Activity Asset. Do you agree? Why or why not?




                                                            
1
  Attention is specifically drawn to paragraph 4.3 of the Preface, according to which accounting standards are
intended to apply only to items which are material
Amendments to Ind AS 16 Property, Plant and Equipment
Appendix B, Stripping Costs in Production Phase of Surface Mine has been added. Appendix B, References
to matters contained in other Indian Accounting Standards has been changed to Appendix C.






This Appendix is an integral part of Indian Accounting Standard (Ind AS) 16

Appendix B
Stripping Costs in the Production Phase of a Surface Mine
Background
1.     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'.

2.     During the development phase of the mine (before production begins), stripping costs are
       usually capitalised as part of the depreciable cost of building, developing and
       constructing the mine. Those capitalised costs are depreciated or amortised on a
       systematic basis, usually by using the units of production method, once production
       begins.

3.     A mining entity may continue to remove overburden and to incur stripping costs during
       the production phase of the mine.

4.     The material removed when stripping in the production phase will not necessarily be a
       total waste; often it will be a combination of ore and waste. The ratio of ore to waste can
       range from uneconomic low grade to profitable high grade. Removal of material with a
       low ratio of ore to waste may produce some usable material, which can be used to
       produce inventory. This removal might also provide access to deeper levels of material
       that have a higher ratio of ore to waste. There can therefore 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.

5.     This Appendix 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.


Scope
6.     This Appendix applies to waste removal costs that are incurred in surface mining activity
       during the production phase of the mine (`production stripping costs').
Issues
7.    This Interpretation addresses the following issues:

      (a)   recognition of production stripping costs as an asset;

      (b)   initial measurement of the stripping activity asset; and

      (c)   subsequent measurement of the stripping activity asset.

Principles
      Recognition of production stripping costs as an asset

8.    To the extent that the benefit from the stripping activity is realised in the form of
      inventory produced, the entity shall account for the costs of that stripping overburden
      removal activity in accordance with the principles of Ind AS 2 Inventories. To the extent
      the benefit is improved access to ore, the entity shall recognise these costs as a non-
      current asset, say, Stripping Activity Asset, if the criteria in paragraph 9 below are met.

9.    An entity shall recognise a stripping activity asset if, and only if, all of the following are
      met:
      (a) it is probable that the future economic benefit (improved access to the ore body)
           associated with the stripping activity will flow to the entity;

      (b)   the entity can identify the component of the ore body for which access has been
            improved; and

      (c)   the costs relating to the stripping activity associated with that component can be
            measured reliably.

10.   The stripping activity asset shall be accounted for as an addition to, or as an enhancement
      of, an existing asset. In other words, the stripping activity asset will be accounted for as
      part of an existing asset.

11.   The stripping activity asset's classification as a tangible or intangible asset is the same as
      the existing asset. In other words, the nature of this existing asset will determine whether
      the entity shall classify the stripping activity asset as tangible or intangible.

      Initial measurement of the stripping activity asset

12.   The entity shall initially measure the stripping activity asset at cost, this being the
      accumulation of costs directly incurred to perform the stripping activity that improves
      access to the identified component of ore, plus an allocation of directly attributable
      overhead costs. Examples of the types of costs that would be included as directly
      attributable overhead costs include an allocation of salary costs of the mine supervisor
      overseeing that component of the mine, and the rental costs of any equipment that was
      hired specifically to perform the stripping activity. Some incidental operations may take
      place at the same time as the production stripping activity, but which are not necessary
      for the production stripping activity to continue as planned. The costs associated with
      these incidental operations shall not be included in the cost of the stripping activity asset.
      An example of such type of incidental operations would be building an access road in the
      area in which the stripping campaign is taking place.


13.   When the costs of the stripping activity asset and the inventory produced are not
      separately identifiable, the entity shall allocate the production stripping costs between the
      inventory produced and the stripping activity asset by using an allocation basis that is
      based on a relevant production measure. This production measure shall be calculated for
      the identified component of the ore body, and shall be used as a benchmark to identify
      the extent to which the additional activity of creating a future benefit has taken place.
      Examples of such measures include:

      (a)   cost of inventory produced compared with expected cost;

      (b)   volume of waste extracted compared with expected volume, for a given volume of
            ore production; and

      (c)   mineral content of the ore extracted compared with expected mineral content to be
            extracted, for a given quantity of ore produced.




13A   The production measure shall not be calculated using a basis that is based on sales values.
      A basis that is based on sales values, in the context of stripping costs, is inappropriate
      because it is not closely linked to the activity taking place. Furthermore, if the current
      sales price of the relevant material is used in determining the allocation basis, the same
      current sales price will be applied to the volume of the mineral in both the extracted ore
      and the identified component. Hence, the relevant variable will be the volume of mineral
      in both the extracted ore and the identified component, i.e., the current sales price will not
      change the allocation basis. Applying a future sales price basis involves practical
      difficulties. Identifying a future sales price for ore that will be mined in the future can be
      difficult, given the volatility of market prices for many minerals. Further complexities
      may arise when more than one mineral is present (whether by-products or joint products)
      when the ore is extracted.



      Subsequent measurement of the stripping activity asset

14.   After initial recognition, the stripping activity asset shall be carried at either its cost or its
      revalued amount less depreciation or amortisation and less impairment losses, in the same
      way as the existing asset of which it is a part.
15.   The stripping activity asset shall be 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 shall be
      applied unless another method is more appropriate.

16.   The expected useful life of the identified component of the ore body that is used to
      depreciate or amortise the stripping activity asset will differ from the expected useful life
      that is used to depreciate or amortise the mine itself and the related life-of-mine assets.
      The exception to this are those limited circumstances when the stripping activity provides
      improved access to the whole of the remaining ore body. For example, this might occur
      towards the end of a mine's useful life when the identified component represents the final
      part of the ore body to be extracted.
Appendix 1 is amended. New text is underlined and deleted text is struck through.

Appendix 1
Note: This Appendix is not a part of this Indian Accounting Standard. The purpose of this Appendix is
only to bring out the differences, if any, between Indian Accounting Standard (Ind AS) 16 and the
corresponding International Accounting Standard (IAS) 16, Property, Plant and Equipment, IFRIC 1,
Changes in Existing Decommissioning, Restoration and Similar Liabilities, and IFRIC 20, Stripping
Costs in the Production Phase of a Surface Mine.
.


Comparison with IAS 16, Property, Plant and Equipment, and IFRIC 1,
Changes in Existing Decommissioning, Restoration and Similar Liabilities and
IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine


1.     The transitional provisions given in IAS 16, and IFRIC 1 and IFRIC 20 have not been
       given in Ind AS 16, since all transitional provisions related to Ind ASs, wherever
       considered appropriate have been included in Ind AS 101, First-time Adoption of Indian
       Accounting Standards corresponding to IFRS 1, First-time Adoption of International
       Financial Reporting Standards.


2.     Different terminology is used in this standard, e.g., the term `balance sheet' is used
       instead of `Statement of financial position', and `Statement of profit and loss' is used
       instead of `Statement of comprehensive income'.





3.     Paragraph 28 has been deleted since Ind AS 20, Accounting for Government Grants and
       Disclosure of Government Assistance does not permit the option of reducing the carrying
       amount of an item of property, plant and equipment by the amount of government grant
       received in respect of such an item, which is permitted in IAS 20. However, to maintain
       consistency with paragraph numbers of IAS 16, this paragraph number is retained in Ind
       AS 16.


4      Paragraph number 64 appears as `Deleted in IAS 16. In order to maintain consistency
       with paragraph numbers of IAS 16, the paragraph number is retained in Ind AS 16.


5      Paragraphs 5 of Ind AS 16 and IE 7 of Appendix A of Ind AS 16 have been modified,
     since Ind AS 40, Investment Property, prohibits the use of fair value model.

6.    Paragraph 12 has been modified and paragraph 13A has been added to provide guidance
      with regard to the requirements contained in the paragraphs 12 and 13.
Consequential Amendments to Other Ind ASs

Ind AS 101: First-time Adoption of Indian Accounting
Standards

Appendix D

After paragraph D26, the following shall be inserted:

Stripping Costs incurred in the production phase of a surface mine


       D32 As at the beginning of the earliest period presented, any previously recognised
       asset balance that resulted from stripping activity undertaken during the production phase
       (`predecessor stripping asset') shall be reclassified as a part of an existing asset to which
       the stripping activity related, to the extent that there remains an identifiable component of
       the ore body with which the predecessor stripping asset can be associated. Such balances
       shall be depreciated or amortised over the remaining expected useful life of the identified
       component of the ore body to which each predecessor stripping asset balance relates.If
       there is no identifiable component of the ore body to which that predecessor stripping
       asset relates, it shall be recognised in opening retained earnings at the transition date.




Ind AS 1, Presentation of Financial Statements Appendix A
References to matters contained in other Indian Accounting
Standards
       ....

   5. Appendix B, Stripping Costs in the Production Phase of a Surface Mine in Ind AS 16, Property,
      Plant and Equipment
Ind AS 2: Inventories

Appendix A

References to matters contained in other Indian Accounting
Standards
          ....

       2. Appendix B, Stripping Costs in the Production Phase of a Surface Mine in Ind AS 16, Property,
          Plant and Equipment



Ind AS 38: Intangible Assets

Appendix B

References to matters contained in other Indian Accounting
Standards
....

4. Appendix B, Stripping Costs in the Production Phase of a Surface Mine in Ind AS 16, Property, Plant
and Equipment

 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2016 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - Our Team

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions