Notes To Consolidated Financial Statements estimated useful lives of 15 to 20 years for buildings and 3  to 25 years for machinery and equipment. Effective January 1, 2002, FCX changed its method of  computing depreciation for PT Freeport Indonesia’s mining  and milling life-of-mine assets. Prior to January 1, 2002,  PT Freeport Indonesia depreciated mining and milling life-of- mine assets on a composite basis. Total historical capitalized  costs and estimated future development costs relating to its  developed and undeveloped reserves were depreciated using  the unit-of-production method based on total developed and  undeveloped proven and probable copper reserves. Estimated  future costs, which are significant, to develop PT Freeport  Indonesia’s undeveloped ore bodies are expected to be  incurred over the next 20 to 25 years. After considering the inherent uncertainties and subjec- tivity relating to the long time frame over which these estimated  costs would be incurred, management revised its depreciation  methodology prospectively. Effective January 1, 2002, deprecia- tion for the mining and milling life-of-mine assets excludes  consideration of future development costs. Under the new  methodology, PT Freeport Indonesia depreciates the capital- ized costs of individual producing mines over the related  proven and probable copper reserves. Infrastructure and  other common costs continue to be depreciated over total  proven and probable copper reserves. Asset Impairment.  FCX reviews and evaluates its long- lived assets for impairment when events or changes in  circumstances indicate that the related carrying amounts  may not be recoverable. An impairment loss is measured as  the amount by which asset carrying value exceeds its fair  value. Fair value is generally determined using valuation tech- niques such as estimated future cash flows. An impairment is  considered to exist if total estimated future cash flows on an  undiscounted basis are less than the carrying amount of the  asset. An impairment loss is measured and recorded based on  discounted estimated future cash flows. Future cash flows for  PT Freeport Indonesia’s mining assets, which are considered  one asset group, include estimates of recoverable pounds  and ounces, metal prices (considering current and historical  prices, price trends and related factors), production rates and  costs, capital and reclamation costs as appropriate, all based  on detailed life-of-mine engineering plans. Future cash flows  for Atlantic Copper’s smelting assets include estimates of  treatment and refining rates (considering current and histor- ical prices, price trends and related factors), production rates  and costs, capital and reclamation costs as appropriate, all  based on operating projections. Assumptions underlying future  cash flow estimates are subject to risks and uncertainties. No  impairment losses were recorded during the periods presented. Deferred Mining Costs.  Mining costs are charged to  operations as incurred. However, because of the configura- tion and location of the Grasberg open-pit ore body and the  location and extent of the related surrounding overburden,  the ratio of overburden to ore is much higher in the initial  mining of the open pit than in later years. As a result,  surface mining costs associated with overburden removal  at PT Freeport Indonesia’s Grasberg open-pit mine that are  estimated to relate to future production are initially deferred  when the ratio of actual overburden removed to ore mined  exceeds the estimated average ratio of overburden removed  to ore mined over the life of the Grasberg open-pit mine.  Those deferred costs are subsequently charged to operating  costs when the ratio of actual overburden removed to ore  mined falls below the estimated average ratio of overburden  to ore over the life of the Grasberg open-pit mine. The  reserve quantities used to develop the life of mine ratio are  the proven and probable ore quantities for the Grasberg open  pit disclosed in Note 13.  The deferred mining cost method is used by some  companies in the metals mining industry; however, industry  practice varies. The Emerging Issues Task Force of the  Financial Accounting Standards Board (FASB) currently is  evaluating this issue. The deferred mining cost method  matches the cost of production with the sale of the related  metal from the open pit by assigning each metric ton of  ore removed an equivalent amount of overburden tonnage  thereby averaging the overburden removal costs over the life  of the mine. The mining costs capitalized in inventory and  the amounts charged to cost of goods sold do not represent  the actual costs incurred to mine the ore in any given period. If PT Freeport Indonesia were to charge all mining costs to  expense when incurred, including all overburden removal costs,  as some mining companies do, there would be greater  volatility in FCX’s period-to-period results of operations. The application of the deferred mining cost method has  resulted in an asset on FCX’s balance sheets (“Deferred  Mining Costs”), which based on current mine plans, is  estimated to increase through about 2010. Subsequently,  these costs are expected to be amortized as a charge to  production and delivery costs until they are fully amortized  at the end of the open pit’s life, which is estimated to be in  approximately 2015. This is because PT Freeport Indonesia  expects to mine higher than average amounts of overburden  through 2010 and less than average thereafter. Deferred  mining costs totaled $220.4 million at December 31, 2004,  and $142.6 million at December 31, 2003. Additions to  deferred mining costs are classified as increases in deferred  mining costs in operating activities in the consolidated  statements of cash flows and totaled $77.8 million in 2004,  $64.4 million in 2003 and $30.6 million in 2002. PT Freeport  Indonesia evaluates the recoverability of these deferred  mining costs in conjunction with its evaluation of the  recoverability of its mining assets as described in FCX’s  2004 ANNUAL REPORT  | 55