Accounting Policies
Introduction
Minerals Resource Rent Tax is a tax that will be placed on iron ore and coal projects starting July 1 2012. The introduction of MRRT will potentially have an effect on the accounting policy choices of mining companies affected by the tax. This paper will be split into two sections; a literature review and an analysis. The literature review will look at articles on the Minerals Resource Rent Tax and what it actually entails. Positive Accounting Theory in relation to bonus plans and political costs. It will address articles on accounting methods that were used prior to the introduction of Minerals Resource Rent Tax and why they were used. Finally an article on the implementation of a previous mining tax and its implications on the accounting policies used will be analysed. This paper will then go on to analyse the accounting policy choices used prior to the introduction of the tax and post introduction of the tax using Positive Accounting Theory to explain and predict the accounting practices. While positive accounting theory has many criticisms, this is the correct theory to use.
Literature Review
To obtain a quick overview of the Minerals Resource Rent Tax (MRRT), this paper will review Honey and Mok 2010. On July 2 2010, MRRT was announced to come into effect on July 1 2012. Currently other mining taxes in Australia include; at the federal level there, is a Petroleum Resource Rent Tax (PRRT) and at the state level, there are royalty regimes.
MRRT is a tax that requires 30% on the MRRT profits for iron ore and coal projects. Honey and Mok (2010) stated that profits below $50 million will not have a MRRT liability, although it should be noted that after this article was written the figure was revised to $75 million (Mining tax bills pass Lower House 2011). MRRT profit is the company’s revenue, minus associated costs, where revenue is the value of commodity at its first saleable form. The company can have a 25% extraction allowance for costs
Minerals Resource Rent Tax is a tax that will be placed on iron ore and coal projects starting July 1 2012. The introduction of MRRT will potentially have an effect on the accounting policy choices of mining companies affected by the tax. This paper will be split into two sections; a literature review and an analysis. The literature review will look at articles on the Minerals Resource Rent Tax and what it actually entails. Positive Accounting Theory in relation to bonus plans and political costs. It will address articles on accounting methods that were used prior to the introduction of Minerals Resource Rent Tax and why they were used. Finally an article on the implementation of a previous mining tax and its implications on the accounting policies used will be analysed. This paper will then go on to analyse the accounting policy choices used prior to the introduction of the tax and post introduction of the tax using Positive Accounting Theory to explain and predict the accounting practices. While positive accounting theory has many criticisms, this is the correct theory to use.
Literature Review
To obtain a quick overview of the Minerals Resource Rent Tax (MRRT), this paper will review Honey and Mok 2010. On July 2 2010, MRRT was announced to come into effect on July 1 2012. Currently other mining taxes in Australia include; at the federal level there, is a Petroleum Resource Rent Tax (PRRT) and at the state level, there are royalty regimes.
MRRT is a tax that requires 30% on the MRRT profits for iron ore and coal projects. Honey and Mok (2010) stated that profits below $50 million will not have a MRRT liability, although it should be noted that after this article was written the figure was revised to $75 million (Mining tax bills pass Lower House 2011). MRRT profit is the company’s revenue, minus associated costs, where revenue is the value of commodity at its first saleable form. The company can have a 25% extraction allowance for costs
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