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Accounting Theory and Current Issues Evaluation of an ASX Listed Company A-Cap Resources Ltd

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Holmes Institute Sydney

   

HI6025 Accounting theory and current issues (HI6025)

   

Added on  2019-10-30

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Accounting Conceptual and Current Issues Executive Summary The report aimed at examining the accounting policies and estimates used by an Australian Securities Exchange (ASX) listed company named A-Cap Resources Ltd. In the later part, an investigative report on the accounting strategy of its management and choices of reporting strategy were evaluated according to the information presented in the annual reports. This evaluation was performed by identifying the key accounting policies, assessing accounting flexibility, evaluating its accounting strategy and disclosure quality.

Accounting Theory and Current Issues Evaluation of an ASX Listed Company A-Cap Resources Ltd

   

Holmes Institute Sydney

   

HI6025 Accounting theory and current issues (HI6025)

   Added on 2019-10-30

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Running head: ACCOUNTING THEORY AND CURRENT ISSUESAccounting Theory and Current Issues
Accounting Theory and Current Issues Evaluation of an ASX Listed Company A-Cap Resources Ltd_1
ACCOUNTING THEORY AND CURRENT ISSUESExecutive SummaryThe report aimed at examining the accounting policies and estimates used by an Australian Securities Exchange (ASX) listed company named A-Cap Resources Ltd. Based on this examination, the accounting policies of the company were listed and thereby its accounting flexibility have been evaluated. Moreover, the policies used by its competitors especially Boss Resources Limited was were evaluated as well as o compared. Furthermore, any unexplained change or possibility of red flags was considered for the company to determine its accounting position. The company’s accounting quality was critically evaluated by identifying various pressures being experienced during operations. In the later part, an investigative report on the accounting strategy of its management and choices of reporting strategy were evaluated according to the information presented in the annual reports. This evaluation was performed by identifying the key accounting policies, assessing accounting flexibility, evaluating its accounting strategy and disclosure quality. Page 2
Accounting Theory and Current Issues Evaluation of an ASX Listed Company A-Cap Resources Ltd_2
ACCOUNTING THEORY AND CURRENT ISSUESTable of ContentsExecutive Summary.........................................................................................................................2Introduction......................................................................................................................................5A. Assessment of Accounting Policies and Estimates of A-Cap Resources Limited.....................6A.1. Accounting Policies and Estimates Used by the Company.................................................6A.2. Flexibility.............................................................................................................................7A.3. Determining the Usage of Accounting Policies and Estimates by its Competitors.............7A.4. Comparison of Accounting Policies and Estimates.............................................................8A.5. Agreement Regarding the Policies and Estimates...............................................................9A.6. Determination of Whether Accounting Strategy is Hiding or Revealing..........................10A.7. Possibility of Red flags or Questionable Number in the Accounting Report....................11A.8. Explanation about the Accounting Positions.....................................................................11B. Critical Evaluation of Accounting Quality...............................................................................14B.1. Pressures that Influence the Accounting Standard-Setting Environment..........................14B.2. Implication of the Company Making Accounting Disclosures..........................................15B.3. Understanding the Possible Implications Making Accounting Choices and Disclosures.16C.1. Identification of Key Accounting Policies.........................................................................16C.2. Assessing Accounting Flexibility......................................................................................17C.3. Evaluating Accounting Strategy........................................................................................17C.4. Evaluation of the Quality of Disclosure.............................................................................18C.5. Identification of Potential Red Flags.................................................................................19C.6. Compliance with the Conceptual Framework....................................................................19Conclusion.....................................................................................................................................20References......................................................................................................................................21Bibliography..................................................................................................................................24Page 3
Accounting Theory and Current Issues Evaluation of an ASX Listed Company A-Cap Resources Ltd_3
ACCOUNTING THEORY AND CURRENT ISSUESIntroductionA-Cap Resources Limited is an Australian based company, which deals with uranium exploration. The ASX code of the company is ACB and it’s headquarter is located in Australia. However, it mainly operates in Botswana by the ASX code of A-CAP. It is a resource based company, which specifically deals with uranium and coal projects as well (A-Cap, 2017). It has one of the largest uranium deposits in the entire world and always focuses on gaining higher level of competitive advantage over the competitors. Moreover, the company emphasizes developing process design and underlying infrastructure, which supports in conducting mining projects successfully in the entire world. Its vision is to enhance uranium projects towards developmental activities and accordingly setting policies towards providing maximum benefits shareholders (A-Cap, 2017a). Emphasizing the issue, the report intends to evaluate the accounting policies and estimates of A-Cap Resources Limited. This has been performed by simply accessing the annual reports of the company from where various accounting related information is obtained and likewise included inthis report. Thus, initially, annual reports for two financial years of the company have been explored that helped in identifying key accounting policies of the selected ASX listed company. Thereafter, critical evaluation of the company’s accounting quality is undertaken by considering various pressures it faces during operations and the implications of accounting disclosures. In thelater part, an investigative report is prepared identifying chief key accounting policies of the company, assessing accounting flexibility, evaluating business or operational strategy and qualityof disclosure, identifying its possible red flags and thereby accommodating with the conceptual framework.Page 4
Accounting Theory and Current Issues Evaluation of an ASX Listed Company A-Cap Resources Ltd_4
ACCOUNTING THEORY AND CURRENT ISSUESA. Assessment of Accounting Policies and Estimates of A-Cap Resources LimitedA.1. Accounting Policies and Estimates Used by the CompanyThere are various accounting policies and estimates that have been considered by A-Cap Resources Limited and its management team based on the standards of Corporations Act 2001 and Australian Accounting Standards Board (AASB). Adhering to these standards, the company has been able to comply with the international standards of financing as well. It is the material accounting policies that adopted by the company to prepare the financial statements on the basis of historical costs and the value of its assets and liabilities. It also consolidates its financial statements according to the ‘principles of consolidation’, incorporating all its subsidiaries and parent company’s liabilities and assets (A-CAP Resources Limited, 2015). Apart from the board remuneration policy, which has been stated in the annual reports, the company is also involved into executing share trading policy. In addition, remuneration policy is also implemented to design the packages of remuneration in a way so that the skilled employees are retained for a longer time. In contrast, the company also uses share trading policy, which focuses on regulating the shares and the securities being issued. Adhering to International Financial Reporting Standards (IFRS) from the year 2005 resulted into making significant changes specifically in the accounting policy, covering assets’ impairment and payments based on shares as well as income tax. The expense for income tax was then based on the adjusted accounting profit (A-CAP Resources Limited, 2004).With respect to the estimates, A-Cap Resources Limited uses mineral resource and other resource estimates according to the Localised Uniform Conditioning (LUC) approach. LUC is used by the company to control and develop the method of mining. Any further change in the Page 5
Accounting Theory and Current Issues Evaluation of an ASX Listed Company A-Cap Resources Ltd_5
ACCOUNTING THEORY AND CURRENT ISSUEScost estimates is accounted based on the underlying prospects. Therefore, accounting estimates are generally made by the company based on historical information and recent trends of estimating the liability of withholding tax (A-CAP Resources Limited, 2016). A.2. FlexibilityAccording to the annual reports of A-Cap Resources Limited for 2 years, which have been explored and assessed in a detailed way, it has been apparent that there are various phases through which the company’s policies and estimates are reviewed on a timely basis. This eventually results into designing effective accounting policies that prove to be highly beneficial for the shareholders and the company as a whole (A-CAP Resources Limited, 2016). Therefore, it can be opined that the accounting policies/estimates used by the firm can be changed or revisedas and when required, giving ample time and opportunities to make optimum utilization of the available resources. A.3. Determining the Usage of Accounting Policies and Estimates by its CompetitorsBoss Resources Limited is regarded as one of the chief competitors of A-CAP Resources Limited. Based on the information provided in the 2016 annual report of Boss Resources Limited, it can be stated that the accounting standards being followed by the company were similar to that of A-CAP Resources Limited. As per the remuneration policy is concerned, it can be observed that the Board of Directors of Boss Resources Limited usually make independent decisions associated with remunerations policies based on the current trends of the competitors in the respective markets. However, differences in the estimates can be witnessed within Boss Resources Limited, as the company not only focused on corporate governance, but also on Page 6
Accounting Theory and Current Issues Evaluation of an ASX Listed Company A-Cap Resources Ltd_6

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