Costs that have been carried forward for a specific area of interest are to be amortised against revenue earned during the production phase.How is the amortisation of the costs to be calculated?
A) Any generally accepted amortisation method may be used except for the inverted sum-of-years-digits method.
B) The costs should be amortised in proportion to the expected revenue stream, so that a higher proportion of costs are matched against higher revenue streams, especially where they occur as a result of greater quality product in the early years of production.
C) The costs should be amortised straight-line over a period of not greater than 20 years.
D) The costs should be allocated over the life of the economically recoverable reserve in terms of production output or in terms of time in circumstances such as where there is a fixed period of tenure or the limiting factor is the length of the mining right.

Question

Quizplus · Accepted Answer

The costs should be allocated over the life of the economically recoverable reserve in terms of production output or in terms of time in circumstances such as where there is a fixed period of tenure or the limiting factor is the length of the mining right. This method is the most appropriate and commonly used for calculating amortisation costs in the mining industry.

Costs That Have Been Carried Forward for a Specific Area