What is the primary reason for restating Newmont's financial statements?

Newmont is restating its financial statements due to a change in the accounting treatment for a prepaid forward gold sales contract and a related forward gold purchase contract. The company's new independent auditors, PwC, determined that the original accounting treatment, which classified it as a mineral conveyance, was not technically correct. The contracts will now be treated as a single financing transaction.

How will this accounting change impact Newmont's reported financials?

The restatement will increase Newmont's reported net losses by approximately $6.5 million across the period from 1999 to the first half of 2002. It will also increase the company's reported long-term debt by $145.0 million as of the end of 1999 and subsequent periods, reflecting the borrowing nature of the transaction. However, the overall cash flow and total costs over the life of the contracts are expected to remain the same, with the difference being in the timing of revenue and expense recognition.

Why did the accounting treatment change, and who identified the issue?

The change was identified during a review of the company's accounting policies by its new independent public accountants, PricewaterhouseCoopers LLP (PwC), in preparation for the 2002 audit. PwC concluded that the Prepaid Forward contract did not meet the technical criteria to be accounted for as a mineral conveyance because the delivery requirements were met by purchased gold rather than actual production, and because the two contracts were entered into contemporaneously with the same counterparty.

Will this restatement affect any of Newmont's debt agreements?

No, the company states that the correction in accounting will not result in any default under any debt-related covenants contained in any of the Company's credit agreements or other material agreements, and would not have resulted in any such default in any of the relevant periods.

NEM/NEMCL 8-K SEC Disclosure

Summary

Newmont Mining Corporation announced on October 23, 2002, a significant correction to its accounting treatment for a prepaid forward gold sales contract and a related forward gold purchase contract entered into in July 1999. This correction, prompted by a review from its new independent auditors, PricewaterhouseCoopers LLP (PwC), will necessitate the restatement of the Company's financial statements from the third quarter of 1999 through the second quarter of 2002. The core issue lies with the accounting for a Prepaid Forward contract. Newmont will now treat this, along with a contemporaneous Forward Purchase contract, as a single financing transaction rather than a mineral conveyance. This change will result in a reclassification of the $137.2 million received as a borrowing with accruing interest, rather than deferred revenue. While the overall cash impact over the life of the contract remains the same, the timing of revenue and expense recognition will shift, leading to an increase in reported net losses for historical periods and a reduction in net income for the first half of 2002.

Key Highlights

1Newmont will restate its financial statements from Q3 1999 to Q2 2002 due to accounting corrections for gold contracts.
2The Prepaid Forward and Forward Purchase gold contracts, entered into in July 1999, will now be treated as a single financing transaction (borrowing).
3The accounting change is due to new auditors PwC determining the Prepaid Forward did not meet criteria for a mineral conveyance.
4This will result in an increase to historical net losses of approximately $6.5 million over the period 1999-2002.
5Long-term debt will increase by $145.0 million as of December 31, 1999, and subsequent periods, reflecting the borrowing.
6PwC is re-auditing the financial statements for the three years ended December 31, 2001, due to Arthur Andersen's unavailability.
7The accounting change will not result in any default under the Company's debt-related covenants.

NEWMONT Corp /DE/ 8-K Report (Oct 23, 2002)

Summary

Key Highlights

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