Analysis of Northern Star Resources Limited's Accounting Practices

Desklib provides past papers and solved assignments for students. This essay analyzes Northern Star Resources' accounting practices.

ACC00712 - Business Accounting
1

Contents
Essay................................................................................................................................................3
References........................................................................................................................................6
2

Essay
Australian accounting standard board is the regulatory body in Australia which is basically
concerned with the rules and regulations that needs to be followed by all the organizations so that
the accountability as well as accuracy in financial reporting can be maintained. The AASB is
used by Northern star resources Limited to prepare its financial statements and it also helps
organizations to present its financial transactions in the proper manner so that the position of
organization in external market can easily be known. Northern star resources Limited is ASX
listed organization which is global scale producer of gold and is located in low as well as high
sovereign risk locations of North America and Australia.
According to the AASB 102 the measurement of inventory of Northern star resources Limited is
done in accordance with that of cost or the realizable net value (Northern star resources limited,
2018). There are various factors which are included in the cost of purchase value such as
conversion cost and other costs. Net present value of inventory is evaluated when the inventory
of organization is sold out. In case of Northern star resources Limited, the method which is used
for the measurement of inventory is last in first out that is LIFO method is being used. This
method has been used by the organization as it helps in deferring the amount of taxes on the
overall profit of firm which is achieved through the sale of inventory (Gertler, et. al., 2016). The
Northern star resources Limited has used AASB 112 which determines that deferred taxes will
not be arised in agreement with that of the assets which are acquired and the liabilities that are
assumed as there is the exemption of deferred tax under this standard. So, the fair value of the
assets at the date of purchase is amounted to be $4203 during the financial year 2017-18
(Northern star resources limited, 2018).
In all organizations it is necessary to apply the inventory management systems so that that the
inventory level of organizations can be maintained and productivity within the firm can be
enhanced (Gertler, et. al., 2016). The method which is being used by Northern star resources
Limited is Radio Frequency Identification. This method has raised the level of perpetual
inventory. This is being used by organization so as to move many pieces of stock through their
doors. As Northern star resources limited is dealing in the manufacturing of gold so it uses the
fixed tag readers and whenever the stock is passed through warehouse it is recorded in the
3

software of inventory management. This system is being adopted by Northern star resources
limited due to the reason that it can scan the tag as soon as it is within the range of frequency and
also can automatically pick up the tag ID from long distance (Northern star resources limited,
2018). With this it also helps in scanning multiple stocks simultaneously and it also has the
benefit of convenience in all the services such as the cash payments. For example the wrist bands
of RFID tagged can easily tap a reader to pay the specific amount (Hamlett, 2019).
The costing system is the framework which is used by organizations so that the cost of products
in firms can be estimated for the analysis of profits and cost control. In Northern star resources
limited the historical cost convention has been to prepare the financial statements. This cost
helps in determining that the assets are booked at the amount of purchase value or the actual
amount in the statements financially (Accounting Tools, 2018). The reason behind choosing this
costing method by Northern star resources limited is that the organization is gold producer
company that provides gold all over the world and for that they need the large area of network.
So, this is the best suited method as it will help in updating and mentioning all the information of
cost at the original price and which will help the stakeholders in taking decisions related to
investments accordingly (Northern star resources limited, 2018). It will also help in analyzing the
cost of functioning for the future data based on the past data which is available. Through this the
assets can also be tracked and accordingly the liabilities of organization can be identified which
in turn will help in analyzing the financial performance of organization (Accounting Tools,
2018).
The company if choose to use distinct types of costing methods in its financial reporting of
transactions so the price of assets in will be impacted which in turn will also impact the amount
of financial statements (Farquhar, et. al., 2016). As from the above it can be seen that Northern
star resources limited is using historical cost for its evaluation which helps in determining the
cost at its actual value instead of fair value for its purchase in the market so this may impact the
reliable presentation of assets amount in the financial statements. If the organization chooses to
use the fair value method then it will allow them to show the accurate cost of product as the
misinterpretation of the financial information presentation will not get hampered (Northern star
resources limited, 2018). The aggregate revenue of firm will also get impacted through this
method as the cost of purchase as well as sales will be impacted which in turn will lead to show
4

inaccurate results in the financial statements. So, it is necessary for organization to adopt the best
suitable costing method for its analysis (Farquhar, et. al., 2016).
It can be accomplished that the AASB helps in providing the accurate structure through which
the financial information can be presented in fair and accurate manner in the book of accounts.
With this it also helps in keeping the safer side for the positive interest of stakeholders. As it has
been observed that the adequate system has been used by Northern star resources limited in order
to manage its inventory which will help the investors to take investment related decisions. The
costing system which is used in also precise as it will help in controlling the cost and maximizing
revenues so that overall profitability of firm can be increased in the competitive market.
5

References
 Accounting Tools, 2018. Costing Systems. [Online]. Accounting Tools. Available at:
https://www.accountingtools.com/articles/what-is-a-costing-system.html. [Accessed On 6-02-
2019]
 Farquhar, M.C., Prevost, A.T., McCrone, P., Brafman-Price, B., Bentley, A., Higginson, I.J.,
Todd, C.J. and Booth, S., 2016. The clinical and cost effectiveness of a Breathlessness
Intervention Service for patients with advanced non-malignant disease and their informal carers:
mixed findings of a mixed method randomised controlled trial. Trials, 17(1), p.185.
 Gertler, P.J., Martinez, S., Premand, P., Rawlings, L.B. and Vermeersch, C.M., 2016. Impact
evaluation in practice. The World Bank.
 Hamlett, K., 2019. Types of Inventory Management Systems. [Online]. Chron. Available at:
https://smallbusiness.chron.com/types-inventory-management-systems-2195.html. [Accessed On
6-02-2019]
 Northern star resources limited, 2018. Annual report. [Online]. Northern star resources limited.
Available at: https://www.nsrltd.com/wp-content/uploads/2018/08/2-2018-Annual-Report-to-
Shareholders-Final-22-08-2018.pdf. [Accessed On 6-02-2019]
6