Introduction
Iluka Resources Limited Company is a mineral company based in Australia. Its main operation includes marketing, exploration, and project development of minerals and their products. The main minerals that the company produces are titanium and zircon. Although the company’s headquarters are in Australia, they have a processing operation plant in Victoria. In addition, the company carries out ilmenite upgrading and processing operations in Western Australia. In Virginia, the company primarily focuses on mining and processing operations (Masbate, Rowlands & Vaisey 2009, p. 2).
Accounting for Research and Development
According to the Morning star, 2011, (p. 1) after the company reported reduced sales, the directors decided to look for alternative ways to increase the revenue. They identified some resources in Sri Lanka. The sales of these resources would bring an increase of the annual sale by one percent.
Revenue Recognition
Financial reports showed reduced revenue collection. It was therefore important for the directors to review other means to increase the company’s revenue. The main way to increase revenue was to reduce the operational costs, which they achieved through reducing workforce and low or no use of some processing plants (Morning star, 2011, p 1).
Accounting for Inventory
Companies determine their income against the share value. There is a direct relationship between inventory and the company’s income. The inventory cost includes all the expenses incurred including insurance, freight-in, invoice price and storage costs. Thus, the cost of units in the same inventory can be different (Morning star, 2011, p 1).
In accounting, there are three methods of inventory. The first method is First-in, first-out; whose main emphasis is the match between the oldest unit and the revenue. The units bought recently receive the ending inventory. Another method of inventory is last-in, first-out where the oldest costs remained in inventory while the recently acquired units sell out. Lastly, to determine the weighted average cost of unit which is a method of inventory, there is a division of the cost of the goods and all units available for sale (Muhamad, Shahimi, Yahya & Mahzan 2009, p. 68).
Evaluation of the Quality of Disclosure
Iluka Resource Limited Company’s level of disclosure is high; hence it is considered a high-quality report. They followed all the required steps according to Corporations Act 2001. In addition, they met the necessary reporting accounting policies. Moreover, the company disclosed consistent financial trends for a period of time (Muhamad, Shahimi, Yahya & Mahzan 2009, p. 68).
Identification of potential Red flags
In 2001, Iluka Company’s financial reports had little or no indication of income management. Moreover, there was no evident accounting distortion during reporting. On the other hand, the company’s auditors remained the same. Nevertheless, there was little change in key management posts whose effects would be negligible if any.
Conclusion
Iluka Resource Limited Company is a company involved with sand minerals. It operates from South Australia though it has another branch in Virginia in United States. It aims at satisfying its customers while offering value for shares to shareholders. In the year 2012, Iluka Resource Limited Company reported low sale volumes, which consequently lowered the final dividend for its shareholders. The low sale volumes was a result of global economic crisis, reduced use of zircon in tile manufacturing in China, inventory de-stocking and fragile business confidence. The disclosure of Iluka Resources Limited Company is of high quality, which makes it more competitive in the market.
Reference List
Masbate, J, Rowlands, S & Vaisey, A 2009, ‘Iluka Resources Limited’, Energy Efficiency Opportunities, vol 1. No. 1 pp. 1-23.
Morningstar 2011, Iluka Resources Limited.
Muhamad, R, Shahimi, S, Yahya, Y & Mahzan, N 2009, ‘Disclosure Quality on Governance Issues in Annual Reports of Malaysian PLCs’, International Business Research, vol. 6. No. 4, pp. 61-72.