Financial Report Analysis of Liquefied Natural Gas Limited - Finance

This report provides a comprehensive financial analysis of Liquefied Natural Gas Limited. It examines the company's equities, including contributed equity, reserves, and accumulated losses, as presented in the balance sheet. The report delves into the income tax expenses, comparing the figures from 2016 and 2017, and explores the company's tax structure, including the effective tax rate and the absence of deferred tax assets or liabilities on the balance sheet, while noting the existence of unrecognized deferred tax. Furthermore, the report analyzes the differences in income tax expenses and the tax refunds received by the company, providing insights into the company's financial performance and tax strategies. The analysis is based on the company's financial statements and relevant accounting standards, offering a detailed overview of the company's financial position and tax-related activities.

Running head: FINANCIAL REPORT ANALYSIS OF LIQUEFIED NATURAL GAS LTD
FINANCIAL REPORT ANALYSIS OF LIQUEDFIED NATURAL GAS LTD
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FINANCIAL REPORT ANALYSIS OF LIQUEFIED NATURAL GAS LIMITED
Executive Summary
The main objective of this report is to analysis the financial statements of Liquefied Natural Gas
Limited. The report focuses on the analysis of different areas of the financial statement of the
company such as how much the company incurs in income tax expense of the company and how
deferred tax assets and liabilities. The report will be analyzing the various kinds of equity which
the business has and the equities which are depicted in the balance sheet. The report will be
considering the changes which occurs in the values of equity from previous year figure. The
report will analyzing the tax treatments and tax expenses of the company with respect to
previous year figures. The report will end with a detailed explanation of the company’s tax
structure.

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FINANCIAL REPORT ANALYSIS OF LIQUEFIED NATURAL GAS LIMITED
Table of Contents
Introduction......................................................................................................................................3
Discussion........................................................................................................................................3
i. Equities of Liquefied Natural Gas Ltd..................................................................................3
ii. Income Tax Expenses of Liquefied Natural Gas Ltd...........................................................5
iii. Deferred Tax Assets and Deferred Tax Liabilities...........................................................5
iv. Current Tax Expenses and Income Tax Payable..............................................................6
v. Difference in Income Tax Expenses.....................................................................................6
vi. Tax Structure of Liquefied Natural Gas ltd......................................................................7
Conclusion.......................................................................................................................................7
References........................................................................................................................................9

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FINANCIAL REPORT ANALYSIS OF LIQUEFIED NATURAL GAS LIMITED
Introduction
Accounting Reports are prepared the accountants by following the relevant accounting
standards, principles and prevailing accounting rules. The accountants are responsible for the
preparation and presentation of the annual reports of the company. A normal annual report
consist of a statement of Income and Expenses of the year, a statement of financial change of the
year, a statement of the changes in cash flow during the year (Kitching, Kašperová & Collis,
2015). Such annual reports of the company are published annually by the company which are
then used by different stakeholders to assess the financial performance and the future objectives
and goal of the business.
Overview
Liquefied Natural Gas Limited is an Australian based company which is publicly own.
The company was formed in 2002 and was listed in the Australian Stock Exchange with the ASX
code LNG in 2004. The company operates mostly In Australia and also in some parts of USA,
Canada. The company is engaged in the liquefication of Natural Gas projects at the lowest cost
as possible. The company aims to provide safe, energy-efficient, reliable natural gas liquefaction
for the customers at the lowest minimum price possible (Liquefied Natural Gas Limited, 2018).
Discussion
i. Equities of Liquefied Natural Gas Ltd
The different types of equity which the company has shown in the balance sheet of the
company are contributed equity, reserves and accumulated losses. The equities of the company
refer to the components which are associated with the share capital of the business. The types of

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FINANCIAL REPORT ANALYSIS OF LIQUEFIED NATURAL GAS LIMITED
equity which are shown in the balance sheet of Liquefied Natural Gas Limited are discussed
below:
1. Contributed Equity: Theses refers to the equity capital which is contributed by the
investors of the company for acquiring shares of the company. In other words,
contributed equity refers to that part of the capital of the company which the company
collects by issuing share of the company. The company has a contributed equity of
$392,875,000 in 2017 which has increased from the previous year’s figure of
$392,220,000. This increase in the value of contributed equity is due to issue of new
equity shares by the company which has been issued by the company.
2. Reserves: Reserves means a part of the profit which the company keeps aside for some
specific purposes of business. Reserve may also be of two types like specific reserves and
general reserves for example reserves created for the purchase of the noncurrent assets of
the company. The reserves of the company show that in 2017 the company has
$43,690,000 which has increased from the previous year’s figure of $41,553,000 in 2016.
3. Accumulated losses: Theses refers to the losses which has been incurred during the past
years and the management of the company follows the policy of accumulating such
losses in the balance sheet of the company for the previous years. Such losses appear in
the balance sheet of the company till they can be set off. The accumulated losses of the
company shows a figure of $382,012,000 which has also increased form the previous
year figure of 352,702,000. The increase is due to the loss which the business had
incurred in the year 2017.

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FINANCIAL REPORT ANALYSIS OF LIQUEFIED NATURAL GAS LIMITED
ii. Income Tax Expenses of Liquefied Natural Gas Ltd
The income tax expense of the company as shown in the statement of profit and loss
account of the company is $1,11000 in 2017. The company did not have to bear any income tax
expenses in the year 2016 as the company got a refund of taxes paid which might be for previous
year or same year but different quarters. The refund which the company gets is of $28,000 which
was deducted from the net loss which the company had in 2016. All the rules and regulations of
tax laws prevailing in Australia are followed by the company Income tax rate of Liquefied
Natural Gas Ltd.
The change in current income tax is due to the profit which the company has earned or
adjusted from the net profit before tax. The tax which is followed by the company is either
enacted from earlier or recently enacted till the reporting date. The company operates in
Australia and the tax rate prevalent in Australia is at 30% rate of income tax (Feld, Heckemeyer
& Overesch, 2013). The prime facie tax rate of the company as per the notes of account is at
27.5%. The main reason for this may as the company is earning losses from the past two year the
company does not satisfy the slab for higher taxes and so the company has to follow the lower
slab rates as set by the Australian Tax Office (ATO). The changes in the tax rate is mentioned in
the notes to accounts of the company and the notes to accounts of the company also mentions the
fact that the company follows all the tax rules and regulations (Saez, Slemrod & Giertz, 2012).
iii. Deferred Tax Assets and Deferred Tax Liabilities
As per the company’s policy, deferred tax is recognized on temporary differences
between the carrying amounts of assets and liabilities in the financial statements. The company
also uses the tax base which is required for the necessary calculations. As per the balance sheet
of the company, the company does not possess any deferred tax assets or deferred tax liability for

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FINANCIAL REPORT ANALYSIS OF LIQUEFIED NATURAL GAS LIMITED
the year 2017. However the notes to accounts of the company shows that the company has
certain deferred tax which are not recognized by the company and hence it is not shown in the
balance sheet of the company (Spengel & Zöllkau, 2012). The company does not have any
deferred tax asset or liability as such an item is not displayed in the balance sheet of the
company. As per the policies of the company, the company’s deferred tax assets and liabilities
are set off when there is a legally enforceable right to set off current tax assets against current tax
liabilities and when they relate to income taxes levied by the same taxation authority and the
Company intends to settle its current tax assets and liabilities on a net basis.
iv. Current Tax Expenses and Income Tax Payable
Current tax assets and liabilities are measured at the amount expected to be recovered
from or paid to the taxation authorities. Deferred tax assets and liabilities are measured at tax
rates that are expected to apply in the period in which the liability is settled or the asset is
realized. The tax rates and laws used to determine the amount are based on those that have been
enacted or substantially enacted by the end of the reporting period (Lignier & Evans, 2012). The
company does not have any current tax asset or current tax liabilities as shown in the balance
sheet of the company during the year 2017. The income tax payable as per the balance sheet of
the company that the company does not have any income tax payable in the year 2017. The
income tax payable for the year 2016 is shown at $9000. The income tax payable is set off
against the income tax expenses of the company.
v. Difference in Income Tax Expenses
The income tax expenses which is shown in the profit and loss statement of Liquefied
Natural Gas ltd has a income tax expense of $111,000 whereas the analysis of the cash flow
statement states that the company has received tax refunds from the Australian tax authority for

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FINANCIAL REPORT ANALYSIS OF LIQUEFIED NATURAL GAS LIMITED
the year 2017. The amount of refund which the company receives for the year 2017 amounts to
$497,000 and the same refund which the company had received in the previous was a much
bigger amount of $11,96,000 as compared to the figure of 2017. This may be due to the fact that
the company has been incurring losses from the previous year. In case of losses a company is not
required to pay any taxes if the company is able to prove that the company has earned losses
during the year. In this case the company receive refunds for the tax which the company had
payed previously during the year or for prior years (Graham, Raedy & Shackelford, 2012).
Therefore it is evident that the company is receiving refunds from the tax authorities due to the
losses which the company has incurred in both 2016 and 2017 as per the analysis of the cash
flow statement.
vi. Tax Structure of Liquefied Natural Gas ltd
The financial reports analysis of Liquefied Natural Gas Ltd shows that the company
follows the AASB 112 in order to calculate the tax of the company. The company has an
effective rate of tax of 27.5%. The company does have any deferred tax assets or liabilities which
are shown in the balance sheet of the company(Gómez Sabaini & Jiménez, 2012). However the
company has an unrecognized deferred tax which is mentioned in the notes of account of the
company. The company also does not have any current assets as per the balance sheet of the
company (Lewis, 2013). As per the analysis of the company’s financial report it can be said that
the company does not have any significant tax structure for the increasing losses which the
company has suffered for the years of 2016 and 2017.
Conclusion
The balance sheet of the company shows no deferred assets or liabilities. The company
also has received tax refunds from the tax authority of the company which clearly shows that the

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FINANCIAL REPORT ANALYSIS OF LIQUEFIED NATURAL GAS LIMITED
company is incurring that much loss that the company is not required to pay that much amount of
taxes which results from over payments of taxes in prior periods,

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FINANCIAL REPORT ANALYSIS OF LIQUEFIED NATURAL GAS LIMITED
References
Feld, L. P., Heckemeyer, J. H., & Overesch, M. (2013). Capital structure choice and company
taxation: A meta-study. Journal of Banking & Finance, 37(8), 2850-2866.
Gómez Sabaini, J. C., & Jiménez, J. P. (2012). Tax structure and tax evasion in Latin America.
Graham, J. R., Raedy, J. S., & Shackelford, D. A. (2012). Research in accounting for income
taxes. Journal of Accounting and Economics, 53(1-2), 412-434.
Kitching, J., Kašperová, E., & Collis, J. (2015). The contradictory consequences of regulation:
The influence of filing abbreviated accounts on UK small company
performance. International Small Business Journal, 33(7), 671-688.
Lewis, M. K. (2013). Off-balance sheet activities and financial innovation in banking. PSL
Quarterly Review, 41(167).
Lignier, P., & Evans, C. (2012). The rise and rise of tax compliance costs for the small business
sector in Australia.
Liquefied Natural Gas Limited - About Us LNGL at a Glance. (2018). Lnglimited.com.au.
Retrieved 27 January 2018, from http://www.lnglimited.com.au/irm/content/lngl-at-a-
glance.aspx?RID=172
Saez, E., Slemrod, J., & Giertz, S. H. (2012). The elasticity of taxable income with respect to
marginal tax rates: A critical review. Journal of economic literature, 50(1), 3-50.
Spengel, C., & Zöllkau, Y. (Eds.). (2012). Common Corporate Tax Base (CC (C) TB) and
determination of taxable income: An international comparison. Springer Science & Business
Media.

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FINANCIAL REPORT ANALYSIS OF LIQUEFIED NATURAL GAS LIMITED