I. Theoretical Analysis of Reclamation Liability AccountingCompanies in the extractive industry generally follow a general model of assessment and exploration, development, production and finally rehabilitation of the site. According to the AASB framework, “a liability is a current obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits.” (CNAC Framework No. 49a, 2004, p. 22) Beyond the simple legal form of the mining asset, the economic advantage of the land in such a scenario where the asset (mining site) is leased or purchased would return to the entity. rather than its legal owner. Thus, the responsibilities corresponding to the site also fall on the company. One of these liabilities is the cost of rehabilitating or restoring the site at the end of its economic life. The AASB framework defines an obligation as “a duty or responsibility to act or perform in a certain way.” (CNAC Framework No. 60, 2004, p. 25) The restoration obligation must meet the criteria for a present obligation in order to fully satisfy the definition of a liability. In addition, this item must also meet the criteria for recognition as a liability to be recorded in a company's financial statements, whereby the future economic benefits associated with the item are probable and its cost can be measured reliably. (AASB Framework No. 83, 2004, p. 30) According to the AASB Framework, “an obligation normally arises only when the asset is delivered or the entity enters into an irrevocable agreement to acquire the asset. In the latter case, the irrevocable nature of the agreement means that the economic consequences of non-compliance with the obligation, for example...... middle of paper ......Annual Report 2006.BHP 2009. BHP Billiton Annual Report 2009.BHP. 2006. Decommissioning, site rehabilitation and environmental costs [Online]. Available: http://www.wikinvest.com/stock/BHP_Billiton_(BHP)/Decommissioning_Site_Rehabilitation_Environmental_Costs [Accessed].CPA 2010. Accounting Handbook 2010, Pearson Education Australia.CPA 2010. Ethics and governance of the CPA program. Module 5 pp49DEEGAN 2010. Australian Financial Accounting, 6th, Sydney, McGraw-Hill Australia. pp268-286, pp544-568DOWNING, TE 2002. Avoiding new poverty: mining-induced displacement and resettlement. Mines, minerals and sustainable development, n° 58, pp15-19. Joseph U Kish, J., Olin Mathieson, James Morris 1966. 3 New Executive Guides. The Journal of Accountancy, pp66-67.LGL 2008. Lihir Gold Limited Annual Report 2008.RIO 2009. Rio Tinto Annual Report 2009.