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Update of US and IFRSUpdate of US and IFRSMining GAAPMining GAAP

September 23September 23rdrd, 2010, 2010

Presenters:Presenters:PaulPaul FitchettFitchettJames TerryJames Terry

PricewaterhouseCoopers

- Convergence Timeline- IFRS Standards Effective in 2010- US GAAP Standards Effective in 2010- US Financial Statement Updates- Upcoming US GAAP Updates- Upcoming IFRS Projects- Key IFRS / US GAAP Differences

Contents

Slide 2

Convergence Timeline

Slide 3

Currently Anticipated US GAAP / IFRS Convergence Timeline

* The consolidation project has been divided into two projects: one focused on investment companies and one that is more comprehensive.The FASB will decide how it wants to proceed on a comprehensive project after it performs additional stakeholder outreach.

** These are IASB projects that have the potential to impact the views of the FASB as it evaluates existing U.S. GAAP in these areas.

*** IASB timeline. The FASB will decide, once the IASB issues its exposure draft, how best to proceed and plans to obtain stakeholderfeedback on the IASB proposal.

Emissions trading schemes

IASB - contingencies**

IASB - insurance contracts***

IASB - postemployment benefits**

Fin. instr. with characteristics of equity

Discontinuedoperations

Financial statement presentation

Consolidation - investment companies*

Balance sheet netting

Fair value measurement

Statement of comprehensive income

Leases

Revenuerecognition

Financial instruments

Pre-exposuredraft deliberations Exposuredraft issuedor expected Comment periodandredeliberations Finalstandardexpected

Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q42011 2012

Slide 4

Convergence Resources

- www.pwc.com/usgaapconvergence.com

- Upcoming webcasts

- Publications

Slide 5

IFRS Standards Effective in 2010

Slide 6


• Additional exemptions added for entities:

− Applying full cost accounting for oil and gas assets from retrospective application of IFRS

− With existing lease contracts from reassessing the classification of those contracts in accordance with IFRIC 4

• Effective for years commencing after January 1, 2010

IFRS 1 – Additional Exemptions for First-time Adopters

Slide 7


• New requirements related to business combinations and non-controllinginterests

• Key Changes:

− Definition of a business including additional guidance for development stage enterprises

− Consideration

− Fair value of assets and liabilities acquired

− Step acquisition and non-controlling interest

− Post-acquisition accounting

− Disclosures

• Effective for annual reporting periods commencing after July 1, 2009

IFRS 3 (Revised) & Business Combinations & IAS 27 (Revised)

Consolidated and Separate Financial Statements

Slide 8


• IFRS 2: Share-based Payments

• IFRS 5: Non-current Assets Held for Sale and DiscontinuedOperations

• IFRS 8: Operating Segments

• IAS 1: Presentation of Financial Statements

• IAS 17: Leases

• IAS 36: Revenue

• IAS 38: Impairment of Assets

• IAS 39: Financial Instruments

• IFRIC 9: Reassessment of Embedded Derivatives

• IFRIC 16: Hedges of Net Investment in a Foreign Operation

IFRS Annual Improvements Project

Slide 9

US GAAP Standards Effective in 2010

Slide 10

HealthCare Reform

Patient Protection and Affordable Care Act (the PPACA) - March 23, 2010,Health Care and Education Reconciliation Act of 2010 (HCERA) - March 30,2010

• Many provisions of the Act do not take effect until years in the future;however, their expected impact must be reflected in current reporting periods.

− Postretirement benefits accounting

• Plan changes, once adopted, should be accounted for as plan amendmentswith the effect on the APBO accounted for as prior service cost/credit

Slide 11

Dodd-Frank Act

Dodd-Frank Wall Street Reform and Consumer Protection Act – July 21, 2010

• Requires over 533 rules, 60 studies, and 93 reports to clarify and implementthe Act’s requirements:

− Significant uncertainty regarding timing of implementation

• Exempts non-accelerated filers from compliance with SOX Section 404(b)requirements (still requires management attestation)

• Includes clawback provisions into incentive compensation for executiveofficers triggered by certain accounting restatements

Slide 12

Dodd-Frank Act (continued)

• Section 1504

− Payments made by the registrant to US and foreign governments

− Likely 2012 requirement

• Section 1503

− Mine safety disclosure information and pending actions before the Federal Mine Safety and Health Review Commission

− Currently effective

• Section 1502

− Disclosure of “conflict minerals” originating in the DRC


Slide 12

Example Form 8-K disclosure – MSHANewmont Mining Corporation

Slide 13

Example Form 10-Q / 10-K disclosure – SafetyCloud Peak Energy (Item 5 – Other Information)

Slide 14

Dodd-Frank Act (continued)

• Section 1504

− Payments made by the registrant to US and foreign governments


• Section 1503

− Mine safety disclosure information and pending actions before the Federal Mine Safety and Health Review Commission

− Currently effective

• Section 1502

− Disclosure of “conflict minerals” originating in the DRC


Slide 12

Transfers and Servicing

ASU 2009-16, Transfers and Servicing (Topic 860): Accounting for Transfersof Financial Assets

• Recognition: on- or off-balance sheet treatment?

− Has a portion of the receivable been transferred?

− Transfer when consideration includes a deferred purchase price (DPP)

• DPP needs to be subsequently accounted under Investments-Debt andequity securities guidance

• Statement of Cash Flow – Operating or Investing?

− Receivable sold in entirety for cash and DPP

− SEC staff views: may be classified as operating subject to an accounting policy election

Slide 15

Consolidation

ASU 2009-17, Consolidation (ASC Topic 810): Improvements toFinancial Reporting by Enterprises Involved with VariableInterest Entities

• Significantly changes the consolidation rules as they relate tovariable interest entities (VIEs)

− Effective January 1, 2010 for calendar-year companies

− Changes the model for who should consolidate a VIE

− Addresses how often this assessment should be performed

• There are numerous implementation issues that companiesneed to consider triggered by the conclusion to consolidate

Slide 16

Consolidation (continued)

• ASU 2010-02, Consolidation (ASC Topic 810): Accounting and Reporting forDecreases in Ownership of a Subsidiary – a Scope Clarification

− Clarifies what decrease in ownership provisions apply to

− Clarifies what decrease in ownership provisions do not apply to

• Internal controls of consolidated VIE to be assessed

Slide 17

Fair Value

• ASU 2010-06 requires the following new disclosures:

− Details of significant transfers in and out of Level 1 and Level 2 measurements and the reasons for the transfers; and

− Gross presentation of activity within the Level 3 roll forward, presenting separately purchases, sales, issuances, and settlements.

• Requires fair value disclosures by class of assets and liabilities rather thanby major category, based on the nature and risks of the assets and liabilities.

• Reporting entities must disclose the valuation technique used and the inputsused in determining the fair values of each class of assets and liabilities

• The ASU was effective for 2009, except for the gross presentation of theLevel 3 roll forward, which is required for 2010.

Slide 18

Highly Inflationary Economies - Venezuela

ASU 2010-19, Foreign Currency (Topic 830) Foreign Currency Issues:Multiple Foreign Currency Exchange Rates

• Venezuela has met the threshold for being a highly inflationary, andtherefore calendar year entities will begin applying highly inflationaryaccounting beginning January 1, 2010.

• SEC has requested enhanced disclosures.

• Application of ASC 30-10-45-11 accounting.

Slide 19

Stock Compensation

ASU 2010-13, Compensation – Stock Compensation (Topic 718): Effect ofDenominating the Exercise Price of a Share-Based Payment Award in theCurrency of the Market in Which the Underlying Equity Security Trades

• Clarifies classification as equity for certain awards

Slide 20

Distributions to Shareholders

ASU 2010-01, Equity, (ASC Topic 505): Accounting for Distributions toShareholders with Components of Stock and Cash

• Distinction between share issuance and stock dividend.

• Effective for interim and annual periods ending on or after December 15,2009, and should be applied on a retrospective basis.

Slide 21

US Financial Statement Updates

Slide 22

Subsequent Events

ASU 2010-09, Subsequent Events (ASC Topic 855): Amendments to CertainRecognition and Disclosure Requirements

• Removed requirement for SEC filers to disclose the date through which anentity has evaluated subsequent events

• If the financial statements of an entity, other than an SEC filer, are revised,as a result of (a) correction of an error or (b) retrospective application of U.S.generally accepted accounting principles, the entity should retain the initialdate, but also disclose the date through which subsequent events havebeen evaluated in the revised financial statements

Slide 23

Climate Change

Interpretive Release No. 33-9106, Commission Guidance RegardingDisclosure Related to Climate Change

• Obligation under existing federal securities laws and regulations to considerclimate change and its consequences in disclosures

• Disclosure requirements may require a company to disclose the impact thatbusiness or legal developments related to climate change may have on thebusiness:

− These disclosure rules cover a company’s risk factors, business description, legal proceedings and management discussion and analysis.

Slide 24

Non-GAAP Measures

• Updated SEC Guidance – 32 Compliance and Disclosure Interpretations

• Encourages consistency in all communications.

• Removes certain constraints that discouraged companies from disclosingimportant non-GAAP measures in SEC filings (e.g. excluding recurring items)

• Companies prohibited from disclosing misleading non-GAAP measures andmust continue to present the most directly comparable GAAP measures withequal or greater prominence, along with a reconciliation.

• Required to disclose the reason why the non-GAAP measures provideuseful information to investors and any other material ways managementuses the measures (if any).

Slide 25

XBRL (eXtensible Business Reporting Language)

Phase-in Schedule:

Date Issuer Description

June 15, 2009 Domestic and Foreign Large Accelerated Filers using US GAAPwith Worldwide Public Common Equity Float above $5 billion as ofthe End of the Second Fiscal Quarter of their most recentlycompleted Fiscal Year

June 15, 2010 All Other Domestic and Large Accelerated Filers using USGAAP

June 15, 2011 All Remaining Filers using US GAAP, including Smaller ReportingCompanies

June 15, 2011 Foreign Private Issuers with Financial Statements prepared inaccordance with IFRS as issued by the IASB

Slide 26

Proxy Disclosure Enhancements

• Effective date: February 28, 2010

• Amendments require enhanced disclosures in the areas of:

− compensation policies and practices that present material risks to the company;

− stock and option awards of executives and directors;

− director and nominee qualifications and legal proceedings;

− board leadership structure;

− the board’s role in risk oversight; and

− potential conflicts of interest of compensation consultants that advise companies and their boards of directors

Slide 27

Statement of Comprehensive Income

• Joint Project of the IASB and FASB

• On May 26, 2010, the Board issued a proposed Accounting StandardsUpdate, Statement of Comprehensive Income. The comment period ended onSeptember 30, 2010.

See further detail in IFRS update

Slide 28

Upcoming US GAAP Updates

Slide 29

Accounting for Multiple Foreign Currency Exchange RatesEITF Issue

• In countries with currency exchange controls, a multiple exchange ratesystem sometimes exists where companies are able to access certainexchange rates for different types of transactions.

• Should a company re-measure transactions at one rate and translate itslocal currency financial statements at a different rate?

• Task Force to consider whether a company should use multiple exchangerates when a company has the intent and ability to access multiple rates, orwhen the existence of multiple exchange rates represents an unusualcircumstance which might indicate that the a company should use the samerate for re-measurement and translation.

− The Task Force asked the FASB staff to develop factors to consider when assessing whether an unusual circumstance has occurred.

Slide 30

Loss ContingenciesFASB Exposure Draft

• Most common contingencies expected to be in scope are litigation,environmental remediation, withdrawal liabilities related to a multi-employerpension plan, self-insurance liabilities, certain non-income-based taxuncertainties, and warranty liabilities

• A company should disclose publicly available information (quantitative andqualitative) to better explain the nature and potential magnitude of a losscontingency.

• A company may aggregate disclosures about similar contingencies (forexample, by class or type). Basis for aggregation should also be disclosed.

• Disclosure of certain remote contingencies may be necessary to alert usersabout a company's vulnerability to a potential severe impact due to thecontingency's nature, potential timing, or potential magnitude.

Slide 31

Goodwill ImpairmentEITF Issue

• Goodwill reminders and tips

− Fresh look at determining the fair value of your reporting units

− Assignment of assets and liabilities

− Include deferred tax assets and liabilities in the carrying value of a reporting unit in step one of the goodwill impairment test

− In step two of the goodwill impairment test, first measure the fair value of recognized and unrecognized assets and liabilities

− At risk for failing step one of the goodwill impairment test? Consider forward looking disclosures

Slide 32

IFRS Projects and Pending Standards

Slide 33


• Income Taxes

• Lease Accounting

• Joint Arrangements

• Revenue Recognition

• Financial Instruments

• Measurement of Liabilities

• Employee Benefits

• Consolidation

• Financial Statement Presentation

IASB Proposed Timeline for Changes –What Impacts Mining?

Slide 34


• Convergence project with FASB

• Exposure Draft issued March 31, 2009

• Decided subsequently not to proceed with Exposure Draft following thecomment period

• IASB is considering limited scope amendments to IAS 12

• An Exposure Draft of the limited scope amendments is expected in the thirdor fourth quarter of 2010

• Final limited scope amendments to IAS 12 are expected in the first orsecond quarter of 2011

Income Taxes – Exposure Draft Withdrawn

Slide 35


• IASB is considering limited scope amendments to IAS 12 in the followingareas:

− Uncertain Tax Positions (UTPs)

− Deferred tax on re-measurement of investment property at fair value

− Recognition of a deferred tax asset in full and an offsetting valuation allowance to the extent necessary

− Guidance on assessing the need for a valuation allowance

− Guidance on the meaning of substantive enactment

− The allocation of current and deferred taxes within a group that files a consolidated tax return

Income Taxes– Exposure Draft Withdrawn

Slide 36


• Single right-of-use model proposed, rather than finance vs. operating leasemodel

• Proposed model reflects asset and liabilities arising from all lease contracts

• Includes contingent cash flows in measurement

• Adjust for changes in estimates and re-measurements

• Exposure Draft is open for comment until December 15, 2010

Lease Accounting – Exposure Draft (August 2010)Lessee Accounting

Slide 37


• Standard expected Q3 2010

• Definition of a joint venture changing

• Proportionate consolidation of corporate joint ventures no longer an option

• Substance over from approach

• Transitional provisions to ease application

Joint Arrangements – Exposure Draft (September 2007)

Slide 38


• Single revenue recognition model

• Core principal is recognize revenue when goods or services are transferredto the customer in the amount of consideration the Company expects toreceive from the customer

• Identify separate performance obligations for distinct goods and services

• Probability weighted estimates of the consideration expected to be received

• Customer credit risk in measurement of revenue

• Allocate transaction price in proportion to estimated stand-alone price

• Expense acquisition costs

Revenue Recognition – Exposure Draft (June 2010)

Slide 39


What’s Changing under IFRS for Financial Instruments?

IFRSChanges

Classification &Measurement

Impairment

HedgeAccounting

Others

Derecognition

Fair ValueMeasurement

• IFRS 9: Financial Instruments:Mixed Measurement approachbased on business model andfinancial asset characteristics

• Financial Liabilities ExposureDraft: Fair Value Options

• Incurred loss replacedwith expected cashflow approach

• Earlier recognition ofcredit losses

• Extensive disclosures

• A single approachto derecognitionbased on control

• Aim to simplify requirements

• May replace fair value hedgeaccounting with an approachsimilar to cash flow hedgeaccounting

• Clarifies the definition of fairvalue and enhances disclosures

• Largely consistent with FAS 157and IASB’s Expert AdvisoryPanel on measuring FV inInactive Markets

• Interaction with otherdevelopments

− Debt vs Equity

− Consolidation

− Insurance Contracts

Slide 40


• ‘Probability of Outflows’ criterion will be removed

• Account for uncertainty in amount and timing of outflows by using aprobability weighed average

• The amount recognized is the amount of the entity would rationally pay atthe measurement date to be relieved of the liability

Measurement of Liabilities – Exposure Draft (January 2010)

Slide 41


• Removal of corridor approach, immediate recognition in OCI required

• Presentation consistency to increase comparability

• Enhanced disclosures focused on risk

Defined Benefit Plans – Exposure Draft (April 2010)

Slide 42


• Standard expected Q4 2010

• Replace IAS 27 and SIC-12 with one source of guidance on consolidation

• Control is “the power to direct the activities of another entity to generatereturns for the reporting entity”

• Guidance on control without majority of voting rights, investment companies,structured entities and agency / principal relationships

Consolidation – Exposure Draft (December 2008)

Slide 43


• Statement of Comprehensive Income – Exposure Draft (May 2010)

− Required profit or loss and OCI to be shown as separate components of the statement of comprehensive income

− Require separate presentation of OCI items that will and will not be recycled

• IAS 1 / IAS 7 – Exposure Draft scheduled for Q2 2010

− Comprehensive change in format of primary financial statements

− Proposal to present primary financial statements by operating, investing and financing activities similar to current Statement of Cash Flows

• IFRS 5 – Exposure Draft (September 2008)

− Convergence with the FASB on definition of discontinued operations

Financial Statement Presentation Changes

Slide 44


• Harmonized global reserves / resources definitions

• All exploration, evaluation and subsequent development expenditures arecapitalized when legal right to explore is acquired

• More onerous and details disclosures required (current or fair values ofreserves and resources, production revenues by commodity, disaggregatedcosts summaries)

Extractive Activities Project – Discussion Paper (April 2010)

Slide 45

Key IFRS / US GAAP Differences

Slide 46


• Exploration and Evaluation Costs

• Deferred Stripping

• Joint Arrangements

• Income Taxes

• Impairment

• Mine Closure / Asset Retirement Obligations

Common Mining US GAAP vs. IFRS Differences

Slide 47


• Expense under US GAAP until reserves and resources declared

• IFRS 6 allows the continuation of an entity’s existing policy, which includesthe capitalization of exploration expenditure

• Extractive industries project will supersede IFRS 6 when final standardissued

Exploration and Evaluation Expenditure

Slide 48


• Varied practice under IFRS

• US GAAP (EITF No. 04-6) specifies stripping costs incurred duringproduction are included in the cost of inventory

• Canadian GAAP (EIC 160) requires capitalization if there is a ‘betterment’ ofan asset

• IFRIC currently considering the issue

• Staff Proposal:

− Will allow capitalization of stripping costs in the production phase of a surface mine if it adds to an existing asset

− Unit of account is the stripping campaign

− Strip ratio approach to be disallowed

− Cost of stripping campaign allocation to specific section of ore body

− Prospective application

Stripping Costs – Draft IFRIC (expected Q3 2010)

Slide 49


• Under US GAAP, the entity must first be considered if it is a VIE

• US GAAP generally only allows equity accounting

• Currently, equity accounting and proportionate consolidation is stillacceptable under IFRS

• Convergence project between IASB and FASB will harmonize new standard

Joint Arrangements

Slide 50


• Key Differences:

− No guidance on uncertain tax positions

− No exemption for recognition of temporary differences on non-monetary assets

− Deferred tax on intragroup profits

− Initial acquisition exemption

− Tax rates used may be different under IFRS and US GAAP

− Generally assets and liabilities have only one tax basis under US GAAP, whereas under IFRS there may be more than one

− Under IFRS all subsequent movements in equity-related deferred tax assets and liabilities are traced back to equity, whereas under US GAAP itis generally recognized through the income statement

− IFRS requires all deferred taxes to be presented as non-current

Income Taxes

Slide 51


• Need to revisit grouping of assets into CGUs, which could result inimpairment testing at a lower level than that currently required under USGAAP

• IFRS uses a one-step test (based on discounted cash flows or fair valueless costs to sell) as opposed to the two-step approach required under USGAAP

• Reversals of impairment are prohibited under US GAAP, but are requiredunder IFRS when certain conditions are met (excluding goodwill)

Impairment Testing

Slide 52


• Includes constructive obligations, not just legal obligations

• Re-measure the obligation at each reporting period, using prevailingassumptions, including discount rate

Mine Closure and Rehabilitation Provisions

Slide 53

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