Stripping Activity Asset — Open Pit Waste Removal
Capitalising waste rock removal costs that provide access to ore to be extracted in future periods.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Stripping Activity Asset (PPE) | Asset (+) | 5,500,000.00 | - |
| Mining Operations Cost (Stripping) | Expense (-) | - | 5,500,000.00 |
💡 Accountant's Note
In open pit mining, stripping (removing overburden/waste rock to access ore) generates significant costs. Under IFRIC 20, stripping costs during production that provide access to ore to be mined in future periods (improved access to ore body) are capitalised as a Stripping Activity Asset (SAA) and amortised over the ore life that benefits from the stripping. Stripping costs that only provide access to ore being mined now are expensed as production costs.
Practitioner & Systems Framework
💻 ERP Architecture
Stripping costs are separated in the ERP between 'current period ore access' (expensed) and 'future ore access' (capitalised as SAA). The separation requires the mine's geological and mine planning team to identify which stripping activity improves access to future ore. The waste-to-ore ratio (strip ratio) is monitored continuously — periods of high strip ratio (more waste removed per tonne of ore mined) indicate that stripping activity asset capitalisation is likely. The SAA is amortised using the expected volumes of ore to be mined from the improved component of the ore body, using the units-of-production method.
⚠️ Audit Flags
Auditors test the technical basis for SAA capitalisation — the mine's geologist or mine planner must provide documentation identifying which stripping activity benefits future ore access. Test the strip ratio in capitalisation periods against the mine's average strip ratio — unusually high capitalisation during low-strip-ratio periods is a red flag. Review the amortisation rate against the mine plan — if the ore body benefited by the stripping is not extracted on schedule, the SAA is potentially over-capitalised. Confirm that the SAA is not amortised faster than the ore it provides access to is mined.
📄 Required Documentation
IFRIC 20 accounting policy, mine plan showing the ore component accessed by each stripping campaign, strip ratio analysis (period vs. LOM average), SAA capitalisation approval by mine technical team, SAA amortisation schedule (units-of-production), ore production from the benefited component, and mine planning software output (Surpac, Vulcan, Datamine).
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