AusNet Services Limited: A Comprehensive Analysis of Financial Statements

This report provides a detailed analysis of the financial statements of AusNet Services Limited, an Australian energy company listed on the Australian Securities Exchange and the Singapore Stock Exchange. The report examines the company's cash flow statement, other comprehensive income statement, and accounting for corporate income tax. It analyzes the company's financial performance and provides insights into its future prospects.

HI5020- Corporate Accounting
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Contents
Introduction.................................................................................................................................................3
Cash flows statement...................................................................................................................................4
Other comprehensive income statements.....................................................................................................9
Accounting for corporate income tax........................................................................................................10
Conclusion.................................................................................................................................................11
References.................................................................................................................................................12
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Introduction
Ausnet services Limited is an Australian company which is listed on Australian securities
exchange and is also listed on the Singapore stock exchange. They operate electricity
Transmission network, also they have various gas distribution centers. The company provides
not only these services but also provides telecommunication solutions and has various
infrastructure sectors across Australia. It has been over 100 years since the company is providing
energy in the form of electricity into various houses and offices across Victoria. It is recognised
as Victoria's largest energy providing service. The company provides employment to 2 more
than 2600 people around Australia.
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Cash flows statement
Cash flow from operating activities for the company is not present in all the three financial years.
This proves that the companies have not done any operating activity during the 3 years and also
it can be ascertained that the company is not involved any of such operating activities which are
in relation to the running business of the company.
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Cash Flow Statement 2015-
03
2016-
03
2017-
03
Cash Flows From Operating Activities
Cash Flows From Investing Activities
Investments in property, plant, and equipment -800 -693 -888
Property, plant, and equipment reductions 6 1 4
Acquisitions, net 0
Other investing activities 9 9 9
Net cash used for investing activities -786 -683 -875
Cash Flows From Financing Activities
Debt issued 1830 1100 988
Debt repayment -1159 -1373 -756
Cash dividends paid -179 -195 -212
Other financing activities
Net cash provided by (used for) financing activities 492 -468 20
Net change in cash -294 -1152 -855
Cash at beginning of period 410 883 441
Cash at end of period 116 -269 -414

Cash flow from investing activities for the company is provided in the cash flow statement and
also it can be said that the company has cash flow from investing activities in all the three years.
But when considered the 3 years that are 2015, 2016 and 2017 the cash flow from investment in
property, plant, and equipment is seen considerably higher in all the three years.
Only investment is made in property, plant, and equipment and no sale of such investment are
made during the year. There is a sale of property, plant, and equipment but the figures provided
in the cash flow statements are of not that important.
Therefore, cash flow from investing activities is only generated by investing in property, plant
and equipment.
Cash flow from financing activities can be seen in the cash flow statements. For the company,
positive cash flow from financing activities can be seen in all the three financial years. A debt
instrument has been issued by the company in all the three years. For the year 2015, the debt
issued is more than the issued in the year 2016 and 2017.
When negative cash flow from financing activities is considered for the company it can be found
that debt repayment is made in all the three financial years. But as we have discussed that the
debt issued was more in the year 2015 then in the year 2016 and 2017, the dead payment is also
more than 2016 and 2017 in the year 2015.
Not only has this but the company had also paid dividend which gives rise to the negative cash
flow for the company. The dividends are paid in all the three years.
Analysis of cash flow generated from operating activities- when the various items that are
provided in the financial statement are exhausted with the net profit of the company the
operating cash flow can be extracted. The operating income can be calculated by deducting
depreciation and the working capital has to be adjusted with the net profit of the company. The
basic concept is to be applied for the calculation of cash flow from operating activities as the
items which are to be provided under the heading cash flow from investing activities and cash
flow from financing activities have to be excluded in the calculation of operating cash flow for
the financial year.
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The company provided has no cash flow from operating activities even though the company is
involved in the providing energy for household and commercial purposes. The purpose and the
concept of calculating the operating activity are to analyse whether the company is in good
health or not. With the help of the operating income of the company the users of the financial
statements can easily identify that whether the company has the potential to repay its operating
expenses and to borrow the working capital so as to conduct its day to day and such borrowed
money can be repaired by the company with interest within the time constraints.
(KenFaulkenberry, 2018)
Analysis of cash flow from investing activities- the investment activities that the company has
undertaken during the financial year have to be brought together under the same heading and
then the net amount receivable or payable is to be considered separately. Investment activities
involve various investment and sale of fixed assets or long-term assets that are conducted by the
company during the financial year have to be combined together for the calculation of cash flow
from investment activities. Finally when such combination is made to the company can easily
ascertain the cash flow that the company is receiving or has to pay because of the cash flow from
investing activities.
There can be a negative cash flow from investing activities and also a positive cash flow from
such investing activities can be found. When investments are made in the long-term assets of the
company then there is a reduction in the cash for the company which results in a negative cash
flow from investing activities for the company. Similarly on the other side when the company
has to sell or reduce its investment it has to sell them in the market which brings the company
with the excess cash and generates positive cash flows for the company (Bragg, Cash flows
from investing activities, 2017).
Analysis of cash flow from financing activities- when the company is involved in the various
transactions that are being taken place with the stakeholders and owner of the company, such
have to be reported in the cash flow from financing activities. When the company pays dividend
it is a negative cash flow for the company as the cash flows outside the entity and thus resulting
in the negative cash flow from financing activities. Whereas when a company receives dividend
from its subsidiary company or holding company it results in cash inflow for the company and
cash flow from financing activity is generated in the positive form.
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For not for profit organisation even its donation receipts are considered as cash flow from
financing activities. What the company provided here the cash flow from financing activities is
both positive and negative in all the three financial years that means the company is involved in
the payment and receipt of various items of the financing activities that are resulting in such cash
flow for the financing activities (Bragg, Cash flows from financing activities, 2017).
(ii) Cash flow from operating activities -
For the company, the cash flow generated from operating business is not present in the cash flow
statement that the company has provided in the annual report for the year 2015, 2016 and 2017.
Because of which it can be said that the company's current position and the company's position
in the past few years is not that sound. The company has zero earnings from their core business
and that is the point of problem that the company is facing in the past few years. The company
needs to understand the need for operating income as operating income provides the users and
the investors with the actual detail of the company's earnings. The operating income attracts the
investors to invest in the company because of which cash flow can be increased in the company
and Company can easily diversify its business.
Cash flow from investing activities - for the company provided has sufficient cash flows
movements from the activities that belong to investing. When cash flow statements of the
company that are provided in the annual reports of the year 2015,2016 and 2017 are seen, it can
be found out that the company has purchased/ invested in various plant, property and equipment
during the three accounting years. That provides the users and the investors to acknowledge the
fact that the company might have no cash flows from operating activities but the company still
has huge funds because of which it can easily invest in various plants, properties and equipment.
The net cash flow from investment activities is found to be negative which gives the
understanding that the company is not interested to reduce its investment by selling them and
company believes in long-term investment and that is why the company is investing in huge
amounts every year and retaining such investments for long. (Bragg, Cash flows from investing
activities, 2017).
Cash flow from financing activities-
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For the company provided it can be found that cash flow from financing activities are provided
in the cash flow statement of the company for the financial years 2015, 2016 and 2017 as per the
statement provided in the annual report provided by the company. When the cash flow statement
of the company was overlooked it was found that the company is issuing debt every year in huge
amounts. Not only has this but the company believed in the debt repayment every year that
shows the company's position to repay its debt. This way it can be ascertained that the company
in the long term can survive with the ups and downs of the business.
The net cash provided by financing activities was found to be positive in the year 2017 and 2015.
But for the financing activities, it was found negative in the year 2016 because the company has
paid its debt more than that it issued. (Bragg, Cash flows from financing activities, 2017)
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Other comprehensive income statements
(iii) Other comprehensive items are the part of the company financial statements. What the
company provided movement in defined benefit fund has been made in all the 3 years that are
2015, 2016 and 2017. There has been Movement in The Hedge reserve in all the three financial
years by the company had also income tax has been paid on both defined benefit fund and hedge
reserve. (2017, 2017)
(iv) Define benefit fund has been made for the benefit of the employee of the company so that at
the time of retirement benefits that accrued to the employee can be provided to them with the
help of this fund.
Hedge reserve is made to secure the company's own risk from the market conditions which are
not certain. (2017, 2017)
(v) The Other comprehensive items have not been recognised because whether they will accrue
or not is not certain. That is why they have to be reported in the other comprehensive item of the
financial statement.
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Accounting for corporate income tax
(vi) The tax expense for the company for the year 2017 as per the annual report of the company
is 108.2 million dollars.
(vii) The tax rate applicable to the company provided is 30% and the tax has been calculated @
30%. But the final Tax amount differs from the Tax amount that has to be paid as per the
accounting income for the company, the difference is because of the timing differences and due
to which deferred tax has changed the percentage of tax that the company need to pay according
to the accounting income.
(viii) Deferred tax liability was reduced by 292.9 million dollars which occurred due to the tax
effect of the company. Consolidated tax group for AusNet Services (Distribution) Ltd with the
reset of valuation of lift was 976.3 million dollars that were recognised.
(ix) The company provided here as income tax payable for the accounting year 2017 as per the
annual report of the company. The income tax payable is different from the tax expense of the
company for the accounting year 2017; this is because of deferred tax liability which has
increased the tax payable for the company for the accounting year 2017.
(x) The company's tax expense is not the same as the tax mentioned in the cash flow. This is
because in the cash flow statement of the company for the financial year 2017 as per the annual
report there is no tax paid has been mentioned in the cash flow statement. Where the tax expense
is for the company as per the income statement in the annual report of 2017 is 108.2 million
dollars.
(xi) It can be understood from the annual report of the company that the cash flow statement do
not provide operating cash flows that is a bit strange thing that can be found for the company.
Also, there are no tax expenses in the cash flow statements that the company has paid during the
financial year.
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Conclusion
It can be concluded that the company Ausnet services Limited is earning profits in all the three
financial years that are 2015, 2016 and 2017 as per the annual report provided by the company.
The company has growth prospects for the upcoming future that can be ascertained from the
income statement and the balance sheet provided by the company. In the upcoming future, it can
be found that the company will diversify its business and will increase its energy plants all over
the Victoria. Thereby it can be concluded that the company is considering running in good
profits.
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References
ACCA. (2018, Feburary 1). DEFERRED TAX. Retrieved from accaglobal.com:
http://www.accaglobal.com/in/en/student/exam-support-resources/fundamentals-exams-
study-resources/f7/technical-articles/deferred-tax.html
Bragg, S. (2017, September 8). Cash flows from financing activities. Retrieved from
accountingtools.com: https://www.accountingtools.com/articles/what-are-cash-flows-
from-financing-activities.html
Bragg, S. (2017, July 20). Cash flows from investing activities. Retrieved from
accountingtools.com: https://www.accountingtools.com/articles/what-are-cash-flows-
from-investing-activities.html
Bragg, S. (2017, August 15). Other comprehensive income. Retrieved from accountingtools.com:
https://www.accountingtools.com/articles/what-is-other-comprehensive-income.html
KenFaulkenberry. (2018). What is Operating Cash Flow? Retrieved from
arborinvestmentplanner.com: http://www.arborinvestmentplanner.com/what-is-operating-
cash-flow/
Resources, A. (2016). Annual Report. Retrieved from http://www.abmresources.com.au/:
http://www.abmresources.com.au/
Resources, A. (2017). Annual Report. Retrieved from http://www.abmresources.com.au/:
http://www.abmresources.com.au/
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