DISCUSS the accounting for the unextracted coal and minerals as per Ind AS 16 and Ind AS 37 with respect to aforesaid "Sigma" coal mine.

Accounting for unextracted coal and minerals As per para 16 of Ind AS 16 "Plant, Property and Equipment", the cost of an item of property, plant and equipment comprises the initial estimate of the cost of dismantling and removing the item and restoring the site on which it is located. Further, para 45 of Ind AS 37 “Provisions, Contingent Liabilities and Contingent Assets”, provides that where the effect of time value of money is material, the amount of provision shall be the present value of the expenditures expected to be required to settle the obligation. Thus, costs incurred by an entity in respect of obligations for dismantling, removing and restoring the site on which an item of property, plant and equipment is situated are recognized and measured in accordance with Ind AS 16 and Ind AS 37. Each of the entities in the joint arrangement should recognize their respective share of the cost of decommissioning of the underground storage facility. However, as per para 29 of Ind AS 37 where an entity is jointly and severally liable for an obligation, the part of the obligation that is expected to be met by other parties is to be treated as contingent liability. Accordingly, each of the entities in the joint arrangement should disclose the share of the cost of decommissioning of the underground facility, to be borne by the other joint arrangement entity, as a contingent liability. As per Ind AS 16 Property, Plant and Equipment are tangible items that: (a) are held for use for production or supply of goods or services for rental to others, or for administrative purposes and (b) are expected to be used more than one period. Thus, both entities should classify and account for their share of irrecoverable coal and minerals as property, plant and equipment, as the irrecoverable coal and minerals is necessary for the storage facility to perform its function. Therefore, the irrecoverable coal and minerals being part of the storage facility, should be capitalized as a component of the storage facility asset and should be depreciated to its residual value over the life of the storage facility.