Amortization of Land acquired for mining coal and lignite under the Ind AS framework

Key Takeaways

• The legal form of the holding decides the standard: freehold land containing minerals falls under Ind AS 16, while land under conditional allotment is in substance an acquisition of mineral rights under Ind AS 38.
• In both cases the useful life is driven by the units of minerals expected to be obtained, because extractable reserves – not time – are the predominant limiting factor.
• The units-of-production method may therefore be appropriate, applied consistently and supported by an approved reserve estimate.
• Useful life, residual value and method must be reviewed at least at each financial year-end, with changes accounted for prospectively under Ind AS 8.