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Gold/Mining/Energy : Gold and Silver Juniors, Mid-tiers and Producers -- Ignore unavailable to you. Want to Upgrade?

To: LoneClone who wrote (27791)	12/14/2006 10:30:30 AM
From: LoneClone	Respond to of 78424

Miners Cool on Reserves Disclosure By Charlotte Mathews 13 Dec 2006 at 06:37 AM EST resourceinvestor.com JOHANNESBURG (Business Day) -- The mining industry has given the thumbs down to a suggestion by the accounting profession that a fair value for mineral reserves and resources be included in their financial results. The next step for a project team set up by the International Accounting Standards Board (IASB) to review the relevance of resource companies’ financial reporting will be to canvass the views of users, such as shareholders, analysts and the media, on what changes are needed to make mining companies’ accounts more relevant, consistent and comparable. KPMG director of energy and natural resources, Ian Kramer, said yesterday there was a fundamental inconsistency in mining companies’ financial statements at present. When a company spends money developing a mining project, it brings the historical costs of the infrastructure on to the balance sheet but does not reflect fair value for the mineral reserves and resources of the project. It is when one mining company buys another in a business combination that it reflects the fair value of the acquired company’s mineral reserves and resources on its balance sheet. That inconsistency makes it difficult to value mining companies properly and also to compare one company, which has made acquisitions, with another which has not, he said. Although mining companies have increasingly over the years defined and valued their liabilities, such as environmental and derivative commitments, their assets were not being fully valued. About three years ago the IASB, the global body responsible for determining and harmonising accounting practices, set up the extractive industries research project team with representatives drawn from Norway, Canada, Australia and SA. KPMG senior manager Riaan Davel, who is part of the South African team, said the team presented a report to the IASB in October on the possibility of reflecting the fair value of mineral reserves and resources on the balance sheet. They found, after canvassing the views of the mining industry, there was resistance to accounting a fair value for mineral reserves and resources because of the extra work it would entail every quarter, half-year and year end. Pursuing the fair value principle would alienate the accounting fraternity from the mining industry, they concluded. The team also highlighted the problem of small inconsistencies in definitions between different countries’ mineral classification bodies, such as the South African Mineral Resources Committee (Samrec) and Australia’s Joint Ore Reserve Committee (JORC). An initiative is under way to harmonise those definitions and also eliminate inconsistencies between the definitions used in the minerals industry and those used in the oil and gas industry. Based on discussions with the IASB in October, Kramer and Davel believe it would be difficult to force mining companies to apply fair value accounting to mineral reserves and resources. But they agree with the IASB that it would be useful to review the industry’s use of value-based information and find out what improvements users would like to ensure that financial statements could help them to make investment decisions, Davel said.