AASB 16 / IFRS 16 LEASES

Mining Industry Practitioner Guide

IRIS Lease Portal · SAP S/4HANA Integration · Month-End Close Checklist

Part 1: IRIS → SAP S/4HANA Integration & Journal Posting Flow

1.1  Overview — How IRIS and SAP Interact

IRIS is a dedicated lease accounting subledger. It holds the lease contract data, calculates the amortisation schedule, and generates the accounting entries that must be posted into SAP. The relationship is one-directional for journal generation: IRIS calculates, SAP records.

Layer	System	Responsibility
Contract Management	IRIS	Lease register, payment schedules, IBR, term, modifications
Calculation Engine	IRIS	Lease liability amortisation, ROU depreciation, interest accrual
Journal Generation	IRIS → SAP	Produces posting file or direct interface to SAP FI
GL Posting	SAP S/4HANA FI	Posts entries to cost centres, profit centres, asset classes
Fixed Asset Register	SAP FI-AA	ROU assets tracked as separate asset class
Reporting / Disclosure	SAP / BW	Balance sheet, maturity disclosure, note disclosures

1.2  Integration Architecture Options

Option A: File-Based Integration (Most Common)

IRIS exports a flat file (CSV / XLSX / IDoc) containing journal line items per period. Finance manually uploads or processes this into SAP via:

•       FB50 / F-02 — Manual GL journal posting

•       LSMW or BAPI_ACC_DOCUMENT_POST — Batch upload

•       SAP S/4HANA Journal Entry API (OData) — automated upload

Best practice: Never manually retype journal lines from IRIS. Always upload from the IRIS export file to eliminate transcription errors and maintain an audit trail.

Option B: Direct API / Real-Time Integration

Some IRIS deployments connect directly to SAP via middleware (e.g., Dell Boomi, MuleSoft, SAP Integration Suite). In this model, IRIS posts to SAP automatically on period close trigger. This is preferred for high-volume lease portfolios but requires IT configuration.

1.3  SAP Configuration Requirements

Before IRIS postings can flow into SAP correctly, the following must be configured:

SAP Area	Configuration Required	Notes
FI-AA Asset Class	Separate asset class for ROU assets (e.g., 6000 – Right-of-Use Assets)	Segregates ROU from owned assets in FAR
Depreciation Area	Book depreciation area for AASB 16 lease depreciation	Must not conflict with tax depreciation area
GL Accounts	ROU Asset, Accum. Depr. ROU, Lease Liability (current/non-current), Finance Cost	Ensure mapping matches IRIS output codes
Cost Centres	Lease cost mapped to correct site cost centre	Drives P&L reporting by mine site
Profit Centres	Consistent with segment/site reporting structure	Required for segment note disclosures
Document Types	Separate document type for IRIS lease postings (e.g., LJ)	Enables easy filtering in FBL3N
Posting Keys	40 (DR), 50 (CR) for GL; asset-specific for FI-AA	Standard; confirm with SAP FICO config
Currency	AUD base; USD for foreign currency leases	AASB 121 — liability retranslated at close rate

1.4  Chart of Accounts Mapping — IRIS to SAP GL

The following is a recommended GL account structure for AASB 16 postings. Actual account codes should match your Evolution Mining chart of accounts.

Account Category	Account Name	Suggested Code	SAP Account Type	BS / PL
ROU Asset	Right-of-Use Asset – Mobile Fleet	160100	Asset (FI-AA)	BS
ROU Asset	Right-of-Use Asset – Property	160200	Asset (FI-AA)	BS
ROU Asset	Right-of-Use Asset – Other	160300	Asset (FI-AA)	BS
Accumulated Depreciation	Accum. Depr. – ROU Asset	160900	Asset (FI-AA)	BS
Lease Liability – Current	Lease Liability (< 12 months)	230100	Liability	BS
Lease Liability – Non-Current	Lease Liability (> 12 months)	250100	Liability	BS
Finance Cost	Interest Expense – Lease Liability	710100	P&L	PL
Depreciation	Depreciation – ROU Assets	720100	P&L	PL
Short-Term Lease	Short-Term Lease Expense	730100	P&L	PL
Variable Lease	Variable Lease Expense	730200	P&L	PL

1.5  Period-End Journal Posting Flow

The following sequence must be completed each accounting period for AASB 16:

Step	Action	System	SAP T-Code / Method	Owner
1	Run period close in IRIS — lock the period and generate the lease schedule	IRIS	IRIS period close function	Lease Accountant
2	Export journal posting file from IRIS (CSV/XLSX)	IRIS	IRIS export module	Lease Accountant
3	Validate export: check debit = credit, review for null cost centres	Excel	Manual review	Lease Accountant
4	Post ROU asset depreciation to SAP FI-AA	SAP	AFAB (depreciation run)	Capital Accountant
5	Upload lease liability journal (interest accrual + principal movement) via FB50 or batch	SAP	FB50 / LSMW / OData API	Lease Accountant
6	Reclassify current portion of lease liability (annual, or via IRIS output)	SAP	F-02 / FB50	Lease Accountant
7	Retranslate USD lease liabilities at closing exchange rate	SAP	F.05 / FAGL_FC_VAL	Finance Accountant
8	Reconcile IRIS lease schedule to SAP GL balances (FBL3N / FS10N)	SAP	FBL3N, FS10N	Lease Accountant
9	Prepare disclosure workpaper: maturity analysis, ROU movement schedule	Excel / SAP	Manual / SAP-BW	Financial Accountant
10	Sign off and archive IRIS export, reconciliation, and GL screenshot	SharePoint / GRC	Document management	Finance Manager

1.6  Key SAP T-Codes for AASB 16

T-Code	Description	Use in AASB 16 Context
FB50	Enter GL Document	Post IRIS journal upload (interest, liability movement)
F-02	Enter General Posting	Manual adjustments, reclassifications
AFAB	Post Depreciation	Run ROU asset depreciation each period
AW01N	Asset Explorer	View ROU asset values, depreciation by period
AS01 / AS02	Create / Change Asset Master	Create new ROU asset on lease commencement
AB01	Create Asset Transaction	Post ROU asset acquisition (commencement)
ABAVN / ABAON	Asset Retirement	Derecognise ROU asset on lease termination
FBL3N	GL Line Item Report	Drill into lease liability and ROU account postings
FS10N	GL Account Balance	Validate closing balances vs IRIS schedule
F.05 / FAGL_FC_VAL	Foreign Currency Valuation	Retranslate USD lease liabilities at period close
FAGLB03	Display Balances	View real-time GL balances for AASB 16 accounts
S_ALR_87012936	Asset History Sheet	Generate ROU asset movement schedule for disclosure

1.7  Common Integration Issues & How to Fix Them

Issue	Root Cause	Fix
IRIS and SAP balances don't reconcile	Cost centre missing in IRIS export; double posting	Validate IRIS export before posting; check for duplicate document types in FBL3N
Depreciation not posting in AFAB	ROU asset not activated in SAP; depreciation start date wrong	Check AS03 — confirm asset status is active and depreciation key is set
USD lease liability FX difference is wrong	F.05 run before IRIS posting completed	Ensure IRIS journals are posted before running foreign currency valuation
Current vs non-current split incorrect	IRIS reclassification export not applied	Confirm IRIS generates a reclassification journal; post to correct GL accounts (230100 vs 250100)
Make-good provision not in lease liability	Provision recorded separately and not added to ROU cost	Check commencement journal — provision should increase ROU asset, not be expensed
Lease modification not captured	IRIS not updated when contract amended	Enforce a contract change notification workflow to trigger IRIS update within the same period

Part 2: Gold Ledger Article — AASB 16 in Mining

Suggested Title: "AASB 16 in Mining: Why Lease Accounting is More Complex Than You Think"

Target audience: Mining finance professionals, SAP FICO practitioners, graduate accountants in resources sector

Introduction

If you work in mining finance, you already know that AASB 16 changed the balance sheet. But in the resources sector, the standard bites harder than in most industries — and in ways that aren't always obvious from reading the standard itself.

This article walks through the accounting mechanics of AASB 16 / IFRS 16, the journal entries you need to know, and the specific complexities that make lease accounting uniquely challenging in mining. Whether you're working on mobile fleet leases, camp accommodation contracts, or embedded leases buried in mining service agreements, this guide is for you.

What AASB 16 Actually Does

Before the standard came into force in 2019, lessees could keep operating leases off-balance sheet. A haul truck fleet financed through an operating lease appeared nowhere on your balance sheet — just a periodic expense line in the P&L.

AASB 16 eliminated that treatment for most leases. Now, virtually all leases with a term over 12 months and an underlying asset value above approximately USD 5,000 must be recognised as:

•       A Right-of-Use (ROU) asset — representing your right to use the leased asset over the lease term

•       A lease liability — the present value of future lease payments, discounted at your incremental borrowing rate (IBR)

The P&L impact also changes character. Instead of a flat operating lease expense, you now see:

•       Depreciation on the ROU asset (operating expense)

•       Finance cost / interest expense on the lease liability (finance expense)

For mining companies, this has materially increased reported debt ratios and EBITDA (since lease expenses are removed from operating costs), making it critical to understand for covenant compliance and analyst communications.

The Three Tests: Does Your Contract Contain a Lease?

This is where mining finance teams frequently get caught. A contract contains a lease under AASB 16 if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

There are three tests to apply:

Test	Question to Ask	Common Mining Trap
1. Identified Asset	Is there a specific, identified asset? Can the supplier substitute it without your consent and benefit from doing so?	A drill rig assigned exclusively to your site is likely identified, even if the contract says 'drill services'
2. Economic Benefits	Do you obtain substantially all the economic benefits from using the asset throughout the period?	If you control the output of a processing plant, you may be capturing all economic benefits
3. Right to Direct Use	Do you decide how and for what purpose the asset is used?	If you direct where the haul truck goes and what it carries, you control its use

Practical tip: Build a contract review checklist using these three tests. Apply it at contract inception for all mining contracts over a materiality threshold — not just contracts labelled as 'leases'.

The Key Journal Entries

Let's walk through the lifecycle using a practical mining example.

Scenario: Evolution Mining enters a 3-year lease of a Caterpillar 793 haul truck. Present value of lease payments = $1,200,000. IBR = 6.0% p.a. Make-good obligation = $60,000. Monthly payment = $36,000.

Journal 1 — Lease Commencement (Day 1)

#	Account Code	Account Name / Description	DR ($)	CR ($)	Cost Ctr
1	160100	ROU Asset – Mobile Fleet (Haul Truck)	1,260,000
	250100	Lease Liability – Non-Current		1,200,000
	270100	Provision – Make-Good / Restoration		60,000

Journal 2 — Monthly Interest Accrual (Month 1: 6% ÷ 12 × $1,200,000)

#	Account Code	Account Name / Description	DR ($)	CR ($)	Cost Ctr
2	710100	Finance Cost – Lease Interest	6,000		MINE01
	250100	Lease Liability – Accrued Interest		6,000

Journal 3 — Monthly Lease Payment

#	Account Code	Account Name / Description	DR ($)	CR ($)	Cost Ctr
3	250100	Lease Liability (principal + interest)	36,000
	100001	Bank / Cash		36,000

Journal 4 — Monthly ROU Asset Depreciation ($1,260,000 ÷ 36 months = $35,000/month)

#	Account Code	Account Name / Description	DR ($)	CR ($)	Cost Ctr
4	720100	Depreciation – ROU Asset	35,000		MINE01
	160900	Accumulated Depreciation – ROU Asset		35,000

Journal 5 — Annual Reclassification of Current Portion

#	Account Code	Account Name / Description	DR ($)	CR ($)	Cost Ctr
5	250100	Lease Liability – Non-Current	409,000
	230100	Lease Liability – Current (next 12 months)		409,000

Journal 6 — Lease Modification (e.g. term extended by 1 year, PV impact = $120,000)

#	Account Code	Account Name / Description	DR ($)	CR ($)	Cost Ctr
6	160100	ROU Asset – Mobile Fleet	120,000
	250100	Lease Liability – Non-Current		120,000

Journal 7 — Lease Termination / Early Exit (remaining carrying amounts)

#	Account Code	Account Name / Description	DR ($)	CR ($)	Cost Ctr
7	250100	Lease Liability (remaining balance)	280,000
7	160900	Accumulated Depreciation – ROU Asset	980,000
7	810100	Loss on Lease Termination	40,000
	160100	ROU Asset – Mobile Fleet		1,260,000
	100001	Cash (termination penalty)		40,000

Mining-Specific Complexities

1. Embedded Leases in Mining Service Contracts

This is the single biggest risk area for mining companies. Many contracts are structured as 'services' but economically function as leases. Common examples:

•       Contract mining agreements: If the contractor operates dedicated, identified equipment exclusively at your site

•       Drill-and-blast contracts: Specific rigs assigned to your project

•       Load-and-haul agreements: Named fleet working exclusively on your haulage routes

•       Camp and accommodation villages: Precincts leased for FIFO workforce

•       Processing plant tolling: If the plant is dedicated exclusively to processing your ore

The accounting team needs to be involved at contract negotiation stage — not after execution. Involving finance early can also influence contract structuring decisions that have AASB 16 implications.

2. Variable Payments Tied to Production

Mining leases often include variable components: tonnes hauled, hours operated, ore processed. Under AASB 16, the treatment depends on what drives the variability:

Payment Type	AASB 16 Treatment	Example
Fixed payments	Included in lease liability	$25,000/month fixed availability fee
Variable — index/rate linked	Included (remeasured when index changes)	CPI-linked annual rent adjustment
Variable — usage based	Excluded; expensed as incurred	$8/tonne hauled, hours-based drill charges
In-substance fixed	Included (no real economic variability)	Must-take clauses, minimum volumes

Tip: Always review 'minimum guarantee' or 'take-or-pay' clauses. These are often in-substance fixed payments and must be included in the lease liability even if described as variable.

3. Lease Term and Mine Life

The lease term under AASB 16 is the non-cancellable period plus any optional extension periods that are reasonably certain to be exercised. In mining, this judgement is fundamentally tied to the mine life.

When a mine's Life-of-Mine (LoM) plan is updated — due to reserve changes, expansion decisions, or pit optimisation — the lease term assumptions may need to be revisited. This triggers a lease liability remeasurement and ROU asset adjustment. Finance teams should establish a formal trigger process: whenever LoM is updated, a lease term reassessment must be completed.

4. Make-Good and Restoration Obligations

Mining leases — particularly land access agreements, port leases, and processing facility leases — frequently carry contractual restoration obligations. Under the accounting standards:

•       The obligation is recognised as a provision under AASB 137 (Provisions, Contingent Liabilities and Contingent Assets)

•       The provision amount is added to the cost of the ROU asset at commencement

•       The provision is unwound using the discount rate over time (finance cost in P&L)

•       The ROU asset, including the make-good component, is depreciated over the lease term

This intersects with your mine rehabilitation provisioning. Ensure your provision registers are coordinated — avoid double-counting where a rehabilitation provision relates to a leased area.

5. Units of Production Depreciation for ROU Assets

For mobile fleet and heavy equipment, straight-line depreciation of the ROU asset may not reflect actual usage patterns in mining. AASB 116 principles, applied to ROU assets, permit Units of Production (UOP) depreciation where use is activity-driven.

A haul truck operated on a two-season schedule, or a drill rig used intensively during certain mining phases, may be better depreciated on a UOP basis. This requires a reliable production measure (engine hours, kilometres, tonnes) and a documented accounting policy.

6. Foreign Currency Leases

Equipment procured from Caterpillar, Komatsu, Hitachi or other international OEMs may carry USD-denominated lease payments. Under AASB 121 (The Effects of Changes in Foreign Exchange Rates):

•       The lease liability is a monetary item and is retranslated at the closing exchange rate each period

•       The ROU asset is a non-monetary item and remains at the historical rate at commencement

•       Exchange differences on the liability are recognised in the P&L (finance costs)

This creates P&L volatility when the AUD/USD rate moves — worth flagging in your financial commentary.

Practical Takeaways for Mining Finance Teams

Action	Why It Matters
Build an AASB 16 scoping checklist for all new contracts above materiality threshold	Catches embedded leases before they become a compliance issue
Review take-or-pay and minimum volume clauses in service contracts	Often in-substance fixed — may need to be in the lease liability
Link your lease term reassessment process to LoM plan updates	LoM changes can trigger material remeasurements
Coordinate make-good provisions with the rehabilitation register	Avoid double-counting; ensure ROU asset cost is complete at commencement
Establish a formal contract modification notification workflow	Ensures IRIS / lease system is updated in the same period as the commercial change
Separate ROU assets from owned assets in the Fixed Asset Register	Required for disclosure; enables clear reporting of AASB 16 impacts
Document your IBR methodology by asset class	Auditors will test this; group similar leases for efficiency
Consider UOP depreciation for heavy mobile fleet ROU assets	Better matching; consistent with treatment of owned fleet

Conclusion

AASB 16 is not just a balance sheet exercise. In mining, it touches contract management, mine planning, rehabilitation provisioning, foreign currency, and capital structure. The standard rewards finance teams that are involved early — at contract design stage, at LoM review, and at every significant modification.

The companies that get this right treat lease accounting not as a compliance burden but as a source of financial intelligence: a clear picture of the committed capital embedded in their operating cost structure.

About the Author

Gold Ledger is a practitioner knowledge platform for mining finance and SAP FICO professionals. Articles are written by qualified accountants with hands-on experience in ASX-listed mining companies. Visit gold-ledger.com for more.

Part 3: IRIS Lease Accounting — Monthly Close Checklist

This checklist covers the end-to-end AASB 16 close process from IRIS period close through to SAP posting, reconciliation, and disclosure. Print or use as a digital tracker.

Field	Detail
Entity	Evolution Mining — [Site / Corporate]
Accounting Period	Month: ______  Year: ______
Lease Accountant
Capital Accountant
Finance Manager
IRIS Period Close Date
SAP Posting Date
Reconciliation Sign-Off Date

#	Task	System	Owner	Status
PRE-CLOSE PREPARATION (D-3 to D-1)
P1	Confirm all new leases commenced during the period are loaded into IRIS with correct commencement date, IBR, payment schedule, and asset class	IRIS	Lease Acct	☐
P2	Review any contract modifications received during the period — update IRIS for term changes, payment changes, or remeasurements	IRIS	Lease Acct	☐
P3	Confirm any lease terminations or early exits are flagged in IRIS and derecognition journals are prepared	IRIS	Lease Acct	☐
P4	Check for LoM plan updates during the period — if applicable, initiate lease term reassessment	Internal	Finance Mgr	☐
P5	Confirm IBR is current — check if borrowing rate has changed materially (affects new leases and modifications)	Treasury	Finance Acct	☐
P6	Obtain USD/AUD closing exchange rate for foreign currency lease revaluation	Treasury / RBA	Finance Acct	☐
IRIS PERIOD CLOSE
I1	Run IRIS period close — lock the month and generate the lease amortisation schedule	IRIS	Lease Acct	☐
I2	Export IRIS journal posting file (CSV / XLSX) — verify debit equals credit	IRIS	Lease Acct	☐
I3	Validate IRIS export: check all lines have valid GL account codes, cost centres, and profit centres	Excel	Lease Acct	☐
I4	Confirm variable lease payments for the period have been excluded from the liability calculation and expensed separately	IRIS / Excel	Lease Acct	☐
I5	Confirm short-term and low-value lease expenses are captured separately (not on balance sheet)	IRIS / GL	Lease Acct	☐
SAP JOURNAL POSTINGS
S1	Post ROU asset depreciation via AFAB depreciation run in SAP FI-AA	SAP (AFAB)	Capital Acct	☐
S2	Upload lease liability interest accrual journal from IRIS export via FB50 or batch upload	SAP (FB50)	Lease Acct	☐
S3	Upload lease liability principal movement journal from IRIS export	SAP (FB50)	Lease Acct	☐
S4	Post make-good provision unwinding (interest on provision) to finance costs	SAP (F-02)	Finance Acct	☐
S5	Run foreign currency valuation on USD lease liabilities (F.05 / FAGL_FC_VAL)	SAP (F.05)	Finance Acct	☐
S6	Post reclassification journal — transfer next 12 months of liability to current (if not auto-generated by IRIS)	SAP (FB50)	Lease Acct	☐
S7	Post any lease commencement journals (new ROU asset via AB01 / AS01 in FI-AA)	SAP (AB01)	Capital Acct	☐
S8	Post any lease derecognition journals (ABAVN / ABAON for ROU asset retirement)	SAP (ABAVN)	Capital Acct	☐
RECONCILIATION & VALIDATION
R1	Reconcile IRIS lease liability closing balance to SAP GL (FS10N / FBL3N for accounts 230100, 250100)	SAP / IRIS	Lease Acct	☐
R2	Reconcile IRIS ROU asset opening + additions + modifications – depreciation to SAP FI-AA asset values (AW01N / S_ALR_87012936)	SAP / IRIS	Capital Acct	☐
R3	Confirm accumulated depreciation on ROU assets agrees between IRIS schedule and SAP FI-AA	SAP / IRIS	Capital Acct	☐
R4	Agree IRIS interest expense to SAP GL account 710100 (Finance Cost – Lease Liability)	SAP / IRIS	Lease Acct	☐
R5	Confirm current vs non-current split of lease liability is correctly classified in SAP GL	SAP (FS10N)	Lease Acct	☐
R6	Verify FX valuation result on USD lease liabilities is reasonable (compare to spot rate movement)	SAP / Treasury	Finance Acct	☐
R7	Confirm short-term lease expense and variable lease expense are posted to correct GL accounts (730100, 730200)	SAP (FBL3N)	Lease Acct	☐
DISCLOSURE & REPORTING WORKPAPERS
D1	Prepare ROU asset movement schedule: opening + additions + modifications – depreciation – derecognitions = closing	Excel	Capital/Lease Acct	☐
D2	Prepare lease liability maturity analysis: undiscounted cash flows by < 1yr, 1–5yr, > 5yr	IRIS / Excel	Lease Acct	☐
D3	Prepare interest expense disclosure split (AASB 16 interest vs other borrowing costs)	Excel	Finance Acct	☐
D4	Prepare short-term lease / low-value / variable lease expense disclosure	Excel	Lease Acct	☐
D5	Document any new significant judgements: new leases, term reassessments, IBR determination	Word / SharePoint	Finance Acct	☐
D6	Update AASB 16 note workpaper for interim or annual financial statements as applicable	Excel / Word	Finance Acct	☐
SIGN-OFF & ARCHIVING
X1	Finance Manager review and sign-off of IRIS period close and reconciliation workpapers	SharePoint / GRC	Finance Mgr	☐
X2	Archive IRIS export file, reconciliation, SAP screenshots, and disclosure workpaper in period folder	SharePoint	Lease Acct	☐
X3	Carry forward any open items, unresolved reconciling differences, or new contract reviews to next period	Excel tracker	Lease Acct	☐

Notes & Open Items

#	Description	Raised By	Target Date	Status
1
2
3
4
5

Common IRIS Reference Points

IRIS Function	When to Use	SAP Follow-Up
Period Close & Lock	After all modifications entered for the period	Export journal file; proceed to SAP postings
New Lease Entry	On commencement date of new lease	Create ROU asset in SAP (AS01 / AB01)
Lease Modification	When term, payment, or other terms change	Remeasure — adjust ROU asset and liability in SAP
Lease Termination	On early exit or end of lease	Derecognise ROU asset (ABAVN) and settle liability
IBR Update	For new leases only (existing leases keep original IBR)	Document IBR determination in period workpaper
Schedule Export	Maturity analysis for disclosure	Use in AASB 16 note workpaper
FX Revaluation Input	For USD leases — confirm closing rate used	Cross-check to SAP F.05 valuation result