BISICHI MINING PLC ANNUAL REPORT 2017

Financial statements Group accounting policies
The definition of control assumes the simultaneous
fulfilment of the following three criteria:
• The parent company holds decision-making
power over the relevant activities of the investee,
• The parent company has rights to variable
returns from the investee, and
• The parent company can use its decisionmaking
power to affect the variable returns.
Investees are analysed for their relevant activities
and variable returns, and the link between the
variable returns and the extent to which their
relevant activities could be influenced in order to
ensure the definition is correctly applied.
Revenue
Revenue comprises sales of coal and property
rental income. Revenue is recognised when the
customer has a legally binding obligation to settle
under the terms of the contract and has assumed
all significant risks and rewards of ownership.
Revenue is only recognised on individual sales of
coal when all of the significant risks and rewards
of ownership have been transferred to a third
party. Export revenue is generally recognised
when the product is delivered to the export
terminal location specified by the customer, at
which point the customer assumes risks and
rewards under the contract. Domestic coal
revenues are generally recognised on collection
by the customer from the mine when loaded
into transport, where the customer pays the
transportation costs.
Rental income which excludes services charges
recoverable from tenants, is recognised in the
group income statement on a straight-line basis
over the term of the lease. This includes the
effect of lease incentives.
Expenditure
Expenditure is recognised in respect of goods
and services received. Where coal is purchased
from third parties at point of extraction the
expenditure is only recognised when the coal is
extracted and all of the significant risks and
rewards of ownership have been transferred.
Investment properties
Investment properties comprise freehold and
long leasehold land and buildings. Investment
properties are carried at fair value in accordance
with IAS 40 ‘Investment Properties’. Properties
are recognised as investment properties when
held for long-term rental yields, and after
consideration has been given to a number of
factors including length of lease, quality of tenant
and covenant, value of lease, management
intention for future use of property, planning
consents and percentage of property leased.
Investment properties are revalued annually by
professional external surveyors and included in
the balance sheet at their fair value. Gains or
losses arising from changes in the fair values of
assets are recognised in the consolidated
income statement in the period to which they
relate. In accordance with IAS 40, investment
properties are not depreciated. The fair value of
the head leases is the net present value of the
current head rent payable on leasehold
properties until the expiry of the lease.
Mining reserves, plant and equipment
The cost of property, plant and equipment
comprises its purchase price and any costs
directly attributable to bringing the asset to the
location and condition necessary for it to be
capable of operating in accordance with agreed
specifications. Freehold land is not depreciated.
Other property, plant and equipment is stated
at historical cost less accumulated depreciation.
The cost recognised includes the recognition of
any decommissioning assets related to
property, plant and equipment.
Mine reserves and development cost
The purpose of mine development is to establish
secure working conditions and infrastructure to
allow the safe and efficient extraction of recoverable
reserves. Depreciation on mine development is
not charged until production commences or the
assets are put to use. On commencement of full
commercial production, depreciation is charged
over the life of the associated mine reserves
extractable using the asset on a unit of production
basis. The unit of production calculation is based
on tonnes mined as a ratio to proven and
probable reserves and also includes future
forecast capital expenditure. The cost recognised
includes the recognition of any decommissioning
assets related to mine development.
Post production stripping
In surface mining operations, the group may
find it necessary to remove waste materials to
gain access to coal reserves prior to and after
production commences. Prior to production
commencing, stripping costs are capitalised
until the point where the overburden has been
removed and access to the coal seam
commences. Subsequent to production, waste
stripping continues as part of extraction process
as a mining production activity. There are two
benefits accruing to the group from stripping
activity during the production phase: extraction
of coal that can be used to produce inventory
and improved access to further quantities of
material that will be mined in future periods.
Economic coal extracted is accounted for as
inventory. The production stripping costs relating
to improved access to further quantities in future
periods are capitalised as a stripping activity
asset, if and only if, all of the following are met:
• it is probable that the future economic benefit
associated with the stripping activity will flow
to the group;
• the group can identify the component of the
ore body for which access has been
improved; and
• the costs relating to the stripping activity
associated with that component or
components can be measured reliably.
In determining the relevant component of the
coal reserve for which access is improved, the
group componentises its mine into
geographically distinct sections or phases to
which the stripping activities being undertaken
within that component are allocated. Such
phases are determined based on assessment
of factors such as geology and mine planning.
The group depreciates deferred costs
capitalised as stripping assets on a unit of
production method, with reference the tons
mined and reserve of the relevant ore body
component or phase. The cost is recognised
within Mine development costs within the
balance sheet.
Bisichi Mining PLC
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