St. Barbara in Australia

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Case Study of St Barbara
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Use the six-step accounting analysis framework to assess the degree to which the firm’s accounting reflects the underlying business reality. Identify any accounting distortions if there is any and evaluate their impact on profits and the sustainability of profits.
St Barbara Limited is a mining and exploration Company operating the Leonora, Simberi, and Atlantic Gold segments, and results are consolidated for all the operations. The company reported depreciation and amortisation of fixed assets and capitalised mine development for each of the operations and the consolidated operations. Depreciation included the ‘right-of-use assets and mineral rights acquired. The accounting analysis of St Barbara highlights the extent to which the company’s accounting reflects the business reality and whether there are distortions.
St Barbara Limited’s sales revenue policy the revenue from gold and silver are based on fair value considerations and recognised when there is control transfer to the buyers. Control is either physical or contractual. The average market prices on the measurement date, including the delivery date, influence the total revenue from gold sales as the selling prices. The company realised higher revenues in 2017 compared to 2016 because of the higher average gold prices (St Barbara Limited, 2017).
Fluctuations in the USD gold price and other currencies cause uncertainty, and there is exposure to exchange rate fluctuations. Other income and revenue were reported as $5,558,000 in 2016, then 2,034,000 in 2017, and increased to 7,336,000 in 2018 (St Barbara Limited, 20180. Then 2018 annual reported the $ 8,336,000 figure separately as interest revenue at 5,283,000 and other income as 2.053,000 and not the aggregate figure 7,336,000. In 2019, interest revenue and other income were reported separately at $ 10,073,000 and $ 115,000, respectively. The interest revenue was reported as $ 2,306,000 in 2020, while the other revenue was $ 56,000.
In assessing accounting flexibility there is a focus on evaluating flexibility of the accounting policies and estimates. The company uses AASB 16 in reporting property, plant & equipment, and depreciation. AASB 16 helps differentiate the initial costs of asset acquisition and any expenditure on the PPE. The company adopted AASB 16 Leases for the ‘right-of-use assets in 2019, and the standard affects the value of operating leases. AASB 16 leases replaced AASB 117 leases, which affected the reporting of the non‐cancellable operating leases. 
The depreciation and amortisation of fixed assets and capitalised mine development were reported as $165,366,000 in 2020 compared to $79,643,000 in 2019 for the year. The depreciation and amortisation had increased gradually from $ 80,915,000 in 2016 to $ 85,583,000 the following year, then $87,276,000 in 2018 (St Barbara Limited. 2018). The balance on depreciation and amo...