For this report, annual report of Atlas Iron Limited has been analyzed to evaluate the company’s liability of tax and its annual payment to the government.
1.Annual report of Atlas Iron limited has been evaluated and it has been found that the equity of the company has been divided into 3 parts which are as follow:
(Atlas Iron limited, 2018)
Share capital is the total amount which is raised by the company through exchanging its stock against the money in the stock exchange market. It reflects about the paid up capital of the company and other assets which had been given to the stakeholders of the company against the stock of the company. It has been found through the annual report of Atlas Iron limited that equity capital of the company has been raised by 19.5% from 2016 in 2017. The current equity capital of the company is $ 3, 22,248 which used to be $ 2,69,666 in 2016. Further, it has been found that the reserves of the company have been lower in 2017 by 2.89% (Yang et al, 2015). Moreover, the accumulated losses of the company have been lower and the share capital has been enhanced.
|
Equity (Amount in dollar) ($) |
2017 |
2016 |
Changes |
|
Share capital |
$ 22,03,203 |
$ 21,97,388 |
0.26% |
|
Reserve |
$ 40,816 |
$ 42,030 |
-2.89% |
|
Accumulated Losses |
$ -19,21,771 |
$ -19,69,752 |
-2.44% |
|
Total equity |
$ 3,22,248 |
$ 2,69,666 |
19.50% |
2.Further, the tax amount which has been paid by Atlas Iron limited to the government has been analyzed. This amount has been charged over the total profit of the company. Atlas Iron limited is not paying a single penny of profit to government. According to the below table, the profit of the company has been positive in 2017 and still, the company has used the policies of effective tax planning and controlled over the tax expenses of the company (Bekaert and Hodrick, 2017). Thus the tax amount of the company has been reduced. But through the analysis and study over annual report of the company, it has been found that this company is required to manage the same effective tax planning.
(Atlas Iron limited, 2018)
3.Moreover, the annual report of the company explains that the tax expenses shown in the income tax notes are $ 14,394,000 (30% of the total profit of the company) but the company has deducted the total amount through temporary differences particulars and has not paid a single penny to the government. The above table and the study over annual report of the company express that the company did not pay the tax amount and thus this amount must be shown by the accountant in the balance sheet of the company under the heading of outstanding tax expenses. But it has not been shown in the annual report of the company. Following differences has taken place into the tax amount of the company:
The above given differences are related to the income statement, balance sheet and the accounting rules of the company. The accounting rules of depreciation, bad debts, donation recording etc of the company is quite different and the income tax rules AASB-122 has not been followed by the company properly as well.
4.Further, the study has been done over the deferred tax liabilities of the company and it has been found that the tax liability of Atlas Iron Limited is AUD $ 0. This deferred tax amount must be evaluated and carried forward by an organization till a limit only which is quite reasonable for the company and which has been calculated according to the accounting rules. Therefore, it has been found through the annual report of Atlas Iron limited that the deferred tax of the company is nil. And thus no amount has been shown by the company in its balance sheet. Further, it has also been considered by the company that the accounting income and the paid amount by the company of tax are not equal. And due to it, the deferred income tax of the company is nil (Shantapriyan et al, 2014).
Such as, if an organization calculates the tax amount which is quite higher than the actual tax amount of the company than the amount must be shown under the deferred tax assets of the company according to the accounting rules and the regulations of the company. And if the, calculated tax amount of the company is quite lower than the actual tax amount of the company than the amount must be shown under the deferred tax liabilities of the company according to the accounting rules and the regulations of the company.
According to the below table, it has been found that the tax amount of the company is nil and thus the deferred tax of the company does not fall in the category of assets as well as the liabilities in the balance sheet of the company.
(Atlas Iron limited, 2018)
5.Further, the annual report of the company has also been evaluated and it has been found that the total current tax assets of the company is nil which express that the company do not have any current tax obligations as well as the income tax payable of the company expresses that the nil amount has been changed by the company under deferred tax liabilities. It expresses that this company does not have any tax payable amount and in 2016, the tax payable of the company was 0 as well thus no amount has been deducted from the total tax amount of the company (Amarasinghe, 2016). The below table express about the income tax payable of the company:
|
Particular(AUD $) |
2016 |
2017 |
|
Income tax payable |
0 |
0 |
Further, it has been evaluated that why the income tax expenses are not equal to the tax payable of the company. For the answer of this questions, it has been found that the income tax expenses of the company is 0 and that is why the tax payable amount of the company is 0 as well as company don’t have any tax obligation in current year.
6.Further, the study has been done over the income tax expenses of the company and it has been found that whether the income tax expenses and paid income tax amount is same or not. For this analysis, the income statement and the cash flow statement of the company has been analyzed and it has been found that the income tax payable amount is zero in the profit and loss account of the company and at the same time, the paid tax amount of the company is also zero according to the cash flow statement of the company (Zhuang, 2016).
This evaluation expresses that the tax expenses of the company is zero and thus the paid amount of the company is also zero. And both the amount of the income tax expenses and paid amount is equal.
7.Further, through the analysis, it has been found that this company is not using the taxation system in a surprising way, through the analysis and the study, various surprising, interesting and difficulties have been faced which are as follows:
Interesting thing about the recorded its entire tax amount
Through the analysis, it has been found that the main interesting aspect about the recording of its total tax amount is connected to tax recording according to the accounting rules and regulation as well as the income tax rules AASB-122 (Yang et al, 2015).
It expresses that the company is managing the effective tax planning.
Surprising thing about the recorded its entire tax amount
Further, this analysis expresses about various surprising factors about the taxation planning of the company. The main surprising aspect about the tax amount recording of Atlas Iron limited is its corporate governance program as well as the procedure of recording the tax in the company’s annual report. the tax liabilities and tax assets could not be maintained by the company in a single time.
Difficulty in recorded the entire tax amount
Further, the difficulties have been analyzed in the taxation planning of the company, Atlas Iron limited. This company has faced difficulties in managing the effective tax planning and making the tax amount zero. Further, it would also be difficult for the stakeholders of the company to analyze the tax planning of the company.
References:
Amarasinghe, A.A.S.B., (2016). Optimized Taxi Allocation for Time Bound Taxi Requests (Doctoral dissertation).
Atlas Iron limited, annual report, Retrieved on 3rd January, 2018 from https://www.atlasiron.com.au/site/PDF/8211_1/2017AnnualReporttoshareholders
Bekaert, G. & Hodrick, R., (2017). International financial management. Cambridge University Press.
Brigham, E.F. & Ehrhardt, M.C., (2013). Financial management: Theory & practice. Cengage Learning.
Cheung, E. & James L. (2017). “Readability of Notes to the Financial Statements and the Adoption of IFRS.” Australian Accounting Review 26.2 (2016): 162-176.
Shantapriyan, P., O’Donnell, K., Streeter, J. & Hicks, B., (2014). Getting it Right: Directors’ Assessment of Information.
Yang, C.C., Ho, S.Y., Chang, C.H. & Mingru, Z., (2015). A Study of Real Estate Regulation and the Taxation System. Journal of Statistics and Management Systems, 18(1-2), pp.177-187.
Zhuang, Z., (2016). Discussion of ‘An evaluation of asset impairments by Australian firms and whether they were impacted by AASB 136’. Accounting & Finance, 56(1), pp.289-294.
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