Lease accounting for the mining and chemicals industries will change 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 will 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.