An Analysis Of AASB Compliance And Conceptual Framework In The Annual Reports Of ABM Resources NL And Activex Ltd

ABM Resources NL

To analyze the implication of accounting standards in the accounting procedure of Australian Companies, we have chosen two sample companies. These companies are from GICS group of Materials as per enrollment in ASX listing. They are ABM Resources NL, from Nedlands, Western Australia and Activex Ltd from Queensland, Brisbane. ABM Resources NL is with the ASX code of ABU and Activex Ltd is with the ASX code of AIV. Both companies are flowing the fiscal period which starts from July and ends at June. In this article we will try to explore the areas of compliance by both these companies in respect of AASB standards with future projection of following the upcoming standards (Gaffikin, 2006). We will also highlight the area of compliance in respect of conceptual network which can ensure prudence to the stakeholders. Our other area of concentration will be the analyses of financial statements in the forms of Income Statement and Consolidated statement of financial position (Lonergan, 2003). This article will also provide respective recommendations for those two companies for their future effort to ensure transparency and prudence to the stakeholders in the area of financial information and their respective presentation with proper treatment as per AASB standards and IFRS (Ifrs, 2016).

The annual financial report of the company for the year ended on 30.06.2016 has emphasized on the aspects of compliance of AASB standards regarding management of financial information and processing of respective data through different financial statements as per the recommendation of IFRS (Investsmart, 2015). The financial statements are known as General Purpose Financial Report or GPFR which are projected in the annual financial report of the company along with the Directors’ report and the declaration of independent auditors who have authenticated the compliance of Corporation ACT 2001 related to AASB standards and IFRS. We will append below the compliance of various AASB standards by the company with the future scope of implication to be adapted by the company along with the financial statements and their respective analyses followed by recommendations as per need of the article (24hgold, 2016). 

AASB 6- This standard is related to closure of mines for evaluation of assets. The concept of fair value of assets is considered by considering the impairment issues. This standard is highlighting the issue of evaluation of Cash Generating Units or CGU with respect of Value in Use or VIU or fair value less cost of disposal.

I am appending below the screenshot of the same through Directors’ Report of the company as per Note.12 for the Fiscal year ended on 30.06.2016 (Aasb, 2015).

AASB Compliance

AASSB 8- This AASB standard is highlighting the issues related to segmentation reporting to emphasize on Operating Segments to ensure Management Approach. This Management Approach enables the company to highlight on segment information as practiced by the company for their internal evaluation. Given below the screenshot of the Directors’ Report through Note 31 extracted from the Annual Financial Report of the company for the period ended on 30.06.2016 (Aasb, 2010).

AASB 102- This standard is emphasizing on the stripping activity costs which is based on cost of inventories.  The company is evaluating inventories as per this standard to ensure proper evaluation of inventories as current assets. The below screenshot is highlighting the same featured in Note 31 under the head of Deferred Stripping for the inventories of mining operation to evaluate the same as current assets which is endorsed by the Directors’ Report as per the annual financial report of 30.06.2016 (Aasb, 2015).

AASB 101- The Auditors, independent in nature, are liable to verify, check and conclude with findings as per the AASB standard 101 compliance. The below screenshot is certifying the same confirming that the accounting practice and financial statements are complying with the requirements of Corporation Act, 2001 and AASB Standards to ensure conceptual framework to prove transparency and prudence for the stakeholders (Aasb, 2016).   

Given below the screenshot of declaration by the Board through Note 31 about basis of preparation which is confirmed again through the declaration of compliance of IFRS for financial reporting by the company as per below screenshot annexed

The company is intended to implement flowing AASB standards in the amended form from the date of implementation as prescribed by the AASB with endorsement from Corporation Act, 2001 as conferred by the Directors Report featured in the Annual Financial Report for the year ended on 30.06.2016:-

AASB Standard Date of implementation

AASB 9(Amended version) 01.01.2018

Financial Instruments

AASB 15(Amended Version) 01.01.2018

Revenue from Contracts with customers

AASB 2013-9(Amended Version) 01.01.2018

Revision of conceptual framework, materiality and financial instruments

The below screenshots are conferring those which are declared and accepted by the BOARD of Directors of the company as shown in the annual report on 30.06.2016.

Given below the screenshot of the above as of 30.06.2016 with critical analyses:

Findings:

• The company is involved in mining industry and has featured with revenue and other income enhanced by 1564% positive variance in 2016 with comparison to 2015.
• Expenses of the company has shown negative variance of 285% in 2016 with comparison to 2015
• Loss of the company has increased by 93% variance in 2016 with comparison to 2015
• Basic loss per share had been increased by 63% variance in 2016 in comparison to 2015(Abmresources, 2015).

Graphical presentation of profit and loss account and comprehensive income of ABM Resources NL

Given below the screenshot of the above as of 30.06.2016 with critical analyses:

Future Compliance

Analyses:-

Findings-2016 vs. 2016:

• Current assets are decreased by 27%
• Noncurrent assets are decreased by 59%
• Total assets are decreased by 49%
• Current liabilities are decreased by 61%
• Non-current liabilities are decreased by 41%
• Total liabilities are decreased by 55%
• Net assets and total equity are decreased by 48%
• Contributed equity is increased by 1%
• Accumulated losses are increased by 17%
• Reserves are decreased by 13%
• Working capital is in positive balance featuring the liquidity status of the company as positive.

Graphical presentation of balance sheet of ABM Resources NL

• To ensure future AASB compliance should be met in due time with proper following of guideline of requirements
• To ensure prudence and transparency in the financial reporting system for the security of external stakeholders of the company.
• Maintain good practice of maintaining GPFR as per Corporation Act 2001 to enable the stakeholders understand the financial reporting of the company in accordance with the guideline(Abmresources, 2016).

The annual financial report of the company for the year ended on 30.06.2016 has highlighted on the aspects of compliance of AASB standards, as enforced by the authority, regarding management of financial information and processing of respective data through different financial statements as per the recommendation of IFRS. The financial statements are known as General Purpose Financial Report or GPFR which are projected in the annual financial report of the company along with the Directors’ report and the declaration of independent auditors who have authenticated the compliance of Corporation ACT 2001 related to AASB standards and IFRS. We will append below the compliance of various AASB standards by the company with the future scope of implication to be adapted by the company along with the financial statements and their respective analyses followed by recommendations as per need of the article (Proactiveinvestors, 2013).

The company has adapted AASB standard 139 to ensure prudence in their financial instrument management which is consisting of bank deposit, accounts receivables and payables. The below screenshot depict this which is extracted from the annual financial report of the company as on 30.06.2016 (Aasb, 2010).

As the applicability of AASB standards is not mandatorily implementable to the operation of the company, the company is considering of implementation of a few standards which are to be enforced in the future. AASB 9 for financial instruments and associated amending standards are scheduled to be enforceable since 01.01.2018. AASB 16 for lease is also scheduled to be implemented from 01.01.2019. After getting it implemented AASB 16 will replace AASB 117 which is enforced now. The effect of AASB 16 will be responsible to make changes in financial statements as per anticipation of the Board of Directors. I am giving below the screenshot of the company policy as narrated in the annual financial report as of 30.06.2016 specified as notes to significant accounting policies.

The company is practicing with general purpose financial report or GPFR as specified in International Financial Reporting Standard guideline which is endorsed by IASB to provide prudence and transparency to the stakeholders.

Auditors’ declaration is given below which confirms independence in audit operation is provided by the management to the auditors.

Given below the screenshot of the same from the annual financial report of the company as on 30.06.2016:

Findings:-

• Revenue and other income of 2016 has negative variance in respect of 2015
• Loss from operation is increased with positive variance of 6%
• Basic and diluted income per share is with negative impact to the owners of the company(Activex, 2016).

Graph of profit or loss and comprehensive income of Activex Ltd-2016 vs.2015

Findings:

• Total assets and total liabilities are shown positive variance of 18% and 67% respectively.
• Net assets and total equity are with 17% growth
• Working capital (current assets over current liabilities) is showing positive trend of growth in 2016 in respect of 2015(Activex, 2016).

Graph of Activex Ltd consolidated position of financial statement for the financial period 2016 vs. 2015

• To ensure the applicability of AASB standards in the accounting practice of the company
• To ensure financial reporting as per IFRS set norms for presentation of financial data
• To comply with Corporation Act, 2001 for accounting related proceedings of the company.

References: 

24hgold, 2016. ABM Resources NL. [Online] Available at: https://www.24hgold.com/english/company-gold-silver-abm-resources-nl.aspx?id=17295396E6680&market=ABU.AX [Accessed 09 April 2017].

Aasb, 2010. AASB 139- Financial Instruments: Recognition and Measurement. [Online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/AASB139_07-04_COMPoct10_01-11.pdf [Accessed 09 April 2017].

Aasb, 2010. Compiled AASB Standard – RDR Early Application. [Online] Available at: https://www.aasb.gov.au/admin/file/content102/c3/AASB8_02-07_ERDRjun10_07-09.pdf [Accessed 09 April 2017].

Aasb, 2015. AASB 102 – Inventories. [Online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/AASB102_07-15.pdf [Accessed 09 April 2017].

Aasb, 2015. Exploration for and Evaluation of Mineral Resources. [Online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/AASB6_08-15.pdf [Accessed 09 April 2017].

Aasb, 2016. AASB 101- Presentation of Financial Statements. [Online] Available at: https://www.aasb.gov.au/admin/file/content105/c9/AASB101_09-07_COMPsep11_07-12.pdf [Accessed 09 April 2017].

Abmresources, 2015. Annual report ABM resources nl. [Online] Available at: https://www.abmresources.com.au/wp-content/uploads/2015_08_28_ABM-Financial-Statements-30-Jun-15-FINAL.pdf [Accessed 09 April 2017].

Abmresources, 2016. Annual report. [Online] Available at: https://www.abmresources.com.au/wp-content/uploads/160826-ABM-Financial-Statements-30-June-16.pdf [Accessed 09 April 2017].

Activex, 2016. Financial report Activex Limited. [Online] Available at: https://www.activex.com.au/20160909_Full%20Year%20Statutory%20Accounts.pdf [Accessed 09 April 2017].

Activex, 2016. Financial Report for Half Year Ended 31 December 2016. [Online] Available at: https://www.activex.com.au/asx-2015.php [Accessed 09 April 2017].

Gaffikin, M., 2006. Regulation: Standardising Accounting Practice. [Online] Available at: https://ro.uow.edu.au/cgi/viewcontent.cgi?article=1037&context=accfinwp [Accessed 09 April 2017].

Ifrs, 2016. IFRS Application around the world. [Online] Available at: https://www.ifrs.org/Use-around-the-world/Documents/Jurisdiction-profiles/Australia-IFRS-Profile.pdf [Accessed 09 April 2017].

Investsmart, 2015. ABM Resources NL (ABU). [Online] Available at: https://www.investsmart.com.au/shares/asx-abu/abm-resources-nl [Accessed 09 April 2017].

Lonergan, W., 2003. The emasculation of accounting standard setting in Australia. [Online] Available at: https://www.finsia.com/docs/default-source/jassa-new/jassa-2003/3_2003_emasculation_accounting.pdf?sfvrsn=6 [Accessed 09 April 2017].

Proactiveinvestors, 2013. ActivEX Limited acquiring Queensland copper-gold project from Newcrest Mining. [Online] Available at: https://www.proactiveinvestors.com.au/companies/news/147827/activex-limited-acquiring-queensland-copper-gold-project-from-newcrest-mining-50323.html [Accessed 09 April 2017].

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