Lease accounting for the mining and chemicals industries changes with the new standards. Mining and chemicals companies lease a diverse range of assets from mining equipment to storage and transportation.
The new leasing standards require mining and chemicals companies to update their accounting policies based on the new principles. In some cases, extensive analysis may be required to arrive at judgments on how to apply the standards to certain lease types.
1. Which types of leases are in scope and out of scope under the new standards? Understand not only traditional property, plant, and equipment, but also mineral rights.
2. Do agreements to use part of an asset’s total capacity constitute leases under the new guidelines? Consider storage units, pipeline use, and railcar transport.
3. How are lease and non-lease components separated in contracts? Some complex arrangements for mining and chemicals companies may contain lease components, for assets like equipment, and non-lease components, for assets like storage units.
EY explains the changes ahead for mining and metals industries with the new lease accounting standard, such as their commercial leasing decisions, joint arrangements, and more.
In their "Technical Line" series, EY details how FASB's new lease accounting standards will affect the mining and metals industry, providing examples on how these changes could develop and the actions this industry should take with implementation.
KPMG delves into the impacts of the new lease accounting standards on mining and metals companies, including factors such as lease definition, sale and leaseback accounting, and practical exedients.
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