Financial Performance Analysis Of ASX Listed Company Altura Mining Limited | 2015-2017

Overview of Altura Mining Limited‘s cash flow statement

The report will focus on the financial performance analysis of the ASX listed company Altura Mining Limited through analysis of its different financial statement like cash flow statement, other comprehensive statement and balance sheet for the accounting year ended 2015, 2016 and 2017.

It can be observed through analysing the cash flow statement of the company that the statement is divided in 3 parts – cash flow from the operating activities, cash flow from the investing activities and cash flow from the financing activities (Alturamining.com 2018). The details of various heads are as follows –

• Cash flow from operating activities – it present the details of cash used for generated by the company through operation. Operating cash flows of the company includes various items like interest received, income tax paid and interest paid payments to the suppliers and receipts from the customers (Sethi 2016).
• Cash flow from the investing activities – it present the details of cash used for or generated by the company through investment. Investing cash flows of the company includes various items like proceeds from selling of equipment, property and plant, payments made for purchasing the equipment, property and plant, expenses on account of evaluation and exploration of activities and receipts from the investments held till maturity (Chang et al. 2014).
• Cash flow from the investing activities – it present the details of cash used for or generated by the company through financing. Financing cash flows of the company includes various items like receipts from share issuance after deducting the cost of transaction, payment towards hire purchase and repayment made towards borrowings (Pavlovi? and Bogdanovi? 2013).

The significant change that is found from the cash flow statement of the company is that the cash generation from financing has been significantly increased from $ 25,817,000 to $ 40,309,000 from the year 2016 to 2017. The major item that contributed to this increase was the receipts from share issuance that increased from $ 25,848,000 to $ 40,309,000.

• Cash flow from operation – usage of cash for carrying out the operation of the company is in rising trend. Cash used by the company for operation was $ 2954,000 for 2015, $ 4054,000 for 2016 and $ 5557,000 for 2017.  
• Cash flow from investing – Cash used by the company for investment was $ 1844,000 for 2015 and $ 1714,000 for 2016. However for the purchase of the plant, equipment and property amounting to $ 35,019,000 the cash used for investment increased to $ 43,581 for 2017.
• Cash flow from financing – Cash generated by the company from financing activities was in rising trend. It was $ 3574,000 for 2015, $ 1714,000 for 2016 and $ 40,309,000 for 2017. However, the major reason of significant increase in generation of cash year over year was the receipts from issuance of shares.

Further Items recorded in the other comprehensive income statement of the company are the items that are likely to be reclassified under the profit and loss statement. Further, the alteration in the fair value of asset that can be sold, foreign exchange translation differences and other comprehensive loss or income was included under the same statement (Titman, Keown and Martin 2017). The details of the amount for the included items are as follows –

Financial asset that can be sold are the assets including marketable securities and non-derivative securities. These assets are classified as financial assets only when it is not included under any other category of assets or it is classified as financial assets and these assets must be available to be sold. Further, the assets will be considered as available to be sold if it does not have any fixed payment or fixed maturity period and the assets are likely to be held for medium to long term. Non-current assets that are likely to be sold beyond 1 year time can also be included under this category of asset (Watson 2015).

As the company deals with foreign entities the transactions are carried out in foreign currency denomination. The amount of the difference between its own currency and the overseas company’s currency are recorded in company’s comprehensive income statement instead of the income statement.

Other comprehensive income statement is a major statement in the financial statement of the company as it provides the investors and other users of the financial statement with clear picture of the company’s income position. Major reason for this is that the items those are not recorded under the income statement of company are recorded in the comprehensive income statement. Generally, the item that is generated after the preparation of income statement or that is not yet been recorded is included in the comprehensive statement of income. The main difference among the income statement and the comprehensive income statement is that under the income statement the transaction is recorded only after its completion, however, under comprehensive statement the item is included when the transaction is entered into by the company. For instance, when the company purchase any bonds or make investment in any shares the fluctuations in the price of the share or bonds are recorded in the comprehensive income statement (Weygandt, Kimmel and Kieso 2015). The full value of consideration is recorded in the income statement only after selling the bonds or shares. Items like gains or losses from the transaction in foreign currency or unrealized gains or losses from the investment likely to be sold are recorded in the comprehensive income statement.

Significant changes observed in the cash flow statement of Altura Mining Limited

The income tax expenses of Altura Mining Limited for the year ended 2016 amounted to $ 778,000. However, for 2017 the company did not have any tax expenses. Instead it has tax benefit amounted to $ 534,000

The rate of tax applicable on the company for the year ended 2017 was 27.5%. However, for the same period the company could not generate any positive income and the loss amounted to $ 64,49,000. Therefore, instead of tax expenses the tax benefit for the same period amounted to $ 534,000. The income tax expenses or benefit amount that is shown in the income statement are not same if the applicable tax rate is applied on the income or loss (Sarfaty 2015). The reason of difference is that the amount shown is recorded after making various adjustments like expenses those are not allowed for deduction, under provision or over provision of tax for previous year, difference in the overseas tax rate and compensation cost (Narotzki 2017).

For the accounting year ended 2017 the company did not recognise and recorded any amount as deferred tax assets or deferred tax liabilities.  Deferred tax is recognized in the balance sheet for temporary differences in the tax bases. Deferred tax is computed at applicable tax rate on the company and it is recognized if it is probable that the future profits will be available to set-off the temporary differences (Laux 2013). However, the deferred tax assets or liabilities are set-off if it is legally enforceable and the current tax and deferred tax falls under the same tax authority.

Amount of prepaid current tax recorded by the company for the year 2017 was $ 272,000. However, it had not recognized any amount as current tax for the year 2017.  Income tax payable does not match with the income tax expenses as income tax payable is charged against taxable profit whereas the income tax expenses is owed by the company under the accounting regulation and it is recognised as expenses in the income statement (Maaloul and Zéghal 2015).

Income tax that is recognized in the cash flow is the tax on the company’s operating activities whereas the income tax as per the income statement is the tax charge against the profit reduced by various expenses like financing expenses, selling and distribution expenses, administration expenses and operating expenses (Melloni and Stacchezzini 2018). Income tax recorded in the cash flow statement for the year 2017 is $ 320,000 whereas income tax benefit under income statement for 2017 is $ 534,000.

Insights – income tax charge in income statement is the charges against accounting profit whereas tax as per cash flow statement is against the operating activities. Further, the accrual basis of accounting does not match with the tax rules applicable to compute taxable profit.

Confusing part – most confusing part was to understand the recognition method of deferred tax as no specific sign is there that can be used to determine that the future profits will be available to set off the temporary differences of deferred tax.

References 

Alturamining.com. 2018. Altura Mining | Charging Forward with Lithium. [online] Available at: https://alturamining.com/ [Accessed 27 May 2018].

Chang, X., Dasgupta, S., Wong, G., and Yao, J. 2014. Cash-flow sensitivities and the allocation of internal cash flow. The Review of Financial Studies, 27(12), 3628-3657.

Laux, R. C. 2013. The association between deferred tax assets and liabilities and future tax payments. The Accounting Review, 88(4), 1357-1383.

Maaloul, A. and Zéghal, D., 2015. Financial statement informativeness and intellectual capital disclosure: An empirical analysis. Journal of Financial Reporting and Accounting, 13(1), pp.66-90.

Melloni, G., Lai, A. and Stacchezzini, R., 2018. Integrated reporting and narrative accountability: The role of preparers. Accounting, Auditing and Accountability Journal, p.1.

Narotzki, D., 2017. Corporate Social Responsibility and Taxation: A Chance to Develop the Theory.

Pavlovi?, M., and Bogdanovi?, J. 2013. Cash flow statement. Škola biznisa, (3-4), 129-147.

Sarfaty, G.A., 2015. Measuring corporate accountability through global indicators. The Quiet Power of Indicators: Measuring Governance, Corruption, and Rule of Law, p.103.

Sethi, S., 2016. Globalization and self-regulation: The crucial role that corporate codes of conduct play in global business. Springer.

Titman, S., Keown, A.J. and Martin, J.D., 2017. Financial management: Principles and applications. Pearson.

Watson, L., 2015. Corporate social responsibility research in accounting. Journal of Accounting Literature, 34, pp.1-16.

Weygandt, J.J., Kimmel, P.D. and Kieso, D.E., 2015. Financial and managerial accounting. John Wiley and Sons.

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