Discuss about the Accounting for Business Decision for Business of Exploration.
The company for discussion in this article is Accent Resources NL which is based in Western Australia. They are engaged in the business of exploration of minerals from ore. The company is mainly owned by Xingang Resources of Hong Kong with collaboration with Rich Mark Development (Group) Pty Ltd, who are engaged in the steel mill and shipping industry. The company is enrolled in the Australian Securities Exchange (ASX: ACS) (Accentresources, 2016).
The company’s main activity of exploration is focused on the activities of discovering and developing of iron ore, base metal and precious metal deposits at the project area assigned to them in the geographical area of Western Australia. The company is running with high level of professionalism to find out the proper acquisition of projects along with opportunities related to investments in mining companies which are already in the process of production or are in the process of starting production in mining (Accentresources, 2016).
The mission of the company is to ensure maximization of value addition on the part of the shareholders by performing in such a fashion so that with proper evaluation of potential capacities for developing in both short and long term ensuring cash flow by the assets deployed for the purpose of their business and through this effort add value to the field of mineral discoveries (Accentresources, 2016).
The company was launched in Western Australia on 18.02.2005. The company had been incorporated with the purpose of acquisition of the gold and base metal tenements which was under the possession of Tantalum Australia NL (TANL). The company was aspired to raise capital by enlisting themselves in the AX official list. The company had been engaged in the agreement with Tenement Acquisition and Option Agreement with TANL through which the company ahs got the right to purchase the gold and base metal tenements from TANL except M63/229 which was with the condition of a tribute agreement for the price of $ 1,000,000 cash with subsequent offer of shares of 7,500,000 in the company. The company has posted this matter in their prospectus published on 2005 for offering share for their business growth (Asx, 2003).
The company is run by the Executive Chairman, Yuzi Zhow heading the board of directors. In his letter to the shareholders which was published in the Annual Financial Report of 2015 he had consented to the shareholders that the company is going through the phase of volatile and uncertain market conditions and for this reason the company had made deferment of their flagship project of Magnetite Range with the research and development is being continued for the better projected outcome of this project. Due to the uncertainty of iron ore market the project is being deferred for some time but the company will start its operation in the said project when the market of iron ore will improve. He had also assured that the company will continue with the present status of majority holdings via Xingang Resources Hong Kong and Rick Mark Development Pty Ltd and will be looking for the opportunities to explore and exploit so that the company activities will sore up. Mr. Yuzi Zhow had also told that the company will also involve themselves in the business with the development funding from the source of China (Hotcopper, 2014).
Statement of Financial position:
The statement of financial statement of any company is featured with its balance sheet.
We are giving below the analysis with XL sheet: – (page 23 of Financial Report of Accent Resources NL Ltd. for 2015)—Chart attached at Appendices with name Chart 1
|
Analysis of Balance Sheet- Accent Resources NL Ltd |
|||
|
period – f Y 2014 and 2015 |
|||
|
particulars |
2015 |
2014 |
variance |
|
in $ |
in $ |
||
|
Total Current Assets |
1,273,188 |
2,462,333 |
(48) |
|
Total Non-Current Assets |
3,617,267 |
16,333,270 |
(78) |
|
Total Assets |
4,890,455 |
18,795,603 |
(74) |
|
Total Current Liabilities |
206,725 |
230,588 |
(10) |
|
Total Liabilities |
206,725 |
230,588 |
(10) |
|
Net Assets |
4,683,730 |
18,565,015 |
(75) |
|
Total Equity |
4,683,730 |
18,565,015 |
(75) |
The above analysis showed the financial position of the company as on 2015 with respect of its financial position in 2014 (Finance, 2014).
The following observations are found:-
a) The total current assets of the company had found negative growth of 48%.
b) The total non-current assets of the company had found negative growth of 78%.
c) The company had only current liabilities which were de-grown by 10%.
d) The net assets of the company had negative growth of 75% which is also the de-growth %age of total equity, too.
Inferences:-
a. The company’s current assets comprise of cash and cash equivalents and short term deposits with receivables form goods and service tax refund. Both are with de-growth respective to 2014 which is not healthy sign for the company.
b. The company’s non-current assets comprise of plant and equipments and exploration and evaluation assets. While the plant and equipment is with negative growth, the exploration and evaluation assets are with positive growth with procurement of the same had been done in the F Y 2015.
c. The company has only the current liabilities and that is comprised of payables and provision of employee entitlement. Both the items had faced negative growth during the financial year 2015 in respect of 2014.
d. Total net assets and the total equity are with negative growth. The total equity is comprised of contributed equity which is kept as it was in 2014. The reserve of 2014 had been utilized and accumulated losses had grown to make the financial position of the company more vulnerable (Scribd, 2014).
Stockholders’ equity analysis requires two different types of reports- a) accumulated
Equity and b) the stockholders’ equity in numbers and value with the comparison to last year.
We are giving below the analysis with XL sheet: – (page 24 of Financial Report of Accent Resources NL Ltd. for 2015)—Chart attached at Appendices with name Chart 2A and 2B respectively.
|
Analysis of Stockholder’s Equity- Accent Resources NL Ltd |
|||
|
Period – F Y 2014 and 2015 |
|||
|
particulars |
2015 |
2014 |
variance |
|
in $ |
in $ |
||
|
contributed equity |
29,058,955 |
29,058,955 |
– |
|
accumulated losses |
(24,375,225) |
(10,670,040) |
128.45 |
|
Reserves |
– |
176,100 |
(100.00) |
|
Total |
4,683,730 |
18,565,015 |
(74.77) |
The observations of the first report showed that the company had no increase or decrease of share capital for both the years. The accumulated losses had been increased with the reserves of the last year had been utilized for some reason.
There are other observations like the accumulated losses of the company is increasing every year, and the 2014 figures of accumulated loss of $ 10,670,040 is the accumulation of loss of $ 2,656,578 since 2013. In the 2015 the company had accumulated loss of $ 13,881,285 which was resulting to accumulated closing balance of equity as $ 4,683,730 (Financial Repot , 2005).
The stockholders’ equity balance in umbers and value had not shown any sort of changes as the company is sticking to its equity capital and not intended to float fresh share for pulling money from the market.
The analysis of stockholders’ equity balance in numbers and value:-
We are giving below the analysis with XL sheet: – (page 32 of Financial Report of Accent Resources NL Ltd. for 2015)—Chart attached at Appendices with name Chart 2
|
Analysis of Stockholders’ equity balance in No’s – Accent Resources NL Ltd |
|||
|
Period – F Y 2014 and 2015 |
|||
|
Particulars |
2015 |
2014 |
Variance |
|
In no’s |
in no’s |
||
|
Balance of equity share in No’s |
181,000,233 |
181,000,233 |
– |
|
Analysis of Stockholders’ equity balance in No’s – Accent Resources NL Ltd |
|||
|
Period – F Y 2014 and 2015 |
|||
|
Particulars |
2015 |
2014 |
Variance |
|
in $ |
in $ |
||
|
Balance of Equity Share in Value |
29,058,955 |
29,058,955 |
– |
The income statement of Accent Resources NL had shown de-growth in the two different contributory heads of this account. They are revenue and expenses.
We are giving below the analysis with XL sheet: – (page 22 of Financial Report of Accent Resources NL Ltd. for 2015)—Chart attached at Appendices with name Chart 3.
The analysis is given below:-
|
Analysis of Income Statement- Accent Resources NL Ltd |
|||
|
Period – F Y 2014 and 2015 |
|||
|
particulars |
2015 |
2014 |
variance |
|
in $ |
in $ |
||
|
Total Revenue |
54,743 |
130,480 |
(58.04) |
|
total expense |
(13,936,028) |
(2,787,058) |
400.03 |
|
in cent |
in cent |
||
|
earnings per common share |
(7.67) |
(1.47) |
421.77 |
The observations showed as:-
The company has revenue and total expenses to make its profit and loss account. The total revenue of the company had decreased by 58.04% while the total expense had reduced by 400%. The earnings per share is increased in negative value in respect of last year (Accentresources, 2015).
The inference of p & l account is:-
a. The company has the revenue earning source as interest from financial institutions. The recognition of the income from interest from any financial asset is probably made when the economic benefits will be received by the company with the revenue amount may be calculated with reliance. The nature of interest income that it is accrual on the basis of period with reference to the outstanding of the principal an with the applicability of effective interest rate which is depending upon the rate which discounts the estimated future cash receipts with exact assumption with the factor of expected of the financial asset to the carrying asset value which was initially recognized.
b. The company had different heads of overhead expenses in the form of administration expenses, depreciation, occupancy, director’s fees, other expenses; write off exploration expenditure and impairment of exploration expenditure. Out of these, biggest contributor is impairment of exploration expenditure which had took place in 2015. This expense is due to the obsolete machineries used for earlier exploration, and the recovery value of those had generated the impairment loss of $ 11,508,299.
c. The entire loss thus derived for both the years had been contributed to the p& l account of the company with the resultant loss of $ 13,881,258 in 2015 which was features as $ 2,656,578 in 2014.
d. For clarification of write-off clarification expenditure, it is being stated in the financial report that during the period of January 2015, the Katanning Project with no E70/2729 tenement was given up by the company and the capitalized carrying value of this tenement amounted to $ 1569857 had been written off in the year 2015 in the half yearly report, and the subsequent amount of $ 154,176 of expenditure with capital in nature had also been written off.
e. Related to the impairment expenses booked in 2015, the Mt. Gibson iron ore tenements were declared impaired due to non-ability of deliverance by the said machineries. The capitalized value of this impairment losses are booked in the FY 2015 with the amount of $ 11,508,299 (Openbriefing, 2016).
f. This loss such contributed had made the dividend to the equity with negative valuation of 7.67 Cents in 2015 which was seen as negative valuation of 1.47 cents in 2014.
Cash flow is the instrument through which the liquidity of the company can be ascertained the cash flow statement is featured in page no 25 of the annual financial report of the company for 2015. The spreadsheet will depict the analysis of the cash flow of the company for the f Y 2014 and 2015.
We are giving below the analysis with XL sheet: – (page 25 of Financial Report of Accent Resources NL Ltd. for 2015)—Chart attached at Appendices with name Chart 4.
|
Analysis of cash flow statement – Accent Resources NL Ltd |
|||
|
Period – F Y 2014 and 2015 |
|||
|
Particulars |
2015 |
2014 |
variance |
|
in $ |
in $ |
||
|
Net Cash Inflow(decrease) from operating activities |
(657,109) |
(818,411) |
(19.71) |
|
Net Cash Inflow ( decrease) from investing activities |
(530,074) |
(722,917) |
(26.68) |
|
Net increase( decrease) in cash flow |
(1,187,183) |
(1,541,328) |
(22.98) |
Observations:
a) net cash flow from operating activities had found a negative variance of 19.71%.
b) Net cash flow from investing activities had shown a negative variance of 26.68%.
c) There is not such cash flow from financing activities found in either year.
Inference:
a) Cash flow from operating activities is comprised of interest received as inflow of funds where as payment to suppliers as outflow of funds.
b) Cash flow from investing activities is comprised of payments for plant and equipment and payments for exploration and evaluation.
c) There is a net decrease in net decrease in cash flow which is the accumulated value of these two elements of cash flow which are effective in the financial report of the company for both the years 2014 and 2015 (Bloomberg, 2016).
Conclusion:
The financial report of the company had emphasized on different fields of financial aspects of the company. The financial report of 2015 had shown lots of negativity as per the accounting entries made in the books of accounts are concerned. The event of impairment of assets had made a great blow to the financial health of the company. But the company has to absorb that to make its sustainability in future. The company is engaged in mining and engineering operation with the exploration of iron, base metal and other precious metal within Western Australia and other parts of Australia. So far the balance sheet is concerned, the company is lacking of positive variance of current and non-current assets and the only ray of hope showed as the declining of the liabilities. The most concerned part of the financial report is the cash flow statement which had shown the net cash and cash equivalent ending at the end of the year 2015 as miserable. There was no such revenue in the last year except the revenue generated from the interest from the bank deposits. The company can’t survive like that. The overhead expenses are there to be paid in regular intervals. There is another area of concern. The dividend declaration of the company showed negative amount per share which was prevalent from last year.
The negative dividend will reduce the face value of the share and thus the shareholders will be affected due to loss of capital and subsequent stake in the company. The company is passing through a transition phase as the flagship project like Mt Gibson Iron ore had been dropped from their ventures and that had caused high level of cost without any effective return. The company has got certain good recommendations from the annual report which should be immediately taken care with execution so that the company comes to the path of sustainability. The company, if gets a good assignment in the project, can raise funds from the market through the process of ASX, but for that they have to comply all the steps related to offer of new shares in the market. As the overhead costs are constant and will be till the time the company in existence, the company should immediately look for an avenue through which they can sustain with the focus on their future projects.
The recommendations of studying the annual financial report of 2015 are being highlighted below:-
a) Need of an audit and risk management committee to be established.
b) The said committee is to be structured by the non-executive independent directors with the chair of the independent personnel who is not in the board.
c) The Audit Committee should possess a formal charter with the provision of appointment of external auditor.
d) Company should have the procedure of establishing written policies to avoid any confusion regarding the compliance of ASX.
e) Respecting the rights of the shareholders by introducing an effective module of communication policy with the shareholders with initiating the encouragement of their participation at AGM with their views to be shared.
f) To ensure that the company must publish corporate governance statement in the company website.
g) Effective recognition and management of risk management.
h) Remunerate the right people in the right way with fairness and responsible way to ensure retention of the right professionals.
To elaborate these above points, the annual financial report had urged on the necessity of the recommendations as it is new company and need the guidance for improving their activities, it is the first and foremost area of concern that the company along with its Board should think about the recommendation as per the gravity of the situation and implement them at earliest to get the full favor out of it. The audit and risk management committee is required as the company is not involved in general process of manufacturing and sales operations. It is most required to assess the risk of the upcoming projects and set the necessary steps or checks to mitigate the loss probability. Being launched in 2005 and enlisted in ASX, the company ahs to ensure the proper compliance related to ASX so far their listing is concerned. there most be professional outlook in this aspect as the same is vital when the company will grow more for the purpose of remuneration and retention of the right professionals, the company needs due to its existence across the world. The governance part of the corporate, there should be transparency through proper publication of relevant documents like notice of the meetings, publication of AGM for the stakeholders of the company. To encourage the shareholders to take part in the AGM with the disclosure of their views or grievances which will add value to the organization so far its operation is concerned. All these recommendations should be followed strictly so that the company can find the path of success.
References:
Accentresources, 2015. Financial report. [Online] Available at: www.accentresources.com./index.php?option=com_docman&task=doc [Accessed 25 September 2016].
Accentresources, 2016. Objectives and Strategies. [Online] Available at: https://www.accentresources.com.au/index.php?option=com_content&task=view&id=14&Itemid=29 [Accessed 25 September 2016].
Accentresources, 2016. Welcome to Accent Resources N.L. [Online] Available at: https://www.accentresources.com.au/ [Accessed 25 September 2016].
Asx, 2003. TantaLum. [Online] Available at: https://www.asx.com./asxpdf/20030404/pdf/00354449.pdf [Accessed 25 September 2016].
Bloomberg, 2016. Company Overview of Accent Resources N.L. [Online] Available at: https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapid=22744549 [Accessed 25 September 2016].
Finance, 2014. Accent Resources N.L. [Online] Available at: https://www.google.com/finance?cid=700485 [Accessed 25 September 2016].
Financial Repot , 2005. ANNUAL REPORT. [Online] Available at: www.accentresources.com [Accessed 25 September 2016].
Hotcopper, 2014. Accent Resources NL. [Online] Available at: https://hotcopper.com./asx/acs/ [Accessed 25 September 2016].
Openbriefing, 2016. Accent Half-year Report. [Online] Available at: https://www.openbriefing.com/AsxDownload.aspx?pdfUrl=Report%2FComNews%2F20160315%2F01722446.pdf [Accessed 25 September 2016].
Scribd, 2014. Accent Resources N.L. (ACS) – Company Profle and SWOTAnalysis. [Online] Available at: https://www.scribd.com/document/233169428/Accent-Resources-N-L-ACS-Company-Profile-and-SWOT-Analysis [Accessed 25 September 2016].
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