HI5020 Corporate Accounting: Analyzing the Financial Position of Salt Lake Potash Limited

HI5020 Corporate Accounting
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Contents
Introduction.................................................................................................................................................3
Cash Flow Statement...................................................................................................................................4
Other Comprehensive Income Statement....................................................................................................7
Accounting for Corporate Income Tax........................................................................................................8
Conclusion.................................................................................................................................................11
References.................................................................................................................................................12
Appendix...................................................................................................................................................13
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Introduction
The main aim of the report is to examine the financial position of the company by analyzing the
financial accounts. The financial accounts such as cash flow statement, balance sheet and the
income statement are done so that the practical implementation of the same can be evaluated.
The various items which are listed in the cash flow statement are heighted so that the better
understanding about the can be depicted. The corporate taxes are also shown which will help in
evaluating the treatment of various taxes and their implications in the financial statements of the
organisation. The Salt Lake Potash Limited is the energy limited organisation which basically
aims at the development of resource projects. It holds salt projects in South Australia, West
Australia and the territories of Northern. The difference between the tax expenses and the tax
payables are also depicted which will provide the information related to the factors which lead to
the difference between both.
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Cash Flow Statement
I) The cash flow statement basically tracks the inflow and the outflow of the cash in the
organisation so that the revenues can be maximized (Sözbilir, et. al., 2015). The cash
flow of the Salt Lake Potash Limited includes the following items:
Operating Activities: Operating activities helps in analyzing that the business activities which
are performed in the organisation are profitable for the business or not (Laux, 2013). It includes
activities of distribution and marketing. Operating activities items are:
Payments to suppliers and employees: These are the amounts which are paid by the
organisation to the suppliers from which the goods are purchased so as to run its operations
(Laux, 2013). The payment made to the employees is the payment which is made as salaries for
their services which they have rendered (Lin, et. al., 2017).
Exploration Investments Scheme Received: The amount which is received as the investment
scheme for the exploration activities are treated as the operating activities as these also impact
the operations of the business (Laux, 2013).
Interest Received: The amount which is received in the form of interest to the organisations for
any of the services and securities which are purchased this is generally treated in the income
statement but it shows the change in cash flow so it is depicted in the cash flow statement (Lin,
et. al., 2017).
Investment Activities: It can be seen from the cash flow statement that the company has not
made of the investments which means that the income in the operations is received from the sale
of the goods which are produced by the organisation (Laux, 2013). The investment activities are
those which is done so that in future better returns can be entertained. The one and only one item
in the investing activities is:
Payments for property, plant and equipment: These are the amounts which are paid by the
organisation for acquiring the property, plant and the equipments (Lin, et. al., 2017). These are
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the payment for doing the investment in various sources so that the overall ability of the
organisation can be increased and the profitable returns can be attained (Sözbilir, et. al., 2015).
Financing Activities: These include all those items in the organisation though which the funds
can be raised and the capital of the organisation can be increased (Lin, et. al., 2017).
The items which can be included in the financing activities are:
Proceeds from issue of shares: These are the sources through which the organisation has raised
the capital of the organisation by the issue of new shares (Lin, et. al., 2017). The shares are
issues so that the share capital of the organisation can be increased and the operations can go
smoothly.
Transaction cost from issue of shares: It is the cost of the transaction which has been incurred
from the issue of the new shares in the organisation (Sözbilir, et. al., 2015).
There was no such change in the value of any of the items which are listed in the cash flow
statement but the fluctuations were seen by comparing it with that of previous year (Petro and
Gean, 2014).
II) The analysis has been done by analyzing the annual reports for the year 2016 and
2017. There were various fluctuations that was seen in the operating, financing and
the investing activities (Petro and Gean, 2014). In the year 2015 the cash flow from
the operating activities was $-922348 which increased in the year 2016 to $-3840157
and in the year 2017 it was $-8423419 (Salt Lake Potash Limited, 2018). So, it can be
stated that the operating activities cash flow is increasing for continuous three years
which shows the negative results that the organisation have enough funds so as to
fund its operations as the debt is increasing (Salt Lake Potash Limited, 2018).
The cash generated from the investment activities for the consecutive three years are $-919, $-
120456 and $-162675. So the results are negative for the investment activities which shows that
the organisation have not done the investment in the effective areas through which the profitable
returns can be received to the organisation (Petro and Gean, 2014). The returns are not received
positive to the organization.
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The inflow of cash from the financing activities can be seen that in year 2015 the funds raised
from the external sources was $3693929 and in 2016 it was $8,286,393 while in the year 2017 it
was $16684552 (Salt Lake Potash Limited, 2018). Therefore, it can be evaluated that the
fundings from the external sources are increasing from one year to that of another so it shows
positive results that the capital of the organisation in increasing but it’s also the negative impact
as the organisation are much dependent upon the external sources for its funding (Salt Lake
Potash Limited, 2018).
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Other Comprehensive Income Statement
III) Those items which are not listed in the income statement are listed in the other
comprehensive income statement. The items of the other comprehensive income
statement are:
 Foreign Currency translation differences which have been reclassified to the profit
and loss on disposal of controlled entity (Petro and Gean, 2014).
 Exchange differences on translation of foreign operations (Salt Lake Potash Limited,
2018).
IV) The explanation about the each item, which is listed in the other comprehensive
income statement is as follows:
o Translation of foreign currency differences which are reclassified to profit and
loss: These are the differences which have been occurred due to the change in the
exchange currencies translation. These differences may either show the positive
impact or the negative impact so that is why it is transferred to the profit and loss
account.
o Exchange differences which have been occurred on the translation of foreign
operations: These show the amount of differences which are occurred due to the
translation of the exchange operations (Petro and Gean, 2014). These amounts are
non reconciled amounts which are yet to be reconciled.
V) These items are not recorded in the income statement or the profit and loss statement
as these items are the transactions which are not realized when the financial year
accounts were closed. Once these items will be reconciled they will be transferred to
the profit and loss statement (Salt Lake Potash Limited, 2018). In the income
statement only those items which are reconciled are recorded and there is always the
change in the exchange rates so it is difficult to reconcile the variations in the
exchange rates. So, it can be stated that the difference of the exchange rate are always
treated in the other comprehensive income statement if their exist any such amount
(Salt Lake Potash Limited, 2018).
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Accounting for Corporate Income Tax
VI) The tax expenses are the obligations as the liabilities which are to be paid by the
organisation to the government (Petro and Gean, 2014). As in the latest income
statement of the Salt Lake Potash Limited it was seen that their does not occurs the
value of the tax expenses in the income statement of the organisation (Salt Lake
Potash Limited, 2018).
VII) This statement is not true that the figure is same as that of the company tax rate times
as the tax expenses are not paid by the organisation and the effective tax rate is that
rate which is paid by the individual as well as the corporate separately according to
the specified rules and regulations (Petro and Gean, 2014). So, the organisation has
not paid the tax expense so there does not seem the transparency in financial accounts
of the organisation. This shows that the tax expenses rates are not same as that of the
tax rate times.
VIII) The deferred tax assets as well as the liabilities are not recorded by the organisation.
These are recognized by the differences between the tax rates which are expected by
the organization when the liabilities are settled or the taxes are recovered which are
basically based upon the enactment of the each jurisdiction. So, it can be seen that the
there are no unused tax losses which are taxable in future. The tax assets and
liabilities can only be offset when the legal rights exists to set off these liabilities with
the assets. But this will not be possible in the company as the company does not have
any of the liabilities and the assets which are deferred (Petro and Gean, 2014).
IX) The tax payables are not recorded by the organisaton same as that of the income tax
expense. So it is difficult to evaluate the difference that why these two taxes amount
are not same (Petro and Gean, 2014). But the basic difference between the two taxes
is that the difference occurs as the tax expenses are treated as the income for the
organisation according to the accounting standards while the income tax payables are
treated as the liabilities for the organisation which is compulsory to pay by the
corporate, firms as well as the individuals (Petro and Gean, 2014). Therefore it can be
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said that this the reason due to which the difference occurs between the two of the
amounts (Sözbilir, et. al., 2015).
X) No the income tax payables which are shown in the cash flow statement are not same
as that of the income tax expenses which are shown in the income statement. There
occurs the difference between the two due to the reason that the income tax paid are
the obligations which are to be paid by the organisation but the income tax expenses
are the income for the organisation (Salt Lake Potash Limited, 2018). So the income
statement records all the income and the gains which have been earned during the
accounting period while the cash flow statement shows all the cash which are came in
the organisation and that which have been shown as the outflow of the cash within the
organisation (Marchini and D’Este, 2015).
XI) The interesting thing about the treatment of taxes is that the taxes gave the knowledge
about the treatment of the various taxes in the organisation (Marchini and D’Este,
2015). With that it also gave the new insight about how the taxes may impact the
organization and what is the reason that these taxes are placed at the different
positions in the financial accounts (Salt Lake Potash Limited, 2018).
The confusing was that the treatments of all the taxes are done differently so it is difficult to
evaluate that why such taxes are treated in the different accounts and not in the accounts which it
supposed to be (Marchini and D’Este, 2015). With that company has not paid most of the taxes
in the organisation which can lead to the solution that the transparency and the accountability is
not maintained within the organization and the ignorance of the taxes has led to the compliance
which is the offence according to the taxation rules and regulations of the organisation (Marchini
and D’Este, 2015).
The difficult thing which was found about the taxes was that the tax expenses and the tax paid
are not paid by the organisation so it was difficult to analyze the differences between the two
taxes (Marchini and D’Este, 2015). With that the deferred tax liabilities and the assets why they
are recorded in the balance sheet are also found to be the difficult as it was also not recorded in
the financial statements.
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The new insight which was gained was that all the taxes are treated in their respective accounts
differently (Marchini and D’Este, 2015). The thing which gave new insight was that the tax
expenses and the liabilities are treated differently due to the fact that these are both obligations
for the organisation (Salt Lake Potash Limited, 2018).
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Conclusion
It can be stated that the report overall gave the understanding about the various items which are
listed in the other comprehensive income statement with that the understanding about the taxes
were also gained. The items which are listed in the cash flow statement reveal that what items of
the organisation are leading to the outflow of cash and what items will help in maintaing the
inflow of cashes. The items which are not reconciled are stated in the other comprehensive
income statement. Besides, this report also gave the understanding how the treatment of the taxes
was done and what are its effects in the financial statements. There were various difficulties
which were faced by the evaluation of the taxes but with that some interesting facts were also
found about the treatment of taxes.
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References
 Laux, R.C., 2013. The association between deferred tax assets and liabilities and future
tax payments. The Accounting Review, 88(4), pp.1357-1383.
 Lin, S., Martinez, D., Wang, C. and Yang, Y.W., 2017. Is other comprehensive income
reported in the income statement more value relevant? The role of financial statement
presentation. Journal of Accounting, Auditing & Finance, p.0148558X16670779.
 Marchini, P.L. and D’Este, C., 2015. Comprehensive Income and Financial Performance
Ratios: Which Potential Effects on RoE and on Firm's Performance Evaluation?.
Procedia Economics and Finance, 32, pp.1724-1739.
 Petro, F. and Gean, F., 2014. A logical approach to the statement of cash flows. American
Journal of Business Education (Online), 7(4), p.315.
 Salt Lake Potash Limited, 2018. Company reports. [Online]. Salt Lake Potash Limited.
Available at:
http://www.saltlakepotash.com.au/administrator/components/com_announcements/
uploads/f3261a4567ed1b15d87579edc689d572-170929-Annual-Report-to-
shareholders.pdf. [Accessed On 29 May 2018]
 Sözbilir, H., Kula, V. and Baykut, L.E., 2015. A Research on Deferred Taxes: A Case
Study of BIST Listed Banks in Turkey. European Journal of Business and Management,
7(2), pp.1-10.

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Appendix
For 2015-16
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For 2016-17
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