Canadian Mining Companies Lead the World in Key Disclosures: KPMG Survey

Canadian Mining Companies Lead the World in Key Disclosures: KPMG Survey

Canadian mining companies are leading the industry worldwide in certain areas of financial reporting, but the transition to International Financial Reporting Standards is an emerging challenge, according to a survey released by KPMG.

The 2006 KPMG International report, entitled Global Mining Reporting Survey, found that Canada is ahead of the pack in disclosing reserve and resource information and cash production costs, beating out the other countries in the survey, including South Africa, the United Kingdom, Australia and the United States. In reserve and resource information and cash production costs, Canadian companies disclosed more detailed information than those from other countries. The Canadian companies surveyed included Barrick Gold Corporation, Kinross Gold Corporation and Teck Cominco Limited.

“Canadian companies did much better in disclosing key information in these areas compared to their international counterparts,” said Lee Hodgkinson, Chair of KPMG’s Global Mining Group and partner with KPMG in Canada. “Much progress has been made to enable users to better understand the numbers. However, greater global consistency of financial reporting is needed if the mining industry is to continue to receive support in the capital markets.”

Achieving this consistency is becoming more of a challenge for Canadian-based mining companies, which currently prepare their financial statements using Canadian or US Generally Accepted Accounting Principles (GAAP). By contrast, companies in most non-North American jurisdictions follow International Financial Reporting Standards (IFRS), which Canada will adopt by 2011.

“Canada has always been the centre of the finance world for mining, but now we are in an interim period where Canada is sandwiched between the IFRS and GAAP,” said KPMG’s Hodgkinson. “Over the next several years, Canadian mining companies need to take a careful look at what the non-North American companies are doing and develop a plan for the transition to IFRS.”

Among other challenges, the current lack of global consistency in accounting standards causes difficulties for Canadian companies as they consolidate financial data from their subsidiaries around the globe. “Since most of their international subsidiaries follow IFRS, Canadian companies need to convert subsidiary financial statements to Canadian or US GAAP in order to prepare their financial reports,” Hodgkinson said. “This situation places an unnecessary burden on Canadian mining companies.”

“The mining industry has made strides in developing its own reporting guidelines, and for that it should be applauded. However if external stakeholders are truly to get a better picture of how the industry is faring around the world, then a greater degree of consistency across its financial reporting principles is required — sooner rather than later.”

Key Reporting Improvements:

– 58 percent of Canadian companies had references to sustainability in CEO statements, as compared to 23 percent in 2003. However, Canada lags behind other countries in this area – for example, 100 per cent of the Australian and South African companies included sustainability

references in their CEO statements.

– Companies recognizing mine closure and rehabilitation liabilities in
full at reporting rose from 33 percent in 2003 to 93 percent in 2006.

– Rise in the disclosure of stripping costs and laybacks in open pit
mines from 32 percent in 2003 to 59 percent in 2006.

– A total of 42 of the 44 companies surveyed used a consistent policy
of revenue recognition at the time of shipment.

Key Reporting Challenges:

– Disclosure of reserve and resource data in annual reports has risen from 78 percent in 2003 to 91 percent in 2006, but the information is still being presented in different ways depending on the reporting

jurisdiction, which can cause headaches for capital investors.

– Differences also remain in the classification of mineralization as reserves, resulting in additional disclosure for those companies that

report in more than one jurisdiction.

– Where exploration was capitalized, 72 percent classified it as tangible assets on the balance sheet, at odds with IFRS which suggests the majority of exploration costs relevant to studies,

drilling, and sampling and evaluating are intangible by nature.

– There has been a move to more quantitative data and reporting of sensitivities in some areas but the survey found this had been inconsistent in breadth and depth. The move to provide quantitative information in support of key estimates, uncertainties and judgments in areas such as commodity prices, exchange rates and discount rates

is only just beginning.

– Greater rigor in accounting for financial instruments should have lead to improved disclosures in the financial statements of management of commodity price, exchange rate and interest risk but, to date; many companies have chosen to only report part of these


About KPMG in Canada

KPMG LLP is the Canadian member firm of KPMG International, the global network of professional services firms whose aim is to turn knowledge into value for the benefit of their clients, people and the capital markets. With nearly 94,000 people worldwide, KPMG member firms provide industry-focused audit, tax, and advisory services from more than 717 cities in 148 countries.

KPMG’s Canadian Web site is located at

For further information

Media Contacts: Greg Devine, Media Relations, KPMG, (416) 777-3678,
Julie Bannerjea, Senior Manager, Media Relations, KPMG, (416) 777-3243,

Source: KPMG LLP

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