A mining company operating in the African continent.

BUSINESS REQUIREMENT

As part of its flagship project in the Northern Cape Province of South Africa, focused on a Zinc Open Pit Mine, the company needed to address the following requirements

1. Capitalize Fixed Assets in accordance with International Financial Reporting Standards (IFRS).

2. Conduct physical verification of capitalized Fixed Assets.

3. Establish accountability and ownership of assets.

4. Physically tag the assets that were verified.

IDENTIFIED PROCESS CHALLENGES

Several challenges were identified within the process, including

1. Understanding the various phases of the project lifecycle.

2. Identifying the relevant IFRS standards applicable to the entity.

3. Identifying assets resulting from contracts aligned with Bill of Quantities (BOQ).

4. Distinguishing between Direct and Indirect Costs (Enablers) for the project.

5. Determining asset ownership for various contracts.

6. Identifying Capitalization Trigger Points.

7. Componentizing assets in accordance with IFRS principles.

8. Physical verification and tagging of assets.

9. Determining Depreciation Key and Useful life of assets before configuring them in SAP.

APPROACH AND SOLUTION DESIGN

To address these challenges, the following approach and solutions were implemented

1. Identified the project lifecycle and IFRS standards applicable at each stage.

2. Determined Capitalization Trigger Points for Mining Assets and Non-Mining Assets based on technical achievements.

3. Reviewed contracts and BOQ, identifying assets through discussions with users.

4. Phased Project Capitalization, covering Mining Assets and Non-Mining Assets as they were put to use.

5. Ensured capitalization aligned with IFRS principles for specific scenarios such as Insurance Spares, Borrowing Costs, Pre-Operative Expenses, Pre-Operative Revenue, Exploration, and Feasibility Costs.

6. Established parent-child relationships for identified assets and considered componentization.

7. Conducted physical asset verification, obtaining user sign-offs to confirm ownership.

BUSINESS BENEFIT AND RESULT

The results of this engagement included

1. Delivery of a comprehensive Fixed Asset Register (FAR) in Excel, compliant with IFRS requirements.

2. Upload of the FAR into SAP, defining Depreciation Key, Useful Life, and other mandatory fields.

3. Delivery of a physical verification report to the entity.