ASC 360-930

Extractive Activities—Mining

360 Property, Plant, and Equipment

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In brief

IntermediateImpairment Inventory and PP&E Industry-specific Subsequent measurement

This Subtopic gives mining-specific guidance on accounting for mineral rights and mining assets within Property, Plant, and Equipment. It clarifies that undeveloped land does not qualify for interest capitalization, how mineral resource asset current costs are measured when current cost disclosures are provided, and—most importantly—that impairment cash flow estimates for mining assets must include value beyond proven and probable reserves (with the related development and extraction outflows) and must reflect market-participant assumptions about mineral price fluctuations.

Key points (7)

Land not undergoing developmental activities necessary to ready it for its intended use is not a qualifying asset for interest capitalization (360-930-25-1; see 835-20-15-8).
When current costs are presented under Subtopic 255-10, the cost of mineral resource assets is determined by current market buying prices or by the current cost of finding and developing mineral reserves (360-930-25-2).
Cash flows associated with value beyond proven and probable reserves must be included in both undiscounted and discounted future cash flow estimates used to test a mining asset for impairment under 360-10-15-3 through 15-5 (360-930-35-1).
Those estimates must also include the estimated cash outflows required to develop and extract the value beyond proven and probable reserves (360-930-35-1).
An entity must consider anticipated fluctuations in mineral market prices, using estimates consistent with those of a market participant (360-930-35-2).
Entities generally should consider all available information—current prices, historical averages, and forward pricing curves—and it is generally inappropriate to use a single factor such as current price or a historical average as a surrogate for future prices (360-930-35-2).
Marketplace price assumptions should be consistent with the entity's operating plans and financial projections underlying other aspects of the impairment analysis, such as the amount and timing of production (360-930-35-2).

For students. The signature rule here is counterintuitive: even though "value beyond proven and probable reserves" is generally not recognized as a separate asset, its cash inflows (and the outflows to develop and extract it) are included in the impairment test cash flows for mining assets. Students also often wrongly assume a single spot price or historical average is an acceptable shortcut for future mineral prices—the guidance says a market participant would consider all available pricing information.

mineral rights value beyond proven and probable reserves mining asset impairment interest capitalization qualifying asset market participant assumptions mineral price forecasts current cost of mineral resource assets

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360-930-05Overview and Background

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360-930-05-1

This Subtopic addresses the accounting for mineral rights.

360-930-15Scope and Scope Exceptions

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Overall Guidance

360-930-15-1

This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 930-10-15.

360-930-25Recognition

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360-930-25-1

Land that is not undergoing developmental activities necessary to get it ready for its intended use is not an asset that qualifies for interest capitalization. See paragraph 835-20-15-8 for interest capitalization.

360-930-25-2

If current costs are provided in accordance with Subtopic 255-10 the costs of mineral resource assets is determined by current market buying prices or by the current cost of finding and developing mineral reserves. See Section 255-10-50 for current cost accounting.

360-930-35Subsequent Measurement

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Asset Impairment

360-930-35-1

An entity shall include the cash flows associated with value beyond proven and probable reserves in estimates of future cash flows (both undiscounted and discounted) used for determining whether a mining asset is impaired under paragraphs

360-10-15-3 through 15-5

. Estimated cash flows also shall include the estimated cash outflows required to develop and extract the value beyond proven and probable reserves.

360-930-35-2

An entity shall consider the effects of anticipated fluctuations in the market price of minerals when estimating future cash flows (both undiscounted and discounted) used for determining whether a mining asset is impaired under the Impairment or Disposal of Long-Lived Assets Subsections of Subtopic 360-10. Estimates of those effects shall be consistent with estimates of a market participant. Generally, an entity shall consider all available information including current prices, historical averages, and forward pricing curves. Those marketplace assumptions typically shall be consistent with an entity's operating plans and financial projections underlying other aspects of the impairment analysis (for example, amount and timing of production). It generally would be inappropriate for an entity to use a single factor, such as the current price or a historical average, as a surrogate for estimating future prices without considering other information that a market participant would consider.