Introduction

Stanmore Coal is a currently operating coal mining company that is handling multiple
prospective coal projects and mining assets within Queensland’s Bowen and Surat Basins. 100%
of the Isaac Plains Coal Mine and the adjoining Isaac Plains East Project is owned by Stanmore
Coal’s. This company aims to create and increase shareholder value via the efficient operation of
Isaac Plains and also by identifying development opportunities that can be executed locally
(1).The demand for high quality, low impurity thermal coal is growing globally and that is why
Stanmore is continuing to progress in its high quality thermal coal assets in the Northern Surat
Basin. Which will prove to be valuable as the demand for Stanmore’s focus is on the prime coal
bearing regions of the east coast of Australia (2).

Cash Flow Statement

The Cash Flow Statement – also referred to as statement of cash flows or funds flow statement –
is one of the three financial statements commonly used to gauge a company’s performance and
overall health. The other two financial statements -- Balance Sheet and Income Statement -- have
been addressed in previous articles. As the name implies, the Cash Flow Statement provides
information about an organization’s cash inflows and outflows over a specified time period.
Simply put, it reveals how a company spends its money (cash outflows) and where that money
comes from (cash inflows).

The Cash Flow Statement is the best resource for testing a company’s liquidity because it shows
changes over time, rather than absolute dollar amounts at a specific point in time. It's also useful
in determining the short-term viability of a company. It's important to note that the Cash Flow
Statement reflects a firm’s liquidity. It does not show profitability – the Income Statement does
that.

Components of the Cash Flow Statement

The Cash Flow Statement organizes and reports cash in three categories: operating, investing and
financing.
Operating Activities
This represents the key source of an organization’s cash generation. It's considered by many to
be the most important information on the Cash Flow Statement. This section of the Cash Flow
Statement shows how much cash is generated from a company’s core products or services. A
strong, positive cash flow from operations (especially over time) is a good sign of a healthy
company. Operating Activities starts with the Net Income number from the Income Statement.

Most of these adjustment items can either result in an increase or decrease in cash from operating
activities. Exceptions would be adjustments for depreciation and amortization, which are always
an increase to Net Income on the Cash Flow Statement. Look for consistent levels of cash flow
from Operating Activities over time, indicating the company will probably continue to be able to
fund its operations.

Investing Activities
This section records changes in equipment, assets or investments. Cash changes from investing
are generally considered “cash outflows” because cash is used to purchase equipment, buildings,
or short-term assets. When a company divests an asset, the transaction is considered a “cash
inflow”. A healthy company generally invests continually in plant, equipment, land and other
fixed assets.

Financing Activities
Changes in debt, loans or stock options, long-term borrowings, etc. are accounted for under
Financing Activities. When capital is raised, it is considered “cash in”; when dividends are paid
or debt is reduced, “cash out”. The Financing Activities section shows how borrowing affects the
company’s cash flow.

“Bottom Line”
The bottom line on the Cash Flow Statement is the Net Increase (Decrease) in Cash and Cash
Equivalents. It's determined by calculating the total cash inflows and outflows for each of the
three sections in the Cash Flow Statement.
Statement of Comprehensive Income
Comprehensive income is the change in equity (net assets) of a business enterprise during a
period from transactions and other events and circumstances from non-owner sources.
The statement of comprehensive income illustrates the financial performance and results of
operations of a particular company or entity for a period of time. According to International
Financial Reporting Standards since 1 January 2009 an entities make:

 a Statement of comprehensive income (see the table below) or

 two separate statements comprising:
 an Income statement displaying components of profit or loss and
 a Statement of comprehensive income that begins with profit or loss (bottom line of
the income statement) and displays the items of other comprehensive income for the
reporting period (IAS 1 p.81)

So the statement of comprehensive income aggregates income statement (profit and loss
statement) andother comprehensive income which isn't reflected in profits and losses. "Total
comprehensive income is the change in equity during a period resulting from transactions and
other events, other than those changes resulting from transactions with owners in their capacity
as owners." The statement of comprehensive income is one of the major financial statements
used by accountants and business owners (the other major financial statements are the balance
sheet (statement of financial position), statement of changes in equity and statement of cash
flows). IFRS do not prescribe the exact format of the Statement of comprehensive
income but it can be obtained from IFRS Taxonomy.

In accounting, revenue is the income that a business has from its normal business activities,
usually from the sale of goods and services to customers.Revenue is also referred to as sales or
turnover. Some companies receive revenue from interest, royalties, or other fees.

Cost of sales refers to the direct costs attributable to the production of the goods or supply of
services by an entity. It is also commonly known as the “cost of goods sold (COGS)”. Cost of
sales measures thecost of goods produced or services provided in a period by an entity.
FINANCIAL INCOME is that income that is contained within the financial statements of an
entity. Financial income normally is not in alignment with taxable income reported in income tax
returns.

Finance costs are also known as “financing costs” and “borrowing costs”. Companies finance
their operations either through equity financing or through borrowings and loans. These funds do
not come for free. The providers of funds want reward for against there funds. The equity
providers want dividends and capital gains. The providers of loans seek interest payments.
Interest cost is the price of obtaining loans and borrowings.

Other comprehensive income is those revenues, expenses, gains, and losses under both
Generally Accepted Accounting Principles and International Financial Reporting Standards that
are excluded from net income on the income statement. This means that they are instead listed
after net income on the incomestatement.

Other income is income that does not come from a company's main business, such as interest.
Examples of other income include income from interest, rent, and gains resulting from the sale
of fixed assets. Companies present other income in a separate section, before income from
operations.

A non-operating expense is an expense incurred by a business that's unrelated to its core

operations. The most common types of non-operating expensesrelate to depreciation,
amortization, interest charges or other costs of borrowing.

Income Statement Vs Comprhensive Income

Comprehensive income or ‘Total Comprehensive Income’ is basically any income or expenses
(except those transactions with owners of the company) that would and would not be reported in
‘ordinary’ income statement, which is due to unfit with definition of ‘ordinary’ net profit or loss
or rather ordinary net income or expenses. The latter would be referred to as ‘Other
Comprehensive Income’. According to IFRS, this would mean “Net Profit or Loss + Other
Comprehensive Income”. Examples of ‘Other Comprehensive Income’ would include unrealised
gain or losses that would not make it into the ‘ordinary’ profit or loss.
Other Comprehensive Income includes foreign currency items, pension liability adjustments, and
unrealized gains and losses on certain investments in debt and equity securities, etc.

OCI need not be reported on the Income Statement, since the Income Statement really is
concerned with Net Income. OCI *may* be disclosed there, or it may be disclosed separately.
You can look at the Balance Sheet to see Accumulated OCI.

Tax Expenses
Tax consolidation legislation has been implemented by Stanmore Coal Limited and its wholly-
owned subsidiaries for the whole fiscal year. Stanmore Coal Limited is head leader in regards of
tax consolidated group. All of its subsidiaries are taxed as a single unit. This company uses the
stand-alone taxpayer/separate taxpayer tactics to allocate current income tax expense and
deferred tax expense to wholly-owned subsidiaries that form part of the tax consolidated group
(1).

Figure 1-Income Tax Expense (1)

 Income tax expense/(benefit) for 2017: (5,617,000)

It is assumed by Stanmore Coal Limited that all current tax liabilities and the deferred tax assets
arise because of unused tax losses for the tax consolidated group via intercompany receivables
and payables and also due to tax funding arrangements that have been in place for the whole
financial year. The amounts receivable/payable under tax funding arrangements is issued via
notifications in the end of every financial year and this is done the head unit. Another way for the
head unit to enable it to pay tax installments is by issuing Interim funding notices to its wholly-
owned subsidiaries. These amounts are classified as intercompany receivables or payables (5).

The income tax expense for the period is the tax payable on the current period’s taxable income
based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax
assets and liabilities attributable to temporary differences between the tax base of assets and
liabilities and their carrying amounts in the financial statements, and to unused tax losses (5).

Analysis
The tax amount recorded by company on its profits in the accounting period which is related to
government tax is known as Income tax expense. The amount of income tax expense recorded
does not always match the standard income tax percentage which is applied to the income of a
business because there is a difference between the amounts that are reported under
the GAAP or IFRS frameworks and the reportable amount of income allowed under the
applicable government tax code. For example, straight-line depreciation method is used by many
companies to calculate the amount of depreciation and also to record it in their financial
statements but these companies also use an accelerated form of depreciation to calculate their
taxable profit. These methods results in a figure of taxable income that is lower than the actual
income figure (6).

Figure 2- Review and Other income(1)

Some companies have an income tax expense of almost zero even after having large sums of
profits because they become expert in delaying and avoiding taxes. The calculation of income
tax is not easy and majority of the times companies outsource the calculation of it to a tax expert.
If a company outsources then the tax expense is recorded on a monthly basis and is also adjusted
according to each quarter of year or longer basis by the tax expert (1).

The income tax expense is reported as a line item in the corporate income statement, while any
liability for unpaid income taxes is reported in the income tax payable line item on the balance
sheet (6).

Deferred Tax Assets and Liabilities

Deferred tax assets and liabilities are recorded to recognize all sorts of temporary differences and
these can be between carrying amounts of assets and liabilities for financial reporting purposes
and also their respective tax bases. Furthermore, these can also be recorded to estimate the
expected amount of taxes that apply when the assets are recovered or liabilities settled and based
on that estimated amount of tax rates the company enacts for each jurisdiction. In cases of some
temporary difference that arise based on initial recognition of an asset or a liability, exceptions
are made. These exceptions are made if taxes arise in a transaction, which is irrelevant to the
business or if a transaction made at that specific time does not affect either accounting profit or
taxable profit (7).

Figure 3-Deferred Tax assets and liabilities (1)

Deferred tax assets are only recorded for the deducting temporary differences and unused tax
losses and also it there is a probability that the company will utilize the future taxable amounts to
recognize and eliminate temporary differences and losses (1). Deferred tax assets and liabilities
are not recorded to recognize and eliminate the temporary differences between carrying amount
and tax bases of investments of various units of the company, associates and interests in joint
ventures. Here the main unit of the company has control over timing of the reversal of the
temporary differences and majority of the times it is predicted that the company would not be
able to reverse the temporary differences in the future. Both current and deferred tax balances
which are related to the amounts recorded in the company’s comprehensive income and equity
statements are also recognized directly in other accounting or financial statements of the
company respectively (8).

Income Tax Payable Not the Same as Income Tax Expense

Rules for financial accounting and for tax accounting are different for different areas.The most
common reason for these rules being different is the way how a company depreciates its assets.
According to the guidelines of generally accepted accounting principles, a company can use any
way to depreciate its assets as long as that way is "systematic and rational." However, according
to the tax code, the requirement is to depreciate assets according to very narrow guidelines.
Depreciation expense directly affect any company’s profits and because companies pay taxes on
their profits, different calculation results are produced of the company’s tax obligations between
the two sets of accounting rules (9).

Other Highlights of Annual Report

Taxes calculated and owed by a company according to standard business accounting rules are
known as “Income tax expenses".These expenses are declared by the company on its income
statement. "Income tax payable" is the actual amount owed by a company in terms of taxes and
is calculated according to the rules of tax code. Income tax payable is recorded on the balance
sheet and is classified as a liability until the company actually pays the tax bill (1).

These differences are predicted to even out over time. Based on the above examples, it can be
seen that both systems depreciate the same value, the only difference that exists is of timing.In
general, a company’s income tax expense maybe declared higher than its actual tax bill the
present year, however in future the tax bill maybe declared higher than the tax expense.
Conversely, if the tax expense is declared lower than the actual tax bill this year, a future tax bill
will be larger than the expense. When a company's calculates its income tax expense and its
actual tax bill, the difference between the two must be recorded on the balance sheet so that it
can be "used up" later on.These differences even out eventually but these have to be recorded
under the account title Deferred Tax (8).

Income tax payments and statement of cash flow are classified as operating outflows in the cash
flow statement despite the fact that some income tax payments are related to gains and losses on
investing and financing activities for example: gains and losses on early debts and plant asset
disposals. Due to all of the above stated activities and income tax effects, net cash flow from
operating activities (NCFO) is contaminated. In order to eliminate this sort of contamination it is
recommended to amend SFAS 95 and declaration of income tax allocation in the cash flow
statement is required. By recording income taxes in the cash flow statement, the effects on
transactions because of income tax would be reported in the same section of the cash flow
statement as events themselves. This will result in a precise presentation of the net cash flows
from financing, investing and operating activities (1).