Perpetual Resources Ltd
In the present era there is huge improvement in the reporting of the financial transaction of the company. The users of the financial statement through reading and analysing of the financial statement can obtain the insight of the business. In the report we will analyse the reporting of the shareholder equity of the Perpetual Resource limited and Hill End Gold Ltd and changes in the item over the past. It also analysis changes in the debt position of the company in the recent past. Further the report discusses the items of the cash flow and the way liquidity position of the company can be identified through analysing each item of the equity. The report also states the reporting of the other comprehensive statement of both the company and the reason why the items are not reported as regular operation. The reporting of the taxation of the both the company can also be understood in the report.
Perpetual Resources Ltd
Perpetual Resources Limited was founded in the year 2011 with headquarter situated at NSW, Australia. The company as nagged in the business of exploration of the gold project. The main purpose or focus of the company is to implement the exploration and development of a program for A to Z project.
Hill End Gold Ltd
The company has been founded in the year 1996 with headquartered situated at Sydney, Australia. Hill End Gold Ltd is also spread geographically with their subsidiaries such as Pure Alumina Pty Ltd, Hegel Investments Pty Ltd. The company has mainly been engaged in the exploration of gold across Australia (Hillendgold.com.au. 2018).
Part I:
As required, the following table briefly interprets the Owner’s Equity of the selected companies:
Perpetual Resources Ltd
|
Owner’s equity: |
|||||
|
|
(Amounts in $000 ) |
|
|||
|
Particulars |
2017 |
2016 |
Understanding |
Change |
Change in % |
|
Contributed Equity |
248712 |
247718 |
contributed equity means the amount of invested by the shareholders of the company in exchange for shares |
the slight increase in contributed earning is due to issue of shares by the company in the year ended 2017 |
0.40% |
|
Retained Earnings |
6541 |
-1635 |
It depicts the amount of Money retained with a purpose to meet future contingencies. This amount arises as a result of the transfer of a portion of profit/ loss earned during the year |
such a huge change is due to the profit earned during the year BT Perpetual Resources, however, there was a loss in the previous year that led accumulated loss for the periods |
-500% |
|
reserves |
22707 |
9676 |
As the name suggests, it is a reserve kept aside by every corporations per the law. |
Reserves have a direct connection with profit/ loss earned during the year. Hence increase in reserve is mainly due to the conversion of loss to the company into profit for the period ended 2017 |
135% |
|
Total |
277960 |
255759 |
(Annual Report, 2017).
Hill End Gold Ltd:
|
Owner’s equity: |
|||||
|
|
(Amounts in $ ) |
|
|||
|
Particulars |
2017 |
2016 |
Understanding |
Change |
Change in % |
|
Contributed Equity |
76530051 |
74908934 |
contributed equity means the amount of investment by the shareholders of the company in exchange for shares |
the increase in contributed equity shares shows the additional issue of shares during the year by Perpetual resources limited |
2.16% |
|
Reserves |
212121 |
135539 |
As the name suggests, it is a reserve kept aside by every corporations per the law. |
The increase shows the transfer of profit during the year to the reserve account. It directly means the profit has been increased over the year |
56.50% |
|
Accumulated Loss |
-59322550 |
-58102463 |
As the name predicts, it means the loss accumulated over the years. It is due to a deficit of the company |
it depicts that accumulated loss is greater than the accumulated profit that resultant led to negative balance & the same has been increasing due to an increase in a loss during the year 2017 |
2.10% |
|
Total |
17419622 |
16942010 |
(Annual Report, 2017).
Part ii:
As required, the following table interprets the comparative analysis of equity & debt of the selected companies:
|
|
Perpetual Resources Ltd |
Hill End Gold Ltd |
|
Particulars |
2017 |
2017 |
|
(Amounts in $000 ) |
Amounts in $000 ) |
|
|
Contributed Equity |
2,48,712 |
76,530 |
|
Retained Earnings/ Accumulated loss |
6,541 |
-59,323 |
|
Reserves |
22,707 |
212 |
|
Total |
2,77,960.00 |
17,419.62 |
(Annual Report, 2017).
Part iii:
As required, below table explains each item of cash flow statement along with their understanding and reason for changes for the selected companies:
Perpetual Resources Ltd
|
Cash flow statement: |
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|
|
(Amounts in $000) |
|
|
|
|
|
Particulars |
2017 |
2016 |
Understanding |
Reason for Change |
Change in % |
|
Cash flows from operating activities: |
|||||
|
Distributions/ dividend received |
6,547 |
9,043 |
It refers to the amount of money received as dividend/ distribution during the year 2017 by the company on the investments. |
here, the decrease is mainly due to the announcement of a dividend made by the investee company |
-27.60% |
|
Interest received |
911 |
565 |
it depicts the amount of money received an interest income against the investments |
it is mainly due to increase in investment made during the year 2017 |
61.24% |
|
other income |
216 |
258 |
it refers to other income such commission etc from the customers |
the increase/ decrease depends on the activities performed |
-16.28% |
|
Payment of management fee |
-3,011 |
-2,836 |
it refers to the amount expended during the year against management fee |
due to inflation |
6.17% |
|
paid income tax |
-3,251 |
-669 |
it is the liability of every corporation payable to the government in respect of the income earned during the year |
since the company has significantly earned a profit during the year ended 2017, consequently the income tax payable has been increased |
386% |
|
Other expense paid |
-1,617 |
-1,341 |
it refers to other expenditure incurred to run the operating activities such as salaries, bills etc |
the increase/ decrease depends upon activities reformed during the year |
20.58% |
|
Net cash provided by operating activities |
-205 |
5,020 |
|||
|
Cash flows from investing activities: |
|||||
|
Proceeds due to sale of investment |
2,71,650 |
3,23,038 |
it means the amount received as a result do a sale of investment by the company during the eyar2017 |
It is due to the market value of an investment which has been sold during the year by the company. |
-15.91% |
|
purchases of various investments |
-2,58,761 |
-2,88,113 |
As clearly depicts, it refers to the amount paid for the purchase of an investment that increases the interest income of the company |
it is due to the decision of the management of the company in regard to investments |
-10.19% |
|
Net cash used in investing activities |
12,889 |
34,925 |
-63.10% |
||
|
Cash flows from financing activities |
|||||
|
payment of dividend |
-9,613 |
-3,050 |
It means the amount of money paid by the company to their shareholders as a dividend during the year ended 2017. |
There is such a high increase. This is s because the company has earned a profit during the year 2017 which was a loss in the year ended 2016 |
215% |
|
proceeds from the exercise of options |
– |
1,348 |
it refers to the amount received on exercising options purchased previously |
All options are set off in the years 2016 |
-100% |
|
Net cash used in financing activities |
-9,613 |
-1,702 |
|||
|
The net increase in cash and cash equivalents |
3,071 |
38,243 |
Aggregated cash for the year from activities |
||
|
Cash and cash equivalents at the start of the period |
58,350 |
20,107 |
cash at the beginning of the year |
||
|
Cash and cash equivalents at end of the period |
61,421 |
58,350 |
Net cash at the end of the year |
(Annual Report, 2017).
Hill End Gold Ltd:
|
Cash flow statement: |
|||||
|
|
(Amounts in $ ) |
|
|
|
|
|
Particulars |
2017 |
2016 |
Understanding |
Reason for Change |
Change in % |
|
Cash flows from operating activities |
|||||
|
Interest Received |
5313 |
6277 |
it depicts the amount of money received an interest income against the investments |
the decrease is due to the sale of investment by the company |
-15.36% |
|
Other income received |
0 |
9367 |
it means the amount of money received as a result of other income such as commission etc from the customers |
there is no other income earned by the company for the year ended 2017 |
-100.00% |
|
Payment to supplier & employees |
-970948 |
-990322 |
the amount of money paid o vendors etc for running the operating activities of every company |
Changes directly depend upon the type & nature of services taken |
-1.96% |
|
Net cash flows used in operating activities |
-965635 |
-974678 |
|||
|
Cash flows from investing activities |
|||||
|
Proceeds from the sale of shares |
0 |
657442 |
it refers to the money received as a sale of shares during the year |
no such sale transaction has taken place for the year ended 2017 |
-100.00% |
|
Payment for exploration bonds |
0 |
41519 |
it is a type of investments made by the company for exploration bond |
no such investment made in the eyras ended 207 by the company |
-100.00% |
|
proceeds from the disposal of fixed assets |
0 |
60600 |
it refers to the money received as a sale of noncurrent assets during the year |
no such sale transactions took place for the year ended 2017 |
-100.00% |
|
Mining property |
-23246 |
-48007 |
it depicts the amount invested in regard to the mining property |
-51.58% |
|
|
Payment for exploration expenditure |
-57171 |
-225487 |
it depicts the amount spent in regard to exploration |
the increase/ declares have a direct link with purchases made during the year |
-74.65% |
|
Net cash flows used in investing activities |
-80417 |
486067 |
#REF! |
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|
Cash flows from financing activities |
|||||
|
Proceeds due to the issue of shares |
1649630 |
460220 |
it means the issue of shares to the shareholder during the year |
it depends upon the number of shares & market price of shares issued by the company for the accounting period |
258.44% |
|
Net cash flows used in financing activities |
1649630 |
460220 |
|||
|
Net decrease/ increase in cash and cash equivalents |
603578 |
-28391 |
Aggregated cash for the year from activities |
||
|
Cash and cash equivalents at the start of the period |
27996 |
56387 |
cash at the beginning of the year |
||
|
Cash and cash equivalents at end of the period |
631574 |
27996 |
Net cash at the end of the year |
Comparative Analysis of the selected companies (Perpetual Resources limited and Hill end Gold Limited) based on cash flow statement is as follows:
|
|
Perpetual Resources Ltd |
Hill End Gold Ltd |
||||
|
Particulars |
2017 |
2016 |
2015 |
2017 |
2016 |
2015 |
|
(Amounts in $000 ) |
Amounts in $ ) |
|||||
|
Net cash from operating activities |
-205 |
5020 |
326 |
-966 |
-975 |
-164 |
|
Net cash from Investing activities |
12889 |
34925 |
-224403 |
-80 |
486 |
-108 |
|
Net cash from financing activities |
-9613 |
-1702 |
244184 |
1650 |
460 |
275 |
|
Total |
3071 |
38243 |
20107 |
604 |
-28 |
2 |
By comparing the cash flow statement of both the companies it can be concluded that the financial position of perpetual resources limited is strong than Hill end gold limited. It also depicts that the demand of product & services of perpetual resources is higher. And investors believe to invest comparatively in his company.
Part VI:
Other comprehensive income i.e. OCI of selected companies (Perpetual resources limits and Hill end Gold Limited) are as follows:
Perpetual Resources Limited- As per the annual report of the company for the year ended in 2017; there is no OCI i.e. other comprehensive income presented in the income statement of the company.
Hill End Gold Ltd- income statement of the company present “Gain on revaluation of available for sale financial assets “as OCI i.e. other comprehensive income for the year ended 2017.
Part vii:
Hill End Gold Ltd
In accordance with the prescribed law or as per GAAP, there are some income, revenue, expenses, gain that are excluded to be shown in the income statement are known as other comprehensive income. The reason for the same has been that items are not actually realized during the year. For example sale of assets is the realization of assets during the year however revaluation of assets cannot be said to be the realization of assets hence gain/ loss on the realization of assets will be taken as other comprehensive income. As stated above gain on revaluation in case of Hill end gold limited is OCI i.e. other comprehensive income since the assets has not sold during the year but only revalue’s as per the market value (Bragg, S. and Bragg, S. (2018). Also as per matching concept all the expenses should be charged against the profit of the same period in order to report the profitability of the company in adequate way. There are certain business transaction the benefit of which would arise in the near future thus form the part of other comprehensive income instead of regular business income.
Part viii:
Comparative Analysis cannot be made for the selected companies since there is no OCI i.e. other comprehensive income presented in the income statement of perpetual resources limited (Annual Report, 2017). If these items would have reported in income statement it would have maximized the current year return of the shareholder and leads to inappropriate reporting of the financial statement.
Part ix:
No. The other comprehensive income does not plan any role to determine the performance of the manger of the company (Bragg, S. and Bragg, S. (2018). These income should not be part of the regular income as the transaction does not relates to the regular operation of the business.
Part x:
The income tax expenses for the period can be taken from income statement where it is reported as income tax paid. The tax expense of the selected companies as per the annual report for the year ended 2017 is as follows:
Perpetual resources limited- For the year ended 2017; tax expense of Perpetual Resources Limited is of $11648000.
Hill End Gold Ltd- there is nil tax payable by the company Hill end Gold limited due to a loss for the year ended 2017.
Part xi:
Calculation of effective tax rate for the selected companies (Perpetual Resources Limited and Hill end Gold Limited) is as follows:
|
Effective tax rate |
||
|
|
Perpetual Resources Ltd |
Hill End Gold Ltd |
|
Particulars |
2017 |
2017 |
|
(Amounts in $000) |
Amounts in $) |
|
|
Effective tax rate: |
27% |
0 |
|
Income taxes |
11648 |
0 |
|
Earnings before taxes |
43462 |
-1220087 |
In nutshell on the basis of above able, it has been depicted that Perpetual resource-limited has a highest effective tax rate. It is mainly due to nil tax liability for the Hill end Gold Limited (Perpetualequity.com.au. (2018).
The timing difference during the accounting year led to provide deferred tax assets or deferred tax liability for any company. DTA is a reduction in future tax payable of the company or vice versa for DTL (Taxman, 2018). The other reason for reporting of deferred tax assets and liabilities is due to difference in the regulation of calculating profit for income tax purpose and business purpose.
In respect of both the companies i.e. Perpetual Resources Ltd and Hill End Gold Ltd, there is an increase in deferred tax assets over the year.
Cash tax amount for the selected companies (Perpetual Resources Limited and Hill end Gold Limited) has been calculated as follows:
|
Particulars |
Perpetual Resources Ltd |
Hill End Gold Ltd |
|
Net income |
47,823.00 |
-1,383.44 |
|
Add: deferred tax assets |
2,569.00 |
892.48 |
|
Income on which taxes would have been paid |
45,254.00 |
-2,275.92 |
The brief calculation of the cash tax rate of (Perpetual Resources Limited and Hill end Gold Limited) is as follows:
|
Particulars |
Perpetual Resources Ltd |
Hill End Gold Ltd |
|
Income tax provision |
– |
– |
|
Increase in deferred tax assets |
3,979.00 |
31.76 |
|
Current income taxes |
11,648.00 |
– |
|
Other income |
– |
– |
|
Taxes paid on other income |
– |
– |
|
Unlevered cash taxes |
11,648.00 |
– |
|
EBITA |
47,823.00 |
-1,383.44 |
|
Cash tax rate |
24.36% |
0.00% |
Due to nil tax liability for Hill end gold limited, the cash tax rate of Perpetual Resources Limited is higher comparatively
The reason for the difference in the cash tax and book tax is difference of timing and regulation of income tax law and corporate tax law. In accounting terms, it has been if there seems to have two ways of measuring the income tax expense that incurs for the company during the year based on the income:
- Cash tax payable by the company
- Book-tax expense
- Hence, it can be depicted that both the terms are different and a company always pays less than the due amount during the year.
Conclusion
Taking under consideration the various calculation based on the annual report of the selected companies (Perpetual Resources Ltd and Hill End Gold Ltd), it can be concluded that The cash flow statement of both the companies have been showing good sign in respect of the cash terms i.e. cash inflow & outflow is attractive and have been maintained adequately for the financial position of the companies. By comparing the cash flow statement of both the companies it can be concluded that the financial position of perpetual resources limited is strong than Hill end gold limited. It also depicts that the demand of product & services of perpetual resources is higher. The report also has provided us understanding of the reason of the change in the item reported as the shareholder equity by the company. Also we have got an understanding of the debt position of the above two company through the report.
References:
Bragg, S. and Bragg, S. (2018). Other comprehensive income. [Online] Accounting Tools. Available at: https://www.accountingtools.com/articles/what-is-other-comprehensive-income.html [Accessed 2 Sep. 2018].
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https://www.taxmann.com. (2018). Difference between Deferred Tax Asset (DTA) and Deferred Tax Liability (DTL). [online] Available at: https://www.taxmann.com/blogpost/2000000449/difference-between-deferred-tax-asset-dta-and-deferred-tax-liability-dtl.aspx [Accessed 2 Sep. 2018].
Asx.com.au. (2018). sax-compliance/cog-principles-and-recommendations. [online] Available at: https://www.asx.com.au/documents/asx-compliance/cgc-principles-and-recommendations-3rd-edn.pdf [Accessed 27 Apr. 2018].
Bloomberg.com. (2018). Terms of Service Violation. [online] Available at: https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=8069572 [Accessed 17 Sep. 2018].
Breakingintowallstreet.com. (2018). Book vs. Cash Taxes & Section 382 NOLs – Sample Tutorial. [online] Available at: https://breakingintowallstreet.com/biws/book-vs-cash-taxes-section-382-nols/ [Accessed 17 Sep. 2018].
Editorial, R. (2018). ${Instrument_CompanyName} ${Instrument_Ric} Company Profile | Reuters.com. [online] U.S. Available at: https://www.reuters.com/finance/stocks/company-profile/PEC.AX [Accessed 17 Sep. 2018].
Hillendgold.com.au. (2018). Hill End Gold Limited – Home Page. [online] Available at: https://www.hillendgold.com.au/ [Accessed 17 Sep. 2018].
Investogain.com.au. (2018). PERPETUAL RESOURCES LIMITED PEC – Profile and Status at InvestoGain Australia. [online] Available at: https://www.investogain.com.au/company/perpetual-resources-limited [Accessed 17 Sep. 2018].
Perpetualequity.com.au. (2018). perpetual Resources Limited- Annual Report, 2017. [online] Available at: https://www.perpetualequity.com.au/~/media/perpetualpeic/03-sp-pic-sp-annual-sp-report-sp-final.ashx?la=en [Accessed 17 Sep. 2018].
Perpetualequity.com.au. (2018). Perpetual Resources Limited- Annual report, 2016. [online] Available at: https://www.perpetualequity.com.au/~/media/perpetualpeic/pdf/pl00902_tba_pic_annual_report_wl.ashx?la=en [Accessed 17 Sep. 2018].
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