Share with your friends

Insights into Mining: Guidance Note on AISC and AIC

Insights into Mining: Guidance Note on AISC and AIC

The World Gold Council publishes update in response to new accounting standards and to support consistency of application

Pieter Fourie

Partner, Mining

KPMG in Canada


Related content

Gold Bar

During November 2018 the World Gold Council (WGC) published an update to its Guidance Note on all-in sustaining cost (“AISC”) and All-in cost (“AIC”), which was first issued in June 2013.

The objective of the AISC and AIC metrics is to provide stakeholders with comparable metrics that reflect as close as possible the full cost of producing and selling an ounce of gold, and which are fully and transparently reconcilable back to amounts reported under Generally Accepted Accounting Principles (GAAP).

The changes to the AISC and AIC metrics were necessitated predominantly as a result of the new leases standards (ASC 842 and IFRS 16, effective 1 January 2019) and includes some incremental changes to support further consistency of application. A set of frequently asked questions (“FAQ’s”) and case studies were also included to support consistency of application of the Guidance Note.

Leases are in – at least sustaining capital leases

FAQ # 19 in the updated WGC Guidance Note (released November 2018) states that the original WGC Guidance Note (released in June 2013) explicitly excluded certain financing activities from AISC and AIC. The logic behind this approach was that interest expense largely reflects a company’s capital structure, while capital expenditures reflects costs of operations. This approach effectively scoped finance leases out of the framework, while operating leases were included by virtue of being charged directly to costs.

The new leases standards (ASC 842 and IFRS 16, effective 1 January 2019) will require lessees to bring additional leases onto their balance sheet under certain conditions. In many cases these “additional leases” may have been classified as operating leases and treated as an operating activity before adoption of the new leases standards.

As a result of the new accounting standards the WGC Guidance Note was updated to reflect that sustaining leases cash flows (principal and financing component) should be included in the determination of AISC. Similarly, non-sustaining leases cash flows (principal and financing component) should be included in determining AIC. The WGC’s rationale for including lease cash flows as part of these metrics is on the basis that this reflects the current periodic cash costs under the lease.

To be sustaining or not be sustaining – that is the question

The updated WGC Guidance Note also includes a set 22 frequently asked questions and 8 case studies dealing with classification of costs as sustaining vs non-sustaining which is an area where diversity in practice has been observed and significant judgment required.

The topics covered by the frequently asked questions are:

  • Reporting and disclosure FAQ’s
  • Sustaining vs. Non-Sustaining Cost FAQ’s
  • Items included or excluded from AISC or AIC FAQ’s
  • Other FAQ’s

Other changes

Other incremental changes were made to categories within the AISC and AIC formula to further support consistency and included the following:

  • Clarifying that inventory write downs include write downs of leach pads;
  • Clarifying that similar to by-product credits, co-product credits should be added back in the calculation of AISC;
  • Clarifying that general and admin expenditures include regional expenditures; and
  • Adding a “Growth and development costs not related to current operations” as an AIC category. The Guidance Note added that such costs could relate to business development, research and development and technology and innovation and is non-sustaining in nature.

Next steps

Companies applying the WGC Guidance Note on AISC and AIC should consider the impact of the updates and clarifications made to their Non-GAAP measure disclosures as well. The FAQs and case studies in particular provide guidance on many items requiring significant management judgment and specific criteria to consider in determining AISC and AIC.

The full WGC Guidance note which includes all FAQ’s and case studies can be accessed at:

For more information on how this guidance may affect your financial reporting, please contact your local KPMG professional. 

© 2020 KPMG LLP, a Canada limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

KPMG International Cooperative (“KPMG International”) is a Swiss entity.  Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.

Connect with us


Want to do business with KPMG?


loading image Request for proposal