Iluka Resources Ltd: Financial Reporting, Scandals, CSR, and Ethics

This report provides a comprehensive analysis of Iluka Resources Ltd, focusing on its financial reporting practices, corporate social responsibility (CSR) initiatives, and any scandals or ethical issues the company has faced. The analysis includes a background of the business, an examination of its external environment, tax governance, and sustainability requirements. It also delves into a bribery scandal involving Sierra Rutile, a company acquired by Iluka Resources, and the potential risks associated with this incident. The report further assesses the company's financial performance based on its 2018 annual report and offers recommendations for improving corporate governance and preventing future unethical practices. Desklib provides students access to similar solved assignments and past papers.

Running head: ACCOUNTING THEORY AND ISSUES
Accounting Theory and Issues
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ACCOUNTING THEORY AND ISSUES
Executive Summary
The main purpose of this assessment is to analyze the financial report of Iluka Resource ltd
which is engaged in mining business. The assessment will be identifying the major sustainability
practices which is followed by the business and the contribution which is made by the business
towards corporate social responsibility of the business. The assessment also aims to recognize
any incident or scandal which took place in the business during recent times and how the same
has affected the business. The assessment will also suggest recommendation as to how the
management can bring about improvements and ensure that such scandals or unethical practices
does not take place in future.

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Table of Contents
Introduction......................................................................................................................................3
Description.......................................................................................................................................3
Background of the business.........................................................................................................3
External Environment Analysis...................................................................................................4
Tax Governance...........................................................................................................................4
Corporate Social Responsibility and Sustainability Requirements.............................................5
Scandal and Issues.......................................................................................................................8
Financial Report Analysis............................................................................................................9
Conclusions and Recommendation................................................................................................13
Reference.......................................................................................................................................15

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Introduction
The growth in business over the years have been occurring in tremendous rate which can
be attributed to a better corporate structure and innovations which have taken place in a business
environment. Business in every field has been affected by technological advancements and have
reaped the benefits of such developments. However, it is also to be recognized that technological
developments also breed scandals which are due to unethical practices of certain persons or
management itself. In recent times scandals in business which can be accounts related or even
related to other issues have increased over the years.
The main purpose of this assessment is to analyze the financial statements of Iluka
Resources ltd for the year 2018. The assessment will be considering the financial performance of
the business for the year with the help of annual reports of the business. The assessment will be
considering any scandals which the company is related to and how the same affects the financial
performance and reputation of the business (Magee et al. 2013). Lastly the assessment will be
providing recommendation as how to improve the business structure of the company.
Description
Background of the business
Iluka Resource ltd is an Australian baaed company which is engaged in the business of
specializing in resources supply. The company specializes in minerals sand explorations, project
developments. The company is known to be the largest producers of zircon and titanium dioxide
and synthetic rutile (Iluka.com. 2018). The company has its headquarters in Australia and also
extensively operates in Australia. The business of Iluka Resource ltd has also established its

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business in other countries for example USA where the business operates mining operations. The
business is still in its growth phase and therefore requires further expansions of the business.
External Environment Analysis
External Environment of a business refers to the business environment in which a
particular business operates. The external environment also comprises of the various regulations
which the management of a business needs to follow which includes sustainability requirements,
tax governance of the business, social responsibility of the business and regulations relating to
reporting requirements of the business (Zhang and Andrew 2014). In the case of Iluka
Resources, the external environment of the business plays a vital role in overall operations of the
business. The business has to adhere to environmental regulations and also to rehabilitation
programs as the main activity of the business is mining and exploration.
The sustainability report which is prepared by the management shows that the business
efficiently has device a plan which can effectively meet the social and environmental
responsibility of the business. An analysis of the market and industry condition reveals that the
greatest strength of Iluka Resources is that the business is the largest producer of Titanium
Dioxide which has a variety of uses and has brilliant management and distribution system. The
weaknesses of the business which can be identified from analysis is that the high level of costs
which are incurred by the business. The analysis also reveals that the main competitors of the
business are BHP Billiton, Rio Tinto in the mining industry.
Tax Governance
The tax governance of the business is effectively followed as per the regulations which
are established by Income tax Assessment Act 1997 and other similar acts which are applicable

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to the business. The management also follows the regulations regarding tax assessment of the
business which are directed by Australian Tax Office (ATO). As per the annual report of the
company for the year 2017, the business follows an effective tax rate of 3.6% and a corporate tax
rate of 30% the main operating jurisdictions of Australia and Sierra Leone. As per the notes to
account section of the annual report shows that the business has incurred a significant amount of
revenue as taxes to the government. The management of the company is also engaged in
overseas operations for which tax benefits are not yet allowed as specified in the annual reports
of the business.
The annual reports of the company show that the management has adopted the Board of
Taxation’s voluntary Tax Transparency Code (TTC). The transparency code of the business
requires businesses to provide certain disclosures which are effectively provided in the annual
report of the business. The transparency code requires reconciliation of income and current tax
payable of the business which is to be done on the part of the management.
Agency Theory
The agency theory of business refers to the relationship between the principles and agents
in a business. In the case of a company, the shareholders are considered to the principles whereas
the directors and other executives of the management are considered to be agents. In a general
framework, the directors of the business are to adhere to the needs and expectation of
shareholders. In an annual general meeting, the interests of the shareholders are represented by
the directors of the company. However, in most situation there arises problems which is related
that the directors of the company might consider their own interest above the interest of
shareholders. This is known as agency problem which can be identified by the theory.

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In the management of Iluka Resources, the agency problem can be avoided by following
an appropriate policy relating to corporate governance. The management needs to develop an
appropriate strategy in order to avoid the problems of agency and ensure that the interest of both
shareholders and the management is fulfilled.
Technological Factors
The technology advancements in a business play an important role in the overall
development of the business. The management of Iluka Resources are focusing on sustainability
development for which the management of the company needs to focus on t5echnological
advancements of the business. The management of the Iluka Resources ltd focuses on developing
technology so that the product which is offered can bring about technical support
Iluka Resources ltd maintains metallurgical testing facility in Capel and also has statelites
laboratories which are established in major sites. Narngulu and Hamilton mineral separation
plant laboratories is one of the sites where the management have ceramic testing facilities that
are able to assess the comparative performance of zircon products when applied on ceramic tiles.
Corporate Social Responsibility and Sustainability Requirements
Sustainability reporting in a business about the policies of the business considering the
impacts on environment, social and other factors of the business (Schwartz 2017). Corporate
Social Responsibility of the business refers to the policies of the business for meeting the
requirement of the society and also keeping the environment safe
(Sustainabilityreport.iluka.com. 2018). The management of Iluka ltd provides special emphasis
on its sustainability and corporate social responsibility practices of the business. The business

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needs to formulate special policies in order to meet the corporate social responsibilities and
sustainability requirements as the business is engaged in mining industry (Hahn and Kühnen
2013).
The sustainability report of the company for the year 2017 shows high level of
sustainability performance of the business and also the emphasis of the business in sustainability
practices in day to day business operations (Junior, Best and Cotter 2014). In the business of
Iluka Resource ltd, sustainability practices mean to integrate economic, social and environmental
practices and ensure safety and security in every such practice of the business (Fonseca,
McAllister and Fitzpatrick 2014). The management provides monthly sustainability reports in
order to measure the sustainability practices of the business (Roy et al. 2015). The management
of the company follows ICMM framework for sustainability developments and aims to reduce
the incidents which can affect the environment and also ensure safety of the employees who are
working with the company (Ioannou and Serafeim 2017). An extract of the framework which is
taken from the sustainability report of the company is demonstrated below:
Figure 1: (Sustainability Framework of Iluka Resource ltd)

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Source: (Sustainability report.iluka.com. 2018)
The above figure shows the basic guidelines which the management of Iluka Resource ltd
follows in the operations of the business. One of the example which can be provided about the
efficient sustainability practices of the business is development of Higima and Nyandehun
villages which were connected by a bridge built by the business. The residents of these villages
are of the opinion that such a development will be facilitating trade and commerce between the
two villages and thereby bring about growth and development of both the villages. The
framework for maintaining sustainability and corporate governance practices of the business
requires the employees of the business to maintain a high level of ethical conduct (Ni and Van
Wart 2015). The management also formulated an effective whistle blowing policy which allows
the business to keep the identities of whistle blowers safe. The framework also consists of a zero
tolerance policy regarding bribery and corruption practices of the business. The management
also needs to provide anti-corruption and bribery policies in order to ensure that the key
personnel of the business which can be facilitated with the help of online or manual training
program as formulated by the management of the company.
The management of Iluka Resource Business also adheres to the tax regulations which
are in force in Australia. Tax governance is an important part of the corporate governance
policies of the business. The contribution which is made by Iluka Resource ltd towards the tax
contribution during the year 2017 is shown to be $ 47.1 million. The tax is paid by the business
towards the payments which are made towards income tax, royalties and other tax expenses
which are incurred by the business during the year (Bice 2014). This shows that the business of
Iluka Resource ltd has spent a significant amount on the tax expenses of the business during the
year.

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Scandal and Issues
The company has an efficient policy regarding meeting the corporate social responsibility
of the business and also has an effective system of following sustainability practices of the
business. The business has also faced certain scandals and issues over the years of the business.
The management of Iluka Resource ltd is engaged in acquisition of the business is in Sierra
Rutile business. The business of Sierra Rutile was engaged in a scandal which is related to
bribery issues which affected the business. The management of the business was alleged to be
engaged in corruption activities which was related to bribe payments. The bribe payments were
made to government officials in order to acquire license of the business. The corruption activity
was later revealed after Iluka Resource ltd had acquired the mining business with the help of
internal investigation conducted by the management of Iluka Resource ltd. Even though the
management of Iluka Resource ltd reported about the bribery to the authorities, there is still
significant risks which the business faced after the incident (Stubbs, Higgins and Milne 2013).
The risks which was faced by the business are related to fines, litigations and penalties which can
be imposed on the business of Iluka Resource ltd.
The bribing incident also affected the business of Iluka Resource ltd and also brought into
light the anti-foreign bribery regime which the government of Australia is struggling to maintain.
The present regulations which is in force in Australia risks the business of Iluka Resource ltd to
face prosecution against the bribery incidents. As per the incident, the business of Sierra Rutile
ltd has made payments of $ 110,000 bribe payments funneled with the help of West African
Logistics company and deposited the same in a third person bank account. The incident was
against the anti-bribery policy which is followed by the business. The management of Iluka
Resource ltd is the organization which detected the incident and due to the zero tolerance policy

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of the business is able to report to the authorities regarding the bribery and corruption incident
which took place pre-acquisition of Sierra Rutile ltd. However, the risks which are associated
with the bribery incident will fall on the business of Iluka Resource ltd as the corruption incident
was detected after the acquisition was accomplished (Tai and Chuang 2014).
The management of Iluka Resource ltd also has faced environmental consideration in the
past. The company is engaged in mining business and therefore is engaged in lot of exploration
activities which has the potential of seriously affecting the environment of the surrounding. The
management has incorporated an effective rehabilitation policy which can improve the damages
which the business has caused to environment through the exploration activities of the business
(Dobele et al. 2014). As per the most recent incident, the business is affected by the bribery
scandal which is undertaken by the business of Sierra Rutile and the same bribery was revealed
by the management of Iluka Resource ltd while undertaking an internal investigation. As the
business of Sierra Rutile is acquired by Iluka Resource Ltd, the business of Iluka Resource ltd
also faces risks of fines and legal suits which can affect the reputation of the business (Northey,
Haque and Mudd 2013). The management of Iluka Resource ltd also needs to focus on the
environmental considerations for the activities which can affect the business.
Share Price Fluctuation and Operational Review

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Figure 3: (Increase in sales volume for different products of Iluka Resource ltd)
Source: (Iluka.com. 2018)
The above chart shows the major products which are offered by the business and also the
respective increase in the sales volume of such products during the year. The products which are
offered are zircon, rutile, synthetic rutile and limenite as shown in the chart above. The above
chart shows that the sales volume of zircon, rutile and synthetic rutile has increased significantly
during the year. This shows that the operational performance of the business has improved
significantly in comparison to previous year analysis. The overall revenues which the business is
able to earn from operations from Australia and other countries where the business carries out its
operations has increased tremendously in comparison from previous year’s estimates. The annual
reports of the business also show that the company has also incurred higher costs which are
associated with operations of the business. This is quite natural as the company is in its