Financials
Auditor’s Independence DeclarationUnder Section 307c of the Corporations Act 2001
To the Directors of Morning Star Gold N.L.
I declare that, to the best of my knowledge and belief, during the year ended June 2008 there have been:
- no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and
- no contraventions of any applicable code of professional conduct in relation
to the audit.
Chartered Accountants
GRAHAM ABBOTT
Partner
10 Crown Street Sydney
Dated this 24th day of September 2008
The accompanying notes form part of these Financial Statements
Income Statement
for the year ended 30th June, 2008
Balance Sheet
as at 30th June, 2008
Statement of Changes in Equity
for the year ended 30th June, 2008
Cash Flow Statement
for the year ended 30th June, 2008
Notes to Financial Statements
for the year ended 30th June, 2008
1. SIGNIFICANT ACCOUNTING POLICIES
Statement of Compliance:
The financial report is a general purpose financial report prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards, Australian Accounting Interpretations and other authoritative pronouncements of the Australian Accounting Standards Board.
The financial statements have been prepared in accordance with Australian equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the financial report, comprising the financial statements and notes, complies with International Financial Reporting Standards (IFRS).
The financial report was authorised for issue by the Directors on 24th September, 2008.
Basis of Preparation:
The financial report is prepared on the historical cost basis except for financial instruments which have been stated at their fair value.
(a) Income Tax
The charge for current income tax expenses is based on the profit for the year adjusted for any non-assessable or disallowed items. It is calculated using tax rates that have been enacted or are substantively enacted by the balance sheet date.
Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements.
Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be available against which deductible temporary differences can be utilised.
The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the economic entity will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law.
(b) Property, Plant and Equipment
Each class of property, plant and equipment is carried at cost less, where applicable, any accumulated depreciation and impairment losses.
Buildings, Plant and Equipment
Buildings, plant and equipment are measured on the cost basis less depreciation and impairment losses.
The carrying amount of buildings, plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the assets employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts.
Depreciation
The depreciable amount of all fixed assets including buildings, is depreciated over their useful lives to the economic entity commencing from the time the asset is held ready for use.
The depreciation rates used for each class of depreciable assets are:
| Class of Fixed Asset | Depreciation Rate | Method |
| Buildings | 10% |
Straight Line |
| Plant and equipment | 10% - 50% | Diminishing Value |
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in the income statement.
(c) Exploration and Development Expenditure
Mining Exploration Expenditure consists of expenditure on prospects still at an exploratory stage. These costs include costs of acquisition, exploration, determination of recoverable reserves, economic feasibility studies and all technical and administrative overheads directly associated with those projects. Recoupment of exploration costs is dependent upon the successful development and commercial exploitation of each area of interest. The company adopts the “area of interest” method of accounting whereby all exploration costs relating to areas of interest are written off as incurred.
(d) Mining and Development Leases
Mining and Development leases are carried at cost less, where applicable, impairment losses.
When production commences, the cost of the relevant lease will be amortised over the life of the mine according to the rate of depletion of the economically recoverable reserves.
Estimated costs of site restoration, where material, are provided over the life of the mine from when the lease is acquired.
Security deposits have been lodged with the Department of Mineral Resources in relation to potential site restoration costs.
(e) Financial Instruments
Recognition
Financial instruments are initially measured at fair value. Subsequent to initial recognition these instruments are measured as set out below.
Financial assets at fair value through profit and loss
Financial assets in this category are stated at fair value. Realised and unrealised gains and losses arising from changes in fair value are included in the income statement in the period in which they arise.
Fair Value
Fair value is determined based on current bid prices for all quoted investments.
(f) Impairment of Assets
At each reporting date, the company reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over it recoverable amount is expensed to the income statement.
(g) Cash and Cash Equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with banks and bank overdrafts. Bank overdrafts are shown within short-term borrowings in current liabilities on the balance sheet.
(h) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the assets or as part of an item of the expense. Receivables and payables in the balance sheet are shown inclusive of GST.
(i) Share – Based Payments
Equity – settled share – based payment transactions with suppliers are measured at the fair value of the goods and services received. The fair value is measured at the market price for those goods and services.
23. Financial Instrument Disclosures:
The Company’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk. The Company’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise adverse affects on the financial performance of the Company. The Company uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rates and other price risks and aging analysis for credit risk.
Risk management is carried out by the Chief Financial Officer under policies approved by the Board of Directors. The Chief Financial Officer identifies and evaluates the risks in close cooperation with the Company’s management and Board.
(a) Market Risk
(i) Foreign exchange risk
The Company does not have any significant exposure to foreign exchange risk.
(ii) Price Risk
The Company in the current year did not have any significant exposure to investment or commodity price risk. The Company will have exposure to gold price risk when mining operations begin. Directors have not made any determination at this stage as to whether they will consider commodity price hedge arrangements.
The Company has exposure to interest rate risk which is the risk that a financial instrument’s value will fluctuate as a result
of changes in market interest rates and the effective weighted average interest rates on those financial assets and the financial liabilities.
The Company policy is to ensure that the best interest rate is received for the short-term deposits. The Company uses
a number of banking institutions, with a mixture of fixed and variable interest rates. Interest rates are reviewed prior to deposits maturing and re-invested at the best rate.
The interest rate risk is detailed in the table below.
(b) Credit Risk
The maximum exposure to credit risk, excluding the value of any collateral or other security in respect of recognised financial assets, is the carrying amount as disclosed in the statements of financial position and notes to the financial statements.
(d) Liquidity Risk
Prudent liquidity risk management implies maintaining sufficient cash, the availability of funding through adequate amount of committed credit facilities and the ability to close out market positions. The Company manages liquidity risk by continuously monitoring forecast and actual cash flows matching maturity profiles of financial assets and liabilities. Surplus funds are generally only invested in instruments that are tradable in highly liquid markets.
The Company at trading date had deposits which mature within three months and cash at bank. Due to the cash available to the Company there is no use of any credit facilities at balance date.
(e) Net Fair Values
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. The net fair values of the financial assets and financial liabilities approximate their carrying values.
No financial assets and financial liabilities are readily traded on organised markets.
The aggregate net fair values and carrying amounts of financial assets and financial liabilities are disclosed in the statements of financial position and in the notes to the financial statements.
(e) Sensitivity Analysis
The Company has not performed a sensitivity analysis on price risk and its impact on current year results and equity which could result from a change in this risk as the likely impact is insignificant given the minimal revenue generated from gold sales during the year.
Directors’ Declaration
The directors of Morning Star Gold N.L declare that:
1. the financial statements and notes are in accordance with the Corporations Act 2001 and;
a) comply with Accounting Standards and the Corporations Regulations 2001; and
b) give a true and fair view of the financial position of the Company as at 30th June 2008 and its performance for the year ended on that date;
2. the Chief Executive Officer and Chief Financial Officer have each declared that:
a) the financial records of the Company for the financial year have been properly maintained in accordance with section 286 of the Corporations Act 2001;
b) the financial statements and notes for the financial year comply with the Accounting Standards; and
c) the financial statements and notes for the financial year give a true and fair view.
3. in the directors’ opinions there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
This declaration is made in accordance with a resolution of the board of directors.
N. M. GARLING M. M. GARLING
Dated this 24th day of September, 2008
