Accounting treatment of Final Mine Closure Plan (FMCP)

FMCP means a plan for the purpose of decommissioning, reclamation, and rehabilitation of a mine or part thereof after cessation of mining and mineral processing operations, that has been prepared in the manner specified in the standard format and guidelines issued by the Indian Bureau of Mines or the Director, Atomic Minerals Directorate for Exploration and Research.

For the companies engaged in mining activities, the regulator requires the holder of a mining lease to submit a Final Mine Closure Plan (FMCP) to the competent authority for approval, two years prior to the proposed closure of the mine. Resulting in a legal obligation for the Company to incur decommissioning, reclamation, and rehabilitation expenditures due to mining operations or extraction activities of the Company.

This situation gives rise to the question on the accounting treatment of FMCP in the books of account on a year-on-year basis and whether the estimates for the expenditure to be incurred in the future at the end of mine life, are discounted to present the effect of the time value of money is material.

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