Tax Expense Analysis and Corporate Reporting

This assignment focuses on analyzing the tax expense disclosures provided by Qantm Intellectual Property Limited in their annual report. Students are tasked with examining the key factors influencing the company's effective tax rate and providing an explanation of how these factors are reflected in their financial statements. The analysis should cover areas such as deferred tax assets and liabilities, and highlight any significant differences between income and cash flow tax payments. The goal is to demonstrate an understanding of corporate tax accounting principles and the ability to interpret complex financial information.

Running head: CORPORATE ACCOUNTING
Corporate Accounting
Name of the Student:
Name of the University:
Authors Note:

CORPORATE ACCOUNTING 1
Table of Contents
Question I.........................................................................................................................................2
Question II.......................................................................................................................................3
Question III......................................................................................................................................4
Question IV......................................................................................................................................5
Question V.......................................................................................................................................6
Question VI......................................................................................................................................7
Question VII....................................................................................................................................8
References......................................................................................................................................10
Appendix........................................................................................................................................12

CORPORATE ACCOUNTING 2
Question I
The companies are observed to have three important features in the balance sheet and
equity is of these components. There exists no exception to the same in case of Qantm
Intellectual Property Limited. Based on the year 2017 balance sheet of the firm there exist cetin
key components including reserves, retained earnings and equity including the issued capital.
Issued capital can be observed as equity present in the business firms (Armstrong, Blouin,
Jagolinzerand Larcker 2015). Calculation of the issued capital is performed by the number of
shares along with outstanding shares by par value shares. Observing the annual report of Qantm
Intellectual Property Limited a boost within the capital issue is present in the year 2017 in
contrast to 2016 that is $ 302,562,000 in 2017 from $ 235,073,000 in 2016.
The company provided explanation concerning certain key areas which can effectively
produce tax expenses difference. In that table, the firm has conducted all necessary calculations
and another important tax expense differences in income and cash flow statement. The key
factors present in issues capital are ordinary shares issue, issue of shares cost and the income tax
related with issue of shares. Certain components those are present in the equity of the
organization includes reserves. Within increased consideration to the theory of financial
accounting, reserves can be explained as a part of the company’s equity (Atanasov and Black
2016). This can be revealed as additional amount devoid of basic share capital. The company’s

CORPORATE ACCOUNTING 3
current annual report evidenced a boost in equity reserves for in the year 2017 that is different in
2016 that is. In this organization there are key components of equity reserve which encompass
equity reserve for considerable employee benefit, reserve relied on foreign currency translation
along with hedging reserve.
One major aspect in Qantm Intellectual Property Limited includes retained earnings. This
explains total profits and losses of the firm since its emergence that lessened by the dividend paid
to all the shareholders (Cheng, Ioannouand Serafeim 2014). The recent yearly report of the firm
evidenced that the company attained retained earningsof approximately in the year 2017 in
comparison to year 2016 that has approximately. A good position of retained earnings explains
that the organization has increased profits in contrast to the losses. The aspects within the
company’s retained earnings encompass net profit linked with the people associated with the
firm, dividends paid to offer with the effect of restatement. These components come under the
company’s equity reserve (Christensen et al.2015).
Question II
In the organizations, there are numerous costs that are deemed to encompass selling and
administrative expenses with a lot of expense deemed to be tax expense. Additionally, tax
expense is considered to be a huge liability for the firm which is an aspect of state, federal and
municipal government belonging to the country (Damodaran 2016). Tax expense calculation can
be carried out through necessary business tax before income with explaining important elements
that includes tax assets and liabilities with non-deductible components. Considering Qantm
Intellectual Property Limited’s yearly report the company has indicated $ 77,513,000 in 2017
and $ 66,593,100 in 2016 as their profit from regular income tax operations (Dyreng et al.2017).

CORPORATE ACCOUNTING 4
Based on Australian Tax Law rules the business tax rate for the countries within Australia is
deemed to be 35% (Dowling 2014). Considering this rate of tax, the tax expenses of this
organization is $ 35,576,000 in 2017 and $ 26,570,000 in 2016. It is elaborated that there is a
gradual boost in tax expenses of the firm because of enhancement in the company’s income for
the year 2017 in comparison to the year 2016.
Question III
In accordance with above elucidation, it is explained that Qantm Intellectual Property
Limited attained profits approximately in the year 2017 and in the year 2016 from its regular
business conducts before changes in income tax. In addition, the recent yearly report of the
business signifies that it has a tax rate of 35% for the financial year 2017 and 2016 (Laux 2013).
Considering the same rate, total expenses of income tax of the business is observed being $
76,284,000 ($ 67,613,000*35%) in 2017 and $ 23,975,000 ($ 56,583,000*35%) in 2016.
Accordingly, the original tax expense of the company in the years 2017 and 2016 remained and.
An increased variation might be seen in tax expense rather than attaining 35% of tax rate.
There are some partial aspects that is encompassed or excluded within the preliminary
costs of the overall tax and these are taken into account as reasons for differences in tax expenses
(Piketty and Saez 2013). In Qantm Intellectual Property Limited there are five components that

CORPORATE ACCOUNTING 5
are deemed to have effect on tax expenses of the organization. The first aspect includes expenses
those are not deductible for determining the profits that are taxable.
There are too many expenses in the organization that cannot be decreased from the
income related with the company. Because of the same, $ 679,000 and $ 738,000 considered in
the years from 2017 and the year 2016 considerably (Rego and Wilson 2012). The second aspect
is deemed to be the presence of different rates of tax of the subsidiaries of the organization
having the tax rate of 35% in one nation and 35% in another nation. Because of these variations
in the rate of tax $ 15000 and $ 16000 was decreased from the organizations expense of tax
within the year 2016. There are some factors that can be added in the tax expenses of the
organization and due to the same thing and was added. The final aspect encompasses the
presence of non-accessible income for a part of income are not observed to be analyzed in the
taxation and due to this is added with the total expenses of tax (Qantm Intellectual Property
Limited, 2017).
Question IV
Deferred tax and liabilities assets are considered being important considering the
organization’s tax expenses. Deferred tax assets are observed to have a situation in which
companies overpay taxes and make previous tax payments within the financial assets. Moreover,
deferred income tax liability explains a situation where there are variations in the carrying value
of tax and profit of the company (Saunders and Cornett 2012). Considering case of Qantm
Intellectual Property Limited, this is evident that the company has reported its deferred tax
liability with the assets in yearly annual report. This signifies the organization has deferred tax
assets of approximately $ 17,657,000 in 2017 and $ 6,394,000 in 2016(Dyreng et al. 2017). In

CORPORATE ACCOUNTING 6
contrast, the company has $ 129,433,000 in 2017 and $ 145,708,000 in 2016 as the deferred tax
liability. In a situation of deferred tax assets, there might be a case where increased payment of
depreciation by the company took place due to variance in taxable depreciating rate and
depreciation (Saunders and Cornett 2012). Due to increased payment of depreciation, the
company might not be able to meet the tax amount in upcoming year due to which it is
considered as asset. Being the deferred tax liability there might be minimal differences in the
company profit and it has to pay decreased taxes in the recent year. Due to the same, it is vital for
the company to deal with the same in future years due to which it can be called a liability (Laux
2013).
Question V
Income tax payable along with current tax assets happens to be among the important
aspects of the firms. In Qantm Intellectual Property Limited’s yearly report, the organisation is
deemed to report its current tax assets (Dyreng et al. 2017). Based on the 2017 yearly financial
statement along with financial situation of the organization and this can be explained that the
firm did not represent the current tax asset amount for the year 2017. Additionally, in the year
2016, the company is observed to have a part of current tax liabilities and assets.

CORPORATE ACCOUNTING 7
In several business firms, there can be a lot of difference among income tax expense and
income tax payables with all specific causes that can be deemed responsible for the disparity
(Dyreng et al. 2017). The major cause encompasses increased pressed of deferred tax assets.
Moreover, numerous instances can be in the company that pays high tax amounts rather than tax
expenses. In this situation, further tax amount paid can be considered to be deferred tax asset
which creates a difference. Other causes encompass financial accounting along with tax
accounting rules difference. Considering such theory, a depreciation factor can be elucidated and
certain differences relied on such things is considered to be within tax and financial accounting
in various rate of depreciation (Dowling 2014). In such situation, the final payable amount of
depreciation can be decreased or boosted along with numerous reasons for causing differences in
income tax expenses and payables.
Question VI
In the annual report of Qantm Intellectual Property Limited, the business provided
instances concerning the tax expenses in cash flow and income statement (Armstrong, Blouin,
Jagolinzer and Larcker 2015). Moreover, this is considered as the firm has represented different
amount in the ash flow and income statement. In income statement, the company has presented $
35,766,000 in 2017 and 43,570,000 in 2016 being the income tax expenses and the cash flow
statement of the firm which is observed to be $ 32,570,000 in 2016 and $ 18,687,000 in
2017(Dowling 2014). The important reasons for this disparity in the amounts of income tax
expenses considers that the company experiences total tax expenses with having tax charge of
around 35% on profit from continuous operation before tax. Due to increased payment of
depreciation, the company might not be able to meet the tax amount in upcoming year due to
which it is considered asset. Being the deferred tax liability there might be minimal differences

CORPORATE ACCOUNTING 8
in the company profit and it has to pay decreased taxes in the recent year. Due to the same, it is
vital for the company to deal with the same in future years due to which it can be called a
liability.
However, this increase is not evident within the cash flow statement. This is because this
needs to be elucidated that there are tax expenses in the cash flow from operating activities. In
such scenario, cash flow is observed to be distinct. It is also necessary to gather that all tax
expenses come under the operating conducts cash flow and few components in income statement
that is considered in distinct way. This signifies there are some changes taking place in the
organizations current assets and liabilities (Atanasov and Black 2016). In Qantm Intellectual
Property Limited, payment of income tax is deemed as current assets. In the cash flow statement
certain decrease in the income tax expense factors indicates positive use of cash. This indicates
several considerations within tax expenses are being deducted before mentioned in the statement
of cash flow. In such situation, few tax expense differences are deemed to be explained in
income and cash flow statement (Atanasov and Black 2016).

CORPORATE ACCOUNTING 9
Question VII
After observing the tax treatment situation of Qantm Intellectual Property Limited’s
financial statements that is needed being explained that is not that surprising and confusing in the
tax treatments (Armstrong, Blouin, Jagolinzer and Larcker 2015). The firm focused on tax
treatments in adherence to Australian Taxation Regulations and laws. Additionally, the
organization presented numerous explanations and justifications concerning certain taxation
factors such as deferred tax liabilities, assets, current tax liabilities and assets, tax rate and a few
more. Moreover, there are some considerable factors within Qantm Intellectual Property
Limited’s tax treatment areas (Saunders and Cornett 2012). The most important factor is
regarding the firm’s elaboration regarding certain distinction on total tax expense (Saunders and
Cornett 2012). The company provided explanation concerning certain key areas which can
effectively produce tax expenses difference. In that table, the firm has conducted all necessary
calculations and another important tax expense differences in income and cash flow statement.
All such important factors help in enhancing understanding and knowledge regarding firm’s
taxation (Armstrong, Blouin, Jagolinzer and Larcker 2015). From such explanation, an
individual can gain an insight and understanding concerning tax treatments of the firm.

CORPORATE ACCOUNTING 10
References
Armstrong, C.S., Blouin, J.L., Jagolinzer, A.D. and Larcker, D.F., 2015. Corporate governance,
incentives, and tax avoidance. Journal of Accounting and Economics, 60(1), pp. 1-17.
Atanasov, V. and Black, B., 2016. Shock-based causal inference in corporate finance and
accounting research.
Cheng, B., Ioannou, I. and Serafeim, G., 2014. Corporate social responsibility and access to
finance. Strategic Management Journal, 35(1), pp. 1-23.
Christensen, D.M., Dhaliwal, D.S., Boivie, S. and Graffin, S.D., 2015. Top management
conservatism and corporate risk strategies: Evidence from managers' personal political
orientation and corporate tax avoidance. Strategic Management Journal, 36(12), pp. 1918-1938.
Damodaran, A., 2016. Damodaran on valuation: security analysis for investment and corporate
finance (Vol. 324). John Wiley & Sons.
Dowling, G.R., 2014. The curious case of corporate tax avoidance: Is it socially
irresponsible?. Journal of Business Ethics, 124(1), 173-184.
Dyreng, S.D., Hanlon, M., Maydew, E.L. and Thornock, J.R., 2017. Changes in corporate
effective tax rates over the past 25 years. Journal of Financial Economics, 124(3), pp. 441-463.
Laux, R.C., 2013. The association between deferred tax assets and liabilities and future tax
payments. The Accounting Review, 88(4), pp.1357-1383.
Piketty, T. and Saez, E., 2013. A theory of optimal inheritance taxation. Econometrica, 81(5),
pp.1851-1886.

CORPORATE ACCOUNTING 11
Rego, S.O. and Wilson, R., 2012. Equity risk incentives and corporate tax
aggressiveness. Journal of Accounting Research, 50(3), pp.775-810.
Qantm Intellectual Property Limited., 2017. Annual Report 2017. [online] Available at:
http://www.Qantm Intellectual Property
Limited.com.au/images/investor_docs/RFGLAnnualReport2017.pdf [Accessed 26 Dec. 2017].
Saunders, A. and Cornett, M.M., 2012. Financial markets and institutions. McGraw-Hill/Irwin.

CORPORATE ACCOUNTING 12
Appendix

CORPORATE ACCOUNTING 13

CORPORATE ACCOUNTING 14

CORPORATE ACCOUNTING 15

CORPORATE ACCOUNTING 16

CORPORATE ACCOUNTING 17

CORPORATE ACCOUNTING 18

CORPORATE ACCOUNTING 19

CORPORATE ACCOUNTING 20

CORPORATE ACCOUNTING 21