Page 59 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE, V.71, # 1, 2014, pp. 53-79

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Future price increases are not added in determining the factor due to conservatism principle

required by statements of financial accounting concepts.

MFSP Liabilities

Reclamation liabilities, just as MFSP Assets, must be measured to determine an MFSP

Assets to MFSP Liabilities ratio of three in Assets Safety Factor deposits calculation. It is

important to note that MFSP Liability (MFSP Liability Calculation, Page 20, Alberta

Environment MFSP Guide 2011) amounts should be derived from each Approval Holder’s

publicly filed and audited annual financial statements or other supporting working papers. The

MFSP Liability calculations include all costs of suspension, abandonment, remediation and

surface reclamation of the site assuming the mining operation will run steadily as planned.

Formula 2. MFSP Liability calculation

Where,

 Asset Retirement Obligation is an undiscounted (When discounted a nominal dollar
amount stated at a future time becomes a smaller amount in current period. Because current

balance sheet includes an undiscounted future dollar amount today, it is acceptable to keep this
undiscounted obligation as it is in current balance sheets.) sum of suspension, abandonment,

remediation, and reclamation costs of the MFSP site. Since the sum of these costs is not
discounted, their actual present value today is lower than ARO number in the Balance Sheet.

MFSP Liability estimates and calculations include all the possible costs to reclaim the site. It is
assumed that reclamation operations are carried out during and after the mine ceases to operate.

 Continuous reclamation process is important in obtaining a final reclamation certificate

(The MFSP Liability calculations represent the third party costs to suspend, abandon, remediate
and surface reclaim the site based on the assumption the operation will continue to run in normal

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