It is reasonable to say that the mining sector is far less impacted by IFRS 15 than sectors such as telecoms, software, construction and indeed mining service companies. However, it is wrong to assume that miners are not impacted by this new standard at all. Like other entities, mining companies need to consider whether the contract is within the scope of the standard, and work through the five step model.
The origins of IFRS 9 stem from the global financial crisis and is a very significant standard for the banking sector. Whilst the impact on IFRS 9 is not as great on non-financial entities, those in the natural resources sector should not ignore its impacts.
The key features of IFRS 9 to be considered by those in the natural resources sector include:
IFRS 16 is the new accounting standard that is likely to cause significant changes to miners’ financial statements. It requires miners to recognise most leases on their balance sheet as lease liabilities, with a corresponding right-of-use asset. The profit or loss recognition pattern will change because interest and depreciation expenses are recognised separately in the profit or loss rather than the straight-line operating lease expense.