Critical Analysis Of Financial Accounting Regulation And Standard Setting In Australia And Equity Position Of Selected Firms

Assignment Tasks

This report shows the requirement of the preparation of financial statement along with the shortcomings of not preparing the financial statement. This report shows the contribution of AASB to IFRS and reason IFRS not being made mandatory to members.

The other part of the report deals about four listed companies in mineral industry and there debt and equity position over a period of four years.

Amani Gold Limited, an entity listed on Australian stock exchange is engaged in exploration of minerals. The company marks its presence in South Africa and has interest in Giro Gold project. The traded price of the stock on 26-09-2018 is 0.01 AUD. (Reuters.com, 2018)

Before analysing the equity portion of the company, it shall be important to understand the key terms in the balance sheet and the assumption undertaken for analysing the equity have been enumerated here-in-below:

• Debt bearing interest has been considered while computing debt equity ratio and capital gearing ratio;
• Debt that has been falling under the category of  non-current liability has been considered;
• Balance sheet and notes to accounts have been considered for the purpose of analysis. Further, details have been considered for past 4 years;
• Cash and cash equivalent has not been considered and net debt has been considered on the basis of balance sheet balance;
• Many balance sheet have been reinstated for year 2016 and the reinstated figure has been considered.

Key Definitions

Before analysing the equity portion of balance sheet, it shall be important to understand the key terms in the equity portion of balance sheet of the aforesaid four companies:

• Issued Capital: These shares are issued by the company at its inception and increased by time to time to meet the requirements of funds of the company. These share carry voting rights and the holder of these shares are the owners of the company. Further, these shares are paid at last at the time winding of the company.

• Preference shares of different classes: These shareholders are next to equity shareholders and have less influence on the company. They are entitled to a fixed rate of return. Further, many a times preference share come with a feature of convertibility.

• Non-current liability: The liability which shall be paid in period greater than 12 months;

• Current Liability: The liability which shall be paid in a period of 12 months are known as current liability;  
• Options: Options are the rights which are issued by the company which entitles its holders right to receive shares at a particular date.

• Reserves: Reserve are the saved portion of the company to meet any future contingency. These are created by the company to meet future needs.

• Foreign Currency translation Reserve: This is one type of reserve which are created at the time of consolidation of accounts of subsidiary in the books of parent in terms of requirement of AASB and IFRS. Further, the method of consolidating accounts include temporal and current method.

• Available for Sale Investment Reserve These are the reserve created by the company in compliance with AASB and IFRS to mark the investments at fair value.

• Option Reserve: Options reserves are created by the company to meet the requirement of vesting when the option holders exercise their right. These reserve are created in terms of compliance with IFRS and AASB;

• Cash flow hedging reserve: The reserves are created to meet cash flow requirement in case the management estimate does not match the actual outcome and is essential to meet the working capital requirement of the company;

• Non-Controlling interest: Non-controlling interest represent claim of minority investor who hold shares in the company and do not exercise any significant control in the board of director and decision making of the company.

• Treasury Shares: Treasury share also known as bought back shares represent those shares that have been called back by the company with an intention to cancel the same.

• Dividend reinvestment: These are the dividend which have been reinvested in the company and increases the wealth of the shareholders.

• Retained earnings: This represents the profit or loss of the company accumulated over the years.

The detailed break of equity of Amani Gold has been presented here-in-below:

(BDO Audit (WA) Pty Ltd, 2017) (BDO Audit (WA) Pty Ltd, 2017)

An analysis of the above table represents that the company has been incurring losses and the same is increasing year on year on account of poor performance of the company. The non-controlling interest of the company has also been falling down on account of the afore-stated reason. The reserves of the company include foreign currency translation reserve and option reserve. The aforesaid reserve have already been detailed above. The detail break up of share Capital of the company has been presented here-in-below:

On perusal of the above, it may be seen that company has issued equity from time to time to meet the fund requirement as the company has been incurring losses.

Further detail of debt position of the company has been presented here-in-below:

On perusal of the above, it may be seen that company has not issued debt and accordingly the ratios have not been analysed.

Anova Metal Limited

Anova Metal Limited is an entity listed on Australian Stock exchange and primarily engaged in exploration of minerals The Company has interest in big spring project in Nevada. The price of the share of the company on 26-09-2018 is 0.02 AUD. (Reuters, 2018)

An analysis of the equity of the company has been presented here-in-below:

Corporate Regulation

(Judd, 2017)

An analysis of the above table represents that the company has been incurring losses and the same is increasing year on year on account of poor performance of the company. The non-controlling interest of the company is zero and does not have any minority liability. The reserves of the company include foreign currency translation reserve and option reserve. The aforesaid reserve have already been detailed above. The detail break up of share Capital of the company has been presented here-in-below:

On perusal of the above table, it may be understood that the company has issued additional shares and made shares placement to raise funds during the aforesaid years. Further, the convertible preference share and unlisted option has been issued.

Further detail of debt position of the company has been presented here-in-below:

On perusal of the above, it may be seen that company has not issued debt and accordingly the ratios have not been analysed.

Energia Minerals Limited

Energia Minerals Limited (Alta Zinc Limited) is an Australian entity listed on Australian Stock Exchange and is primarily engaged in the business of exploration of minerals like zinc with principal place of mining in Italy and Australia. (Reuters.com, 2018)

The analysis of equity of the company has been presented here-in-below:

An analysis of the above table represents that the company has been incurring losses and the same is increasing year on year on account of poor performance of the company and in alignment with results of other companies in the sector. The non-controlling interest of the company is zero and does not have any minority liability. The reserves of the company include foreign currency translation reserve and option reserve. The aforesaid reserve have already been detailed above. The detail break up of share Capital of the company has been presented here-in-below:

On analysis of the above, it may be seen that company has issued fresh capital many a times to meet time to requirement of funds of the company and this funds have been wiped off on account of mounting losses of the company.

Debt Structure of the company

The detail of the debt structure of the company has been presented here-in-below:

On perusal of the above, it may be understood that company has not raised much debt and meet most of its requirement through issue of equity. Further, the debt to equity ratio and capital gearing ratio of the company is near to zero.

The company is listed on Australian Stock Exchange and is primarily engaged in exploration of mineral oil and is an investment company. The share price of the company is AUD 0.00 on 27-09-2018. (Reuters.com, 2018)

The detailed breakup of the equity of the company has been presented here-in-below:

An analysis of the above table represents that the company has been incurring losses and the same is increasing year on year on account of poor performance of the company and in alignment with results of other companies in the sector. The non-controlling interest of the company is zero and does not have any minority liability. The reserves of the company include foreign currency translation reserve and option reserve. The aforesaid reserve have already been detailed above. Further, there is treasury share in the equity every four years. The detail break up of share Capital of the company has been presented here-in-below:

On perusal of the above, it may be understood that the share capital of the company has not undergone much change over the years and majority issue has been through placement.

Further, debt and equity position of the company has been presented here-in-below:

On perusal of the above, it may be seen that company has not issued debt and accordingly the ratios have not been analysed.

References:

Australian Accounting Standard Board. (n.d.). The Standard-Setting Process. Retrieved September 21, 2018, from www.aasb.gov.au: https://www.aasb.gov.au/About-the-AASB/The-standard-setting-process.aspx

BDO Audit (WA) Pty Ltd. (2017). Annual Report. Retrieved September 28, 2018, from www.amanigold.com: https://www.amanigold.com/wp-content/uploads/2018/07/2017-Annual-Report.pdf

Judd, H. M. (2017). Annual Report. Retrieved September 28, 2018, from anovametals.com.a: anovametals.com.au/wp-content/uploads/2017/10/Anova-AR-2017.pdf

Reuters. (2018). Anova Metals Ltd (AWV.AX). Retrieved September 28, 2018, from www.reuters.com: https://www.reuters.com/finance/stocks/overview/AWV.AX

Reuters.com. (2018). Alloy Resources Ltd (AYR.AX). Retrieved September 28, 2018, from www.reuters.com: https://www.reuters.com/finance/stocks/overview/AYR.AX

Reuters.com. (2018). Alta Zinc Ltd. Retrieved September 28, 2018, from www.reuters.com: https://www.reuters.com/finance/stocks/overview/EMXXX.AX

Reuters.com. (2018). Amani Gold Ltd (ANL.AX). Retrieved September 28, 2018, from www.reuters.com: https://www.reuters.com/finance/stocks/overview/ANL.AX

Uniassignment.com. (2018). What Are The Arguments For And Against Regulations Accounting Essay. Retrieved September 28, 2018, from https://www.uniassignment.com/essay-samples/accounting/what-are-the-arguments-for-and-against-regulations-accounting-essay.php

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