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IFRIC 20 Stripping Cost in the Production Phase of a Surface Mine


Within certain extractive activities it is necessary to remove waste materials (overburden) to access the commodities the entity aims to extract. The process of waste removal is referred to as stripping.


It is general practice to capitalise any stripping cost incurred during the development phase, where access to the commodity is established. The IFRIC has been informed that there is diversity in practice as to the treatment of stripping cost once production has commenced. This IFRIC aims to eliminate such diversity.

In August 2010, the IFRS Interpretations Committee issued the Draft IFRIC Interpretation Stripping Cost in the Production Phase of a Surface Mine.

EFRAG supported in its comment letter issued in December 2010 the Interpretations Committee in their efforts to address diversity in practice. However, EFRAG did not believe that the Draft Interpretation significantly reduced diversity in accounting for stripping costs. EFRAG believed that the Committee should consider requiring application of the accounting model in IAS 16 to all forms of stripping costs.

IASB issued on 19 October 2011 the IFRIC Interpretation 20 'Stripping Costs In The Production Phase Of A Surface Mine'.

IASB almost re - debated some principles previously contained into the former drafted document and considered not necessary to re - expose the draft interpretation.

IFRIC 20 provides guidance on three issues: how and when to recognise production stripping costs as an asset, how to initially measure the stripping activity asset, and how to subsequently measure the stripping activity asset.

The IFRIC becomes effective for annual periods beginning on or after 1 January 2013 although early application is allowed disclosing the fact. The IASB has granted the same relief for first time adopter by amending also IFRS 1 First Time Adoption of International financial Reporting Standards.

In November 2011, EFRAG has issued an Invitation to Comment relating to the endorsement of IFRIC 20 for use in the European Union and European Economic Area. It is consulting both on its assessment of IFRIC 20 against the technical criteria for the endorsement in the EU and on its initial assessment of the costs and benefits that would arise from the implementation and application of IFRIC 20 in the EU. EFRAG's initial assessment is that IFRIC 20 satisfies the technical criteria for EU endorsement and EFRAG should therefore recommend its endorsement.

After having consulted with its Costituents, in January EFRAG agreed to issue to the European Commission both the positive endorsement advice and the effective study report. 

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