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043110

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19/02/21

16:39

Post #: 51165214
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Originally posted by hightrax: ↑

Something strange seems always to occur in mining accounting. Development costs are charged off against current revenue. For example, the ventilation shaft for Area5 at Renison is billed to current income as an expense of continuing business. Having studied Management Accounting at some length, at Macq. Uni. , the correct thing to do is use accrual accounting and as the ventilation shaft is, say going to be used over about say 4 years, a quarter of the cost of the shaft would be charged against each of those years' income. Initially the cost would be capitalised on the books.

As an example, say you constructed a motel, would you book the cost of the motel against the current year income? This would produce a catastrophic result, in the year, with a massive loss on the books. No, you would capitalise the cost, not go broke immediately, and charge about 5% pa of the cost against income over the life of the asset till it was fully paid off. That would give you a much more accurate idea of how profitable your investment was.

If you take the capital costs of opening up Area5, especially the ventilation shaft- a big expense, off the latest result, the declared profit doubles.

All the miners seem to do this, as opening up the next area is seen as a running cost. What do you think? I have never seen a book or article on accounting for mine operators, with the practices, with pros and cons, and the regulations and tax law in Australia on this. Can anyone point to anything?

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there's nothing strange about it. there will always be a difference between financial and management reporting.

mine development costs are capitalised in the balance sheet and amortised. see Note 20 of the 2020 financials. this has been done for years and is as per aasb standards.

the quarterly is a management/ investor report and is based on industry standards around AISC and AIC, albeit to asx disclosure requirements. mlx has a disclaimer at the bottom of the report

there's nothing untoward here.

Last edited by 043110: 19/02/21

MLX Price at posting: 21.5¢ Sentiment: Buy Disclosure: Held
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