Regulation of Financial Statements and Analysis of Equity and Debt Position of Listed Entities in Mineral Industry

The report discusses the importance of regulating financial statements and the contribution of AASB to IFRS. It also analyzes the equity and debt position of 4 listed entities in the mineral industry over a period of 4 years. The report highlights the key terms in the equity portion of the balance sheet and the assumption undertaken for analyzing the equity. The report also provides a detailed break-up of share capital and debt position of the companies.

TABLE OF CONTENT
TABLE OF CONTENT................................................................1
EXECUTIVE SUMMARY............................................................2
INTRODUCTION........................................................................3
Annexure-1(i)..............................................................................4
Annexure-1(ii).............................................................................5
Annexure-3.................................................................................6
References:..............................................................................12

EXECUTIVE SUMMARY
The report highlights the importance of regulation of financial statements along with the drawback of
not regulating the same. The report further set out to deal in length about how AASB contributes to
IFRS and the rationale behind IFRS not being declared mandatory for members.
In the second half of the report, the analysis deals with the equity and debt position of 4 listed entities
dealing in mineral industry. Further, the analysis has been carried out over a period of 4 years.

INTRODUCTION
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.

Annexure-1(i)
Expanding of corporate scandal like Enron and WorldCom lead to the emergence of regulation of
accounting system and a fair and transparency reporting so that all the books of the company is
maintained in such a way that it depicts a true picture of the company without any hidden transaction.
All the bodies and regulators have thereby requested for the reporting pattern which should be
transparent in nature and improvement in standards of accounting and rules thereof.
(Uniassignment.com, 2018) It is very mush necessary to set the standards on accounting as on the
basis of this the auditors can easily form there opinion about the companies and provide justification
on the report on basis of such standard which enhance the value of their professionalism.
The accounting regulation and set of standard also ease the users of financial statement to make
comparison easily and judge the future prospects of the company and their investment decision. It
also helps in saving of cost if certain information is easily available from the disclosures.
The disclosure and setting of standard in accounting helps the investors to easily make their
investment decision so helping the entity to maximise their value and achieve high value.
The error of non-reporting can hide many material facts from the users to financial statements and the
investors will be at risk so a need to regulate the accounting system is required. The disclosures in
financials of the company solve the gap of information between the directors of the company and the
outsiders such as shareholders, suppliers, customers, government and others; it makes the user
group to easily compare the financials of the company with the other company within the same
industry. The accounting method to choose from must be reliable, easily understandable and
comparable with other company in same industry. Through regulation in accounting scam such as
WorldCom can be prevented.

Annexure-1(ii)
AASB is a government control entity manged by the Australian government .It the body who manages
and regulate the financial reporting framework and look after how the financial statement to be
presented.AASB report to the Australian parliament.IASB (International Accounting standard Board) is
an international organisation who looks after the private companies.The accounting board contributes
to International Financial Reporting standard in following ways:
(a) AASB provides funds for the regular activities of IASB.
(b) Coordination on matters relating to preparation of books of accounts of the company with
IASB.
(c) Providing feedback on draft sent by IASB through comment.
(d) Issues to be raised if any came across by AASB.
(e) Accounting standard’s alignment with IFRS.
(f) To adopt IFRS.
The IFRS compliance has not been mandatory for the members due to following reasons:-
(a) IFRS is complex and not easy to adopt;
(b) IFRS has got its own drawback shortcomings ;
(c) Since members are from different countries they have a varied accounting system making
IFRS compulsory may be cumbersome.
.
(a)

Annexure-2
In the third part of the analysis, attention has been paid to understand the different elements of
statement of financial position along with detailed focus in equity part of the balance sheet along with
non-current liability. The companies that have been chosen for the aforesaid analysis includes the
entities that have been listed on Australian Securities Exchange and is engaged in basic materials.
The name of the companied have been detailed here-in-below:
(a) Amani Gold;
(b) Anova Metal;
(c) Energia Minerals;
(d) Alloy Resources.
About the Company
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:
(a) Debt bearing interest has been considered while computing debt equity ratio and capital
gearing ratio;
(b) Debt that has been falling under the category of non-current liability has been considered;
(c) Balance sheet and notes to accounts have been considered for the purpose of analysis.
Further, details have been considered for past 4 years;
(d) Cash and cash equivalent has not been considered and net debt has been considered on the
basis of balance sheet balance;
(e) 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:
(a) 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.
(b) 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.
(c) Non-current liability: The liability which shall be paid in period greater than 12 months;
(d) Current Liability: The liability which shall be paid in a period of 12 months are known as current
liability;

(e) Options: Options are the rights which are issued by the company which entitles its holders right
to receive shares at a particular date.
(f) Reserves: Reserve are the saved portion of the company to meet any future contingency.
These are created by the company to meet future needs.
(g) 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.
(h) 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.
(i) 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;
(j) 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;
(k) 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.
(l) 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.
(m) Dividend reinvestment: These are the dividend which have been reinvested in the company and
increases the wealth of the shareholders.
(n) Retained earnings: This represents the profit or loss of the company accumulated over the
years.
Analysis of Equity
The detailed break of equity of Amani Gold has been presented here-in-below:
Amani Gold formerly known as Burey Gold $ Mio
Sl No Particulars 2017 2016 2015 2014
1 Share Capital 47.883 36.719 30.722 23.82
2 Retained Earnings -30.445 -30.69 -18.31 -17.104
3 Reserves 7.852 9.681 5.266 2.467
4 Non-Controlling interest 0.384 0.365 0.477
5 Total Equity 25.674 16.075 18.155 9.183
(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:
Contributed Equity
Sl No Particulars 2017 2016 2015 2014
1 Full Ordinary Shares 36.719 30.722 23.821 23.142
2 Capital Raising Costs -0.66 -0.43 -0.314 -0.011
3 Capital Raised 11.824 6.427 7.215 0.69
4 Total Contributed Equity 47.883 36.719 30.722 23.821
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:
Gearing Ratio
Sl No Particulars 2017 2016 2015 2014
1 Debt 0 0 0 0
2 Equity 25.674 16.075 18.155 9.183
3 Debt Equity Ratio 0.00 0.00 0.00 0.00
4 Gearing Ratio 0.00 0.00 0.00 0.00
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:
Anova Metal $ Mio
Sl No Particulars 2017 2016 2015 2014
1 Share Capital 44.747 34.947 32.895 29.315
2 Retained Earnings -28.157 -24.98 -22.774 -19.118
3 Reserves 1.863 2.425 2.176 1.897
4 Non-Controlling interest 0
5 Total Equity 18.453 12.392 12.297 12.094
(Judd, 2017) (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:

Contributed Equity
Sl No Particulars 2017 2016 2015 2014
1 Full Ordinary Shares 34.947 32.895 29.315 26.743
2 Placements 9.27 2.004 3.69 1.669
3 Conversion of Unlisted options 1.03 0.172 0.063
4 Issue of ordinary shares 1.001
5 Conversion of Preference rights 0.048 0.016
6 Share issue costs -0.547 -0.14 -0.172 -0.098
7 Total Contributed Equity 44.748 34.947 32.896 29.315
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:
Gearing Ratio
Sl No Particulars 2017 2016 2015 2014
1 Debt 0 0 0 0
2 Equity 18.453 12.392 12.297 12.094
3 Debt Equity Ratio 0.00 0.00 0.00 0.00
4 Gearing Ratio 0.00 0.00 0.00 0.00
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:
Energia Minerals $ Mio
Sl No Particulars 2017 2016 2015 2014
1 Share Capital 32.523 26.75 26.75 18.249
2 Retained Earnings -32.103 -21.387 -21.789 -17.171
3 Reserves 0.989 0.887 0.688 0.612
4 Total Equity 1.409 6.25 5.649 1.69
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:

Contributed Equity
Sl No Particulars 2017 2016 2015 2014
1 Full Ordinary Shares 26.75 26.75 18.248 16.965
2 Issued during the year 6.09 9.056 1.353
3 Transaction Cost -0.317 -0.554 -0.071
4 Total Contributed Equity 32.523 26.75 26.75 18.247
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:
Gearing Ratio
Sl No Particulars 2017 2016 2015 2014
1 Debt 0 0.063 0.169 0
2 Equity 1.409 6.25 5.649 1.69
3 Debt Equity Ratio 0.00 0.01 0.03 0.00
4 Gearing Ratio 0.00 0.01 0.03 0.00
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.
Alloy Resources Limited
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:
Alloy Resources Limited $ Mio
Sl No Particulars 2017 2016 2015 2014
1 Share Capital 17.477 16.287 14.402 14.011
2 Retained Earnings -13.432 -12.748 -12.255 -9.432
3 Reserves 0.056 0.056 0.111 0.144
4 Total Equity 4.102 3.595 2.258 4.723
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:

Contributed Equity
Sl
No Particulars 2017 2016 2015 2014
1 Full Ordinary Shares
16.28
8
14.40
2
14.01
1
12.85
3
2 Shares issued pursuant to option agreement 0.025
3 Exercise of Performance Share rights 0.035
4 Entitlement issue 0.317
5 Martins Well JV 0.025
6 Exercise of Performance Share rights 0.034
7 Share Purchase Plan 0.162
8 Placement 0.7 0.05
9 Placement 1.25 1.32 0.28
10 Entitlement issue 0.702
11 Capital raising costs -0.089 -0.134 -0.011 -0.07
12 Total Contributed Equity
17.44
9
16.28
8
14.40
2
14.01
1
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:
Gearing Ratio
Sl No Particulars 2017 2016 2015 2014
1 Debt 0 0 0 0
2 Equity 1.409 3.595 2.258 4.723
3 Debt Equity Ratio 0.00 0.00 0.00 0.00
4 Gearing Ratio 0.00 0.00 0.00 0.00
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
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essay.php