Financial Reporting of Panoramic Resources Limited

This essay focuses on the financial statement preparation requirement of Panoramic Resources Limited and covers various aspects such as non-current assets, intangible assets, provisions and contingencies, leased items and revenue. The essay concludes that all the items are properly recorded and disclosed as per the requirement of AASB.

Running head: FINANCIAL REPORTING
Financial reporting
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1FINANCIAL REPORTING
Introduction
Panoramic Resources Limited is the ASX listed mining company located in Western
Australia. The company was formed in the year 2001 to develop the Savannah Nickel Project
in East Kimberley. In addition to substantial copper, nickel and cobalt inventory in Savannah,
the entity has diversified resource base for gold and platinum group metals. Its vision is to
broaden the exploration and base of production with aim of becoming the diversified and
major mining company in S&P/ASX 100 index. The main purpose of the essay is to focus on
the financial statement preparation requirement of the entity and will cover various aspects.
These aspects will cover the reporting of non-current assets, intangible assets, provisions and
contingencies, leased items and revenue. Based on the discussion regarding the reporting of
the mentioned item the essay will finally provide the conclusion (Panoramicresources.com
2019).
Property, plant and equipment (PPE)
One of non-current assets reported by the entity under the balance sheet for the year
ended 30th June 2018 is property, plant and equipment. The item is recorded at $ 10,630,000.
The entity recognises PPE in its books at its cost and the amount is reduced by the amount of
accumulated depreciation and if any impairment charges applied. Construction costs of the
PPE made by the consolidated entity are inclusive of the cost of direct labour and material.
Proportion of the overheads and other associated costs those are attributable directly to the
construction also are capitalised to cost of PPE. Further the cost expensed on PPE following
to the initial acquisition are capitalised if it is apparent that the economic benefits in future
exceeding the original performance of the assets will be flown to the entity. Where these
mentioned costs determine the distinct components for the complex asset, they are recognized
as the separate assets and are depreciated separately over the useful lives of the asset. Further,

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the costs incurred on PPE those do not meet capitalisation criteria are expensed as and when
incurred (Aasb.gov.au 2019).
Any other method that can be used for valuation of PPE as against the cost value is
the fair market value. However, the asset is examined at regular basis for providing the
impairment and is depreciated each year using the prescribed method and percentage.
However, if the fair market value is used the asset cannot be provided depreciation and the
entity will face difficulty in accumulating the fund when it will be the time to replace the
asset. Hence, taking into consideration all these facts, recording the assets at cost reduced by
depreciation and appropriate impairment value, if any (Panoramicresources.com 2019).
Intangible assets
Intangible assets are considered as the long term resources for the entity that does not
have any physical existence. It includes the assets such as name recognition, reputation,
intellectual property like know how and knowledge. Intangible assets derive its value from
intellectual and legal rights from any value they add on to other assets (Bianchi 2017).
However, the intangible assets in normal business scenario cannot be used as collateral for
raising loans or some of the assets like goodwill can be destroyed through business failures or
carelessness in carrying out the business. If the tangible assets add value to the entity it will
be considered as adding value to the future worth. Approximate monetary value of the
company’s intangible asset is measured through deducting net value of the intangible asset
from the market value (Nagaraja and Vinay 2016). However, going through the annual report
of Panoramic Resources Limited dated on 30th June 2018, it is observed that the company did
not record any intangible asset under the balance sheet.
Provision, contingent liabilities and contingent assets

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Looking into the annual report of the entity dated on 30th June 2018 it is found that the
provision is recorded at $ 923,000 under current liabilities and at $ 26,882,000 under non-
current liabilities. Provisions are reported by the entity when it has the present obligation
such as constructive or legal for making the future sacrifice of the economic benefits to any
other entity owing to past events or transactions. However, for recording the provision it must
be probable that the requirement for future economic benefit sacrifice will arise and the
obligation amount can be estimated reliably. However, if the entity expects all or some of the
provisions to be reimbursed, for instance under the insurance contract, reimbursement is
reported as separate asset. However, in this case the reimbursement has to be virtually
certain. Further, the expenses, if any, related to provision is reported under the income
statement after deducting the reimbursement amount, if any. Provision is reported on the
basis of current market assessment of time value of money and proper risks associated to the
liability, wherever applicable. Amount for provision is computed through discounting
projected future cash flows at the pre-tax rate. However, where the discounting is as mesure
of computation, increase in provision owing to passage of the time is reported as borrowing
cost. Provisions are recorded in the balance sheet of the company under the liability section
and the details are disclosed through notes to accounts (Legislation.gov.au 2019).
Contingency is something that may happen in the future period. The way in which
contingencies are recorded based on the probability of its occurrence and the ability of the
entity to predict the amount of the obligation. However, going through the annual report of
Panoramic Resources Limited dated on 30th June 2018, it is observed that the company did
not disclose any contingent asset or contingent liability in their balance sheet
(Panoramicresources.com 2019).
Leases

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Leases plant and equipment recorded at cost by the entity at $ 365,000 on which
depreciation accumulated for $ 365,000. As per the requirement of AASB 16 lessee shall
account all the leases into single on-balance model in the same way to finance the leases
under AASB 117 on leases. This standard includes 2 exemptions for recognition – leases for
the low value assets and the short term leases. Further, at the date of commencement of lease,
the lessee shall recognise the liability for making lease payment. Lessees are required to
recognise separately interest expenses on lease liability and the depreciation on right-of –use
asset. Further, the lessees are required re-measuring lease liability upon occurrence of certain
events that is alteration in the lease term or change in the future payment for lease
(Aasb.gov.au 2019).
Finance leases are reported by the entity where all benefits and risks incidental to the
ownership of the leased item transmitted substantially to the organization. Lease related
payments are distributed among finance charges and the decrease in the lease liability for
achieving stable interest rate on remaining balance of obligation. Finance leases are
capitalised by the entity at begining of lease at fair values of property that has been leased or
at the PV of minimum lease payment if the lease payment is lower. Moreover the finance
charges are directly charged against the income (Spencer and Webb 2015). Income statement
records the operating lease related payments under the head expenses over the term of lease
on straight line approach. Capitalised leases assets are depreciated over lease term and
estimated useful life of asset, whichever is shorter. Hence, the leased items have been
classified and reported by the entity as per the requirement of AASB 16
Revenue
As per the annual report of the entity dated 30th June 2018, the revenue is reported
under consolidated income statement at $ 1,261,000. Items included under the head revenues

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are rents and sub-lease rentals amounting to $ 794,000 and interest income amounting to $
467,000 (Harmon and Ntseh 2016). The entity recognizes the revenue to the extent it is
apparent that economic benefits from it will be inflow to it and the revenue value can be
measured reliably. Revenue is reported at the receivable or received value of consideration.
An earning from interest that is one of the major sources of income is recognised by the
entity as interest accrues through using effective method of interest. Effective rate with regard
to interest is the rate that discounts the estimated future receipts of cash through financial
asset’s expected life to net carrying value of financial asset. The method of computing the
financial asset’s amortised cost and assigning the interest income over relevant period is done
through usage of effective rate of interest (Yeaton 2015).
Conclusion
From the above discussion it is concluded that all the items including the non-current
asset like property, plant and equipment, provisions, leases, and revenues like interest income
are properly recorded and disclosed as per the requirement of AASB. Non-current assets like
PPE are recorded at cost reduced by depreciation and impairment charges, if any. Further, the
leases are separately reported for financial lease and operating lease as per the requirement of
AASB 16. Interest income that is one of the major sources of income is recognised by the
entity as interest accrues through using effective method of interest. However, for the year
ended 2018 the entity did not record any intangible assets and contingencies.

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Reference
Aasb.gov.au., 2019. [online] Available at:
https://www.aasb.gov.au/admin/file/content105/c9/AASB16_02-16.pdf [Accessed 16 Jan.
2019].
Aasb.gov.au., 2019. [online] Available at:
https://www.aasb.gov.au/admin/file/content105/c9/AASB116_08-15_COMPoct15_01-18.pdf
[Accessed 16 Jan. 2019].
Bianchi, P., 2017. The economic importance of intangible assets. Routledge.
Harmon, F. and Ntseh, D., 2016. The New FASB & IASB Revenue Recognition Standards;
Implementation and Effects.
Legislation.gov.au. (2019). AASB 137 - Provisions, Contingent Liabilities and Contingent
Assets - August 2015 . [online] Available at:
https://www.legislation.gov.au/Details/F2015L01607/Explanatory%20Statement/Text
[Accessed 16 Jan. 2019].
Nagaraja, N. and Vinay, N., 2016. The Effect of Intangible Assets on the Firm
Value. International Journal of Engineering and Management Research (IJEMR), 6(1),
pp.307-315.
Panoramicresources.com., 2019. [online] Available at: https://panoramicresources.com/wp-
content/uploads/2018/10/PAN_AR2018_DIGTIAL.pdf [Accessed 16 Jan. 2019].
Spencer, A.W. and Webb, T.Z., 2015. Leases: A review of contemporary academic literature
relating to lessees. Accounting Horizons, 29(4), pp.997-1023.

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Yeaton, K., 2015. A new world of revenue recognition: revenue from contracts with
customers. The CPA Journal, 85(7), p.50.