Breville Group Ltd Financial Analysis

This assignment requires a detailed analysis of Breville Group Ltd's financial statements. Students need to examine the company's treatment of income tax expenses, deferred taxes, equity, and other relevant financial areas. The analysis should be supported by information from the company's annual reports and demonstrate an understanding of key accounting concepts.

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

1CORPORATE ACCOUNTING
Table of Contents
Answer to question 1:.................................................................................................................2
Answer to question 2:.................................................................................................................3
Answer to question 3:.................................................................................................................3
Answer to question 4:.................................................................................................................5
Answer to question 5:.................................................................................................................6
Answer to question 6:.................................................................................................................6
Answer to question 7:.................................................................................................................7
Reference List:...........................................................................................................................9

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Answer to question 1:
In the balance sheet of the organizations there are three chief items that can been
observed and one of them is being the Equity. The similar theory is applicable for Breville
Group Ltd. On observing the annual report of the Breville Group Ltd for the year ended 2017
it was found that there are three main items that is listed in the balance sheet namely the
issued capital, reserves and retained earnings (Picker et al. 2016). Organizations makes the
use of the equity shares so that the firm can raise the capital issue business. The annual report
of the Breville Group Ltd represents that the company reported the equity that was
attributable to the equity shareholders of the parent company with issued capital amounting to
$140,050 for the year ended 2017 and 2016.
The issued capital comprised of the ordinary share that are classified as equity
(Breville Group Ltd 2018). On the other hand, the next items that has been reported by the
firm is the Reserves with reserves standing $6,782 in the year 2017 and in the year it stood
$4,930 respectively. The nature and purpose of the reserves consisted of the foreign currency
translation reserve, employee equity benefits reserve and the cash flow hedge reserves.
Breville Group Ltd makes the use of the foreign currency translation reserve in order to
record the differences originating from the translation of financial reports of the overseas
subsidiaries.
The employee equity benefit reserve of Breville Group Ltd is put into use to account
for the value of equity benefits that is provided to the employees as the part of their
remuneration. The cash flow hedge reserve on the other hand is used to record the amount of
gain or loss made from the hedging instrument in the cash flow hedge which is regarded to be
an effective hedge (Nobes 2014). The final item that is reported by Breville Group Ltd under

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the heads of equity is the retained earnings that stood $110,885 for the year ended 2016 and
in the subsequent year it stood to $126,341.
Answer to question 2:
There are numerous types of expenditure that is reported by Breville Group Ltd in
their annual report. These expenses are selling, expenses, administrative expenditure, general
expenditures and other forms expenses (Macve 2015). Besides these expenditure, Breville
Group Ltd reported tax expenditure which is considered to be one of the vital expenditure of
the company. similarly, these tax expenditure forms the chief liability for Breville Group Ltd
to the state and civic government of Australia. Breville Group Ltd computes the tax
expenditure by multiplying the business tax from the earnings of the company following the
factorization of the components such as current income tax charge and adjustment in regard
to the current income tax of the earlier years (Zhang and Andrew 2014).
Breville Group Ltd performs the reconciliation between the tax expenditure and the
product of accounting profit before the income tax is multiplied by the parent company with
the applicable income tax rate (Breville Group Ltd 2018). Taking into the considerations the
annual report of the Breville Group Ltd company has reported the tax expenditure of $21,347
for the year ended 2016 while in the following year of 2017 the company reported the income
tax expenditure of $23,389 respectively in its income statement.
Answer to question 3:
As evident from the above stated discussion the income tax expenditure that is
reported by the company is greater in the year 2017 than the figures reported by the firm in
the year 2016. The income tax expenditure for the year ended 2016 stood $21,347 while in
the subsequent year of 2017 the income tax expenditure reported by the firm in its income
statement has increased to $23,839 subsequently (Breville Group Ltd 2018). In addition to

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the analysis, the company reported a profit before income tax of $71,519 for the year ended
2016 while in the following year of 2017 the profit before income tax stood $77,223.
On analysing the annual report of the firm the tax rate for the firm stood at the rate of
30% based on the profit reported by the firm for both the financial year of 2016 and 2016.
According to the applicable tax rate of 30% for the year ended 2016 and 2017 the tax
expenditure for the Breville Group Ltd should be 23,167 ($77,223*30%) and $21,456
($71456*30%) respectively. However, the company reported the tax expenditure of $23,167
and $21,456 for the year ended 2017 and 2016. Therefore, as evident it is found that there is a
differences between the actual and reported amount of tax expenditure in the existence of
similar rate of tax for both the years (Marshall 2016). There are few factors that have caused
differences that usually the adjustments, applicable of different tax rates and non-deductible
expenditure.
The primary factor responsible for the existence of the differences in the tax amount
reported by the firm is the adjustment made by Breville Group Ltd in respect of the current
income tax relating to the previous years. The adjustment amount made in respect of the
current income tax of the year stood $105 and $33 respectively. Another reason for the
differences in the amount of tax reported is the effect of the different rates of the tax on the
overseas income. Figures reported under the effect of the different rates of the tax on the
overseas income is $101 and $184 respectively.
Another reason for differences in the tax expenses is the sum of expenses that is non-
allowable for the purpose of income tax (Wahlen, Baginski and Bradshaw 2014). The non-
allowable expenses for income tax stood $64 and $215 respectively for the year ended 2016
and 2017 respectively. Breville Group Ltd reported other expenses of $358 which were added
in the computation of income tax for the year ended 2017 (Breville Group Ltd 2018). In the

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year ended 2016 other expenses of $241 were deducted which altogether made the
differences in the income tax expenses reported by the company in the income statement.
From the above stated discussed elements there are differences that can be witnessed in the
computed and the reported amount of income tax of the firm.
Answer to question 4:
In executing the tax operations of the firm, deferred Tax Assets and deferred Tax
Liabilities is regarded as the vital portion (Barth 2015). The creation of the deferred tax is
regarded can be witnessed in the case of the present company where the company has
reported the deferred tax assets of $5,819 for the year ended 2017 and $7,351 for the year
ended 2016 respectively. According to the Breville Group Ltd the deferred income tax is
provided is based on all the provisional differences amid the tax base of the assets and
liabilities along with their carrying amount on the balance sheet for the financial purpose of
reporting (Williams 2014).
The deferred tax assets reported by the firm is identified for the deductible provisional
differences, carry-forward of the unused amount of tax assets and the unused amount of the
tax losses up to the extent that it is probable ant the taxable profit would be made available
against the deductible temporary differences. The deferred income tax assets represent the
deductible provisional temporary differences along with the carry-forward of the unused
amount of tax assets and the unused amount of the tax losses that can be put into the use
(Warren and Jones 2018). The carrying amount of the deferred income tax assets is reviewed
for each of the balance sheet and lower the extent that it is no more probable that the adequate
amount of assessable profit would be made available to enable all or the portion of the
deferred income tax assets to be used.

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The unrecognized amount of deferred tax assets is revaluated on every balance sheet
date and the same is identified up to the extent that the future value of the taxable profit
would enable the deferred tax assets to be recovered (Henderson et al. 2015). The company
reports that the deferred tax assets and the deferred tax liabilities is offset only when they are
lawfully enforceable rights prevails to set off the current tax assets against the Breville Group
Ltd current tax liabilities.
Answer to question 5:
In the process of taxation system of the firm, the current tax assets and the current tax
liabilities is regarded as the chief elements of the firm. As evident from the annual report of
the Breville Group Ltd the company has reported the current tax assets of $34 for the year
ended 2016 and in the subsequent year 2017 the current tax assets reported by the firm stood
411 respectively. The current tax assets for the present and earlier period is measured for the
amount that is anticipated to be recovered or paid to the authorities of taxation (Marshall
2016). It is noteworthy to denote that the applicable rate of tax and taxation laws is put into
the use to calculate the amount and that are implemented or substantially implemented in the
balance sheet date.
Presently it can be observed that the differences prevail in the Breville Group Ltd
relating to the amount of the current tax payable and the current tax expenses. Nevertheless,
for the tax payable it can be said that that there are certain accounting transactions that are
either included or excluded (Macve 2015). These accounting transactions includes the non-
deductible expenditure, expenditure that are paid in advance and other factors. Because of the
existence of these accounting transactions, the value of current tax payable either represents
more or the less than the actual value of the income tax expenses. Hence, Breville Group Ltd
is under the obligation of including or excluding these factors to obtain the actual amount of
income tax.

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Answer to question 6:
Evidences from the annual report of Breville Group Ltd has stated that the
organization has reported regarding the income tax expenditure in two major statements
namely the income statement and the cash flow statement (Schipper, Francis and Weil 2017).
On analysing these two statements it is found that the amount of income tax expenditure in
the cash flow is different from that of the income tax expenditure in the income statement
(Hoskin, Fizzell and Cherry 2014). In the income statements, the amount of income tax
expenditure for the year ended 2016 and 2017 stood $21,347 and $23,389 respectively. On
the other hand, in the statement of the cash flow it is found that the income tax paid stood
$19,742 and $20,518 for the year 2017 and 2016 respectively.
An assertion can be bought forward by stating that the there is a mark of clear
differences in the amount of tax expenses and the tax paid. There are specific reasons for
such differences is changes in the value of the current assets and the current liabilities. As
evident from the report is that the value of income tax expenditure in cash flow statement is
declined marginally in comparison to the figures reported in 2016 and 2017. Consequently,
the organization has conducted several adjustments in the income tax expenditure for both the
year prior to recording them in the cash flow statement (Mullinova 2016). As a result of this
there is a differences in the amount of income tax reported in the cash flow statement in
respect of the amount reported in income statement.
Answer to question 7:
On analysing the financial statements of the Breville Group Ltd it can be stated that
there are interesting facts relating to the organizations treatment of tax. One of the most
interesting aspects of the organizations is the description provided regarding the value of tax
expenditure. Breville Group Ltd has represented every item that has resulted in differences in
the value of tax. Consequently, the differences in the reported amount of income tax expenses

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in the cash flow and income statement is an interesting factor. Therefore, on analysing the
above factors a person can gain a better knowledge of the firm in the areas of equity, income
tax expenses, deferred tax and other aspects along with the treatment of these expenses by the
firm.

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Reference List:
Annualreports.com. (2018). Breville Group Ltd - AnnualReports.com. [online] Available at:
http://www.annualreports.com/Company/Breville-Groupltd [Accessed 8 Jan. 2018].
Barth, M.E., 2015. Financial accounting research, practice, and financial
accountability. Abacus, 51(4), pp.499-510.
Henderson, S., Peirson, G., Herbohn, K. and Howieson, B., 2015. Issues in financial
accounting. Pearson Higher Education AU.
Hoskin, R.E., Fizzell, M.R. and Cherry, D.C., 2014. Financial Accounting: a user
perspective. Wiley Global Education.
Macve, R., 2015. A Conceptual Framework for Financial Accounting and Reporting: Vision,
Tool, Or Threat?. Routledge.
Macve, R., 2015. A Conceptual Framework for Financial Accounting and Reporting: Vision,
Tool, Or Threat?. Routledge.
Marshall, D., 2016. Accounting: What the numbers mean. McGraw-Hill Higher Education.
Marshall, D., 2016. Accounting: What the numbers mean. McGraw-Hill Higher Education.
Mullinova, S., 2016. Use of the principles of IFRS (IAS) 39 “Financial instruments:
recognitionand assessment” for bank financial accounting. Modern European Researches,
(1), pp.60-64.
Nobes, C., 2014. International Classification of Financial Reporting 3e. Routledge.
Picker, R., Clark, K., Dunn, J., Kolitz, D., Livne, G., Loftus, J. and Van der Tas, L.,
2016. Applying international financial reporting standards. John Wiley & Sons.

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Schipper, K., Francis, J. and Weil, R., 2017. Financial Accounting: Introduction to Concepts,
Methods and Uses. Cengage Learning.
Wahlen, J., Baginski, S. and Bradshaw, M., 2014. Financial reporting, financial statement
analysis and valuation. Nelson Education.
Warren, C.S. and Jones, J., 2018. Corporate financial accounting. Cengage Learning.
Williams, J., 2014. Financial accounting. McGraw-Hill Higher Education.
Zhang, Y. and Andrew, J., 2014. Financialisation and the conceptual framework. Critical
perspectives on accounting, 25(1), pp.17-26.