Corporate Accounting: Analyzing Aeon Metals Limited's Financial Statements

This report delves into the financial statements of Aeon Metals Limited, an Australian mineral exploration company listed on the ASX. It examines the cash flow statement, other comprehensive income statement, and accounting for corporate income tax. The analysis highlights key trends in the company's financial performance, including its operating, investing, and financing activities. It also explores the treatment of deferred tax assets and liabilities, and the relationship between income tax expense and income tax paid. The report concludes with insights into the company's financial health and its approach to tax accounting.

Corporate Accounting
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Table of Contents
Introduction......................................................................................................................................4
CASH FLOWS STATEMENT.......................................................................................................5
(i) From your firm’s financial statement, list each item of reported in the CASH FLOWS
STATEMENT and write your understanding of each item. Discuss any changes in each item
of CASH FLOWS STATEMENT for your firm over the past year articulating the reasons for
the change....................................................................................................................................5
(ii) Provide a comparative analysis of your company’s three broad categories of cash flows
(operating activities, investing activities, financing activities) and make a comparative
evaluation for three years.............................................................................................................8
OTHER COMPREHENSIVE INCOME STATEMENT..............................................................11
(iii) What items have been reported in the other comprehensive income statement?...............11
(iv) Explain your understanding of each item reported in the other comprehensive income
statement....................................................................................................................................12
(v) Why these items have not been reported in Income Statement/Profit and Loss Statement.13
ACCOUNTING FOR CORPORATE INCOME TAX.................................................................14
(vi)What is your firm’s tax expense in its latest financial statements?.....................................14
(vii) Is this figure the same as the company tax rate times your firm’s accounting income?
Explain why this is, or is not, the case for your firm.................................................................14
(viii) Comment on deferred tax assets/liabilities that are reported on the balance sheet
articulating the possible reasons why they have been recorded................................................14
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(ix)Is there any a current tax asset or income tax payable recorded by your company? Why is
the income tax payable not the same as income tax expense?...................................................15
(x) Is the income tax expense shown in the income statement same as the income tax paid
shown in the cash flow statement? If not why is the difference?..............................................16
(xi)What do you find interesting, confusing, surprising or difficult to understand about the
treatment of tax in your firm’s financial statements? What new insights, if any, have you
gained about how companies account for income tax as a result of examining your firm’s tax
expense in its accounts?.............................................................................................................16
Conclusion.....................................................................................................................................17
References......................................................................................................................................18
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Introduction
This report analyses the working of financial statements in the company. Aeon Metals
limited is the listed company on the Australian Stock exchange. It is based on the mineral
exploration portfolio in the world. It carries the principal activities in the financial year that
is development and investigation of the project and exploitation for the precious metals in
Australia. This report discusses the concepts of cash flow statements as it helps to ascertain
the profitability and liquidity of the firm. They also evaluate the balance sheet that includes
the short-term and long-term debts and accrued business that helps to analyse the position of
the business.
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CASH FLOWS STATEMENT
(i) From your firm’s financial statement, list each item reported in the CASH
FLOWS STATEMENT and write your understanding of each item. Discuss any
changes in each item of CASH FLOWS STATEMENT for your firm over the
past year articulating the reasons for the change.
Cash flow statements depict the changes in the income statements and balance sheet statements
and break the analysis down to operating, investing financing activities.
Operating activities: This activities emphasis on the inflows and outflows from the activities of
the business. It includes certain items such as:
Government grant received: It is the financial award that is provided by the state to an eligible
grantee. It is the income for the Aeon Metals limited as they receive an award for the activities.
Cash paid to suppliers and employees: It is the amount that can be paid by the Aeon metal for the
merchandise to sell its clients.
Interest received: It is the amount earned but not received in cash. This amount is credited to the
interest income account(Watson, 2018).
Investing Activities:
Acquisition of plant, property, equipment: These assets or owned resources will allow a business
to have continuous operations. The sum of acquisition of plant, property consist the
transportation costs, installation costs purchase price and other charge incur while putting the
benefit in use.
Proceeds from disposal of plant, property, equipment: In this the amount received from the sale
of property, plant and other assets that income can be used for the performing the activities.
Payments for exploration activities: Exploration is the state of searching for the discovery of
information and resources. The company made a certain amount of payment for this activity.
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Acquisition of other investments: Acquisition is the process in which company purchase then
ownership of other company. It is included in the investing activity as they acquire the other
company that is a benefit for them.
Financing activities:
Proceeds from issue of share capital: It can be said that the shares are held through the
stakeholders. The company cannot issue new share directly up to the full amount. They can use
the amount which can be received by the stakeholders by selling the shares of the company.
Proceeds from issue of notes: Issue of notes can be in form of borrowing or in a loan that helps in
investing the activities to carry out the functions of the company.
Payment of capital raising costs: This cost helps to raise the budget for capital and also raise the
non-financial costs the company makes payments to raise these costs.
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(ii) Provide a comparative analysis of your company’s three broad categories of cash flows
(operating activities, investing activities, financing activities) and make a comparative
evaluation for three years.
Particulars 2015 2016 2017 Change
2015-
2016
change
2016-
2017
Change
2015-
2017
Cash flow from operating
activity
(1077) (767) (1577) (332) (810) (1142)
Cash flow from investing
activity
(4264) (2252) (3184) (2012) (1802) (3814)
Cash flow from financing
activity
1912 7836 - 5924 5924 11848
Operating Activities: This activity includes the manufacturing, marketing, distributing and also
purchase and sells the services and products. From the above table it can be analyses that the
income received from the operating activity is in 2017 it is $ (1577). In 2016 it is (767) and in
2015 it is (1077) it denotes that in 2015 the company makes more payments as compared to the
2016 and in 2017 they have more expense as compared to the previous years.
Investing Activities: The Company includes the losses or gains from the investments done in the
financial markets and operating subsidiaries. The above table denotes the amount of investing
activities that is in 2015 it is $(4264) in 2016 it is (2252) and in 2017 it is (3184), it denotes that
the company makes payments for the tangible and non tangible assets.
Financing Activities: It consists the activities such as the issuance of shares, payment for share
capital. The amount receive by the financing activities is in 2015 it is 1912 and in 2016 it is 7836
and in 2017 it is nil, which denotes that in previous years they finance for the assets and [provide
loans but in current year they did not perform any transactions(Chen, et. al., 2017).
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OTHER COMPREHENSIVE INCOME STATEMENT
(iii) What items have been reported in the other comprehensive income statement?
Comprehensive statement income is that income statement which is adopted by the company and
there are certain items that cannot be recorded in the profit and loss account. As the items of the
comprehensive income statement is not executed but they have to be executed after sometime
and they also create the significant impact to the financial accounts. It includes the administrative
expenses, finance costs, finance income, income tax expense their value are changing according
to the time and activities.
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(iv) Explain your understanding of each item reported in the other comprehensive income
statement
It can be analysed that there are certain items that have covered under the profit and loss account
and a certain amount is recorded under the comprehensive income statement as they did not
execute. It includes the expenses such as administrative expenses which means the company
does not incur directly but includes the functions such as production, manufacturing or sales. It
includes the finance cost and finance income. Finance cost is that in which companies finance
their operations through the equity, loans, and borrowings. Finance income is the earning for the
company as they can receive an amount in form of interest due to dividends and shares
(Bankman, et. al., 2017).
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(v) Why these items have not been reported in Income Statement/Profit and Loss
Statement
Comprehensive income is the sum of net income and other items that must bypass the statements
of income as they did not realize and it includes the unrealized items that can be loss or gain
which is available from the foreign exchange and sale of securities. These items are not included
as they are unrealized transactions and they have to be executed in future. For example, the
unrealized holdings loses and gains on investments, pension plans etc(Rogers, 2017).
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ACCOUNTING FOR CORPORATE INCOME TAX
(vi)What is your firm’s tax expense in its latest financial statements?
Tax expense can be defined as the liability for the Aeon metals limited which means they have to
pay that much amount. From the financial statements of account, it can be observed that there is
no tax expense in 2015, 2016, and 2017 which means that Aeon metal limited does not have to
pay any amount as the tax expense.
(vii) Is this figure the same as the company tax rate times your firm’s accounting income?
Explain why this is, or is not, the case for your firm.
It can be observed that the expense by the company is not same as the tax of accounting. As per
the Australian tax laws, the rate of tax is 30% and that can be identified by Aeon metals limited
and they require the different adjustments. It can be ascertained that certain amounts are to be
deducted from the tax laws. To calculate the amount of income tax expense, the company has to
consider the current tax expense and the deferred tax expense for the financial year.
(viii) Comment on deferred tax assets/liabilities that are reported on the balance sheet
articulating the possible reasons why they have been recorded.
Deferred tax assets: Deferred tax assets are recorded in the balance sheet under the assets side. It
is a state in which business has overpaid the taxes or tax can be paid in advance and these are
returned in the form of tax relief. Deferred tax can be considered as the differences between the
number of liabilities and assets for the reporting of financial statements. It involves the unused
tax credits, unused tax losses etc.
Deferred tax liabilities: Deferred tax liability can be assessed or it can be due for the current
accounting year but it does not pay. It records the will of the company and recognised that the
company will pay more tax(Bradbury and Mear, 2017).
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(ix)Is there any a current tax asset or income tax payable recorded by your company?
Why is the income tax payable not the same as income tax expense?
It can be recognised that the income tax payable and income tax expense are not similar. As the
income tax expense is the liability of the company to pay the amount. In the financial statements
of Aeon, metals limited the income tax expense for the three consecutive years is nil which
means they did not have any liability to pay the amount. To calculate the tax expense the
company has to consider the tax expense for the current year, deferred tax expense etc. In Aeon
metal limited there is no income tax payable under the balance sheet which means that the
company did not incur any taxes which are due from the government(Annual Report, 2017).
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(x) Is the income tax expense shown in the income statement same as the income tax paid
shown in the cash flow statement? If not why is the difference?
It can be observed that the income tax paid in the statements of cash flow and the income tax
expense under the income statements is not same. As the income tax expense includes the
deferred and current tax and it is recognised in the profit and loss account which is related to the
business and considers the items which are affected directly by the equity. Income tax paid is
that amount which can be paid by the company and it is considered as the expense as they have
to pay that amount. In the financial statements of Aeon metals limited, the company did not paid
any amount of income tax(Lukic, 2017).
(xi)What do you find interesting, confusing, surprising or difficult to understand about the
treatment of tax in your firm’s financial statements? What new insights, if any, have you
gained about how companies account for income tax as a result of examining your firm’s
tax expense in its accounts?
Aeon metals limited is the Australian based company that explores the items to obtain the
resources. The main objective of the company is to create the long-term values for shareholders
through the acquisition, discovery, and development of natural resources. By analysing the
financial statements of the Aeon metals limited, it is surprised by the directors and clients that
the company did not have any liability that means they did not incur any expense and any
income tax paid for the last three consecutive years. It shows that they have better liaison and
reputation in the market(Kemp, 2018).
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Conclusion
From the above analysis, it can be concluded that the Aeon metals limited commits to
maintaining the safe and healthy workplace, and also allocates the different resources to the
management systems and training to enhance the approach of better practice. The main objective
of the company is to meet the needs of environmental commitments. It also analyse the cash flow
statements as it captures the operating results with different changes in the balance sheet. It also
determines the short-term viability that has the capability to pay bills. The balance sheet also
summarises the assets of the individual, an organisation with their equity and liabilities.
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References
 Watson, L., 2018. The Deferred Tax Asset Valuation Allowance and Firm
Creditworthiness. The Journal of the American Taxation Association, 40(1), pp.81-85.
 Kemp, W.C., 2018. An Introduction to Case Reports: The Fundamentals of
Accounting (Doctoral dissertation, The University of Mississippi).
 Lukic, R., 2017. Deferred Taxes in Trade. Revista de Management Comparat
International, 18(5), pp.527-544.
 Bradbury, M.E. and Mear, K.M., 2017. Interpreting the Impact of IFRS
Adoption. Australian Accounting Review, 27(2), pp.214-219.
 Rogers, J., 2017. Changes in the Income Tax Act: impact on farming income and disposal
of assets on death. FarmBiz, 3(3), pp.22-25.
 Bankman, J., Shaviro, D.N., Stark, K.J. and Kleinbard, E.D., 2017. Federal Income
Taxation. Wolters Kluwer Law & Business.
 Chen, N., Koester, A. and Shevlin, T., 2017. On the Divergence between Corporate Tax
Expense and Tax Paid.
 Annual Report, 2017. Aeon Metals Limited. [Online]. Annual Report. Available at:
http://aeonmetals.com.au/assets/uploads/2017/10/2017-Oct-17-Annual-Report-to-
Shareholders.pdf [Accessed on 23 May 2018].
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