Minerals disposed of in a foreign currency will have foreign exchange gain or loss implications for the seller and buyer.
A foreign exchange gain or loss occurs when an invoiced amount, that is in a foreign currency, is converted into Australian dollars. It is the difference between the Australian dollar value of the invoice at the time of disposal and the Australian dollar amount at the time of payment.
The foreign exchange gain or loss is unrealised when the invoice is issued but unpaid.
When the invoice is paid, the foreign exchange gain or loss is realised.
As the holder of a NSW mining lease buying or selling minerals in a foreign currency, you must disclose any foreign exchange gain or loss in your royalty returns.
Foreign exchange gains/losses must be brought to account at the end of each return period as either unrealised or realised, and are included in ‘assessable revenue’ when calculating the royalty payable.
In accordance with Australian Accounting Standard AASB 121:
The following scenarios show the calculation of foreign exchange gains/losses and how they are included in mineral royalty returns.
A disposal of coal occurred on 5 July 2017, for an invoice value of $100,000 USD. The customer paid the invoice on 27 July 2017.
A disposal of coal occurred on 27 July 2017, for an invoice value of $100,000 USD. Payment for the disposal was received on 10 August 2017.
The USD invoice amount of $100,000 is converted to AUD at the 27 July 2017 exchange rate of 0.8046.
The gain or loss for the period 1 August to 10 August is to be included in the August 2017 royalty return.
If payment of the invoice was received in any month after August 2017, the unrealised foreign exchange gain or loss would need to be calculated in the same manner for each royalty period that payment remains outstanding.
The foreign exchange gain or loss amount is included in each monthly return until payment is made.