Accounting of expenses for excavation work in the extraction of minerals: normative regulation

Abstract

It has been found that one of the methods of reducing the cost of overburden works is to increase the efficiency of fixed assets in all business processes of overburden works, which requires periodic control of their technical condition to ensure the achievement of the expected capacity of mineral extraction and timely identification of the need for repairs to maintain them in working order. The need to take into account when developing the classification of costs for excavation works in the extraction of minerals is substantiated, the order of reflection in the accounting of benefits in the extraction of minerals: capitalized costs (assets of excavation works) and current costs (stocks of minerals), established by the Interpretation of IFRIC 20 «Expenses for excavation works on at the mining stage in the career». It was established that IFRS 6 «Exploration and evaluation of mineral reserves» regulates the following issues regarding the accounting of expenses for exploration and evaluation of mineral reserves: initial evaluation of exploration and evaluation assets at cost; valuation after recognition of exploration assets and valuation under the cost or revaluation model; changes in accounting policies, if such a change makes financial reporting more relevant and no less reliable; classification and reclassification of exploration and evaluation assets into tangible and intangible assets; assessment of impairment of exploration assets, when facts and circumstances suggest that the book value of an exploration and evaluation asset may exceed the amount of its expected recovery; disclosure of amounts recognized in its financial statements as a result of exploration and evaluation of mineral reserves. Interpretation IFRIC 20 «Expenses for excavation work at the extraction stage in the quarry» regulates the procedure for recognizing the asset of excavation work, in particular recognition of expenses for excavation work at the extraction stage as an asset; initial assessment of the asset of excavation works at cost price; further valuation of the overburden asset at cost, or at its revalued cost less depreciation and less impairment losses, in the same manner as the existing asset of which it is a part.