Corporate Accounting: Analysis of Financial Statements of Adalta Limited and Acrux Limited

The report analyzes the financial statements of Adalta Limited and Acrux Limited, both belonging to the pharmaceutical industry. It covers the equity, cash flow, and other comprehensive income statements, along with deferred tax assets and liabilities. The report also compares the two companies and highlights the importance of financial statements.

CORPORATE ACCOUNTING 1
CORPORATE
ACCOUNTING

CORPORATE ACCOUNTING 2
Executive summary:
The assignment sought to choose 2 companies and do analysis of the financial statements.
The companies chosen for review are Adalta Limited and Acrux Limited. Both of these
companies belong to the industry of Pharmaceuticals.
The report talks about the break-up of the equity of the company, its other comprehensive
statement, the statement of cash flows. The report further throws light on the comparison of
these two as well (ASX, 2018). The report further talks about the deferred tax assets or the
deferred tax liabilities of the company, the difference between the effective tax rate and the
cash tax rate along with the importance of these financial statements.

CORPORATE ACCOUNTING 3
Contents
Introduction:..........................................................................................................................................4
Owners’ equity:.....................................................................................................................................4
Part i:.................................................................................................................................................4
Part ii:................................................................................................................................................8
Cash flow statement:.............................................................................................................................9
Part iii:...............................................................................................................................................9
Part IV:............................................................................................................................................21
Part v:..............................................................................................................................................22
Other comprehensive income statement:.............................................................................................23
Part vi:.............................................................................................................................................23
Part vii:............................................................................................................................................26
Part viii:...........................................................................................................................................27
Part ix:.............................................................................................................................................27
Accounting for corporate income tax:.................................................................................................28
Part x:..............................................................................................................................................28
Part xi:.............................................................................................................................................28
Part xii:............................................................................................................................................29
Part xiii:...........................................................................................................................................29
Part xiv:...........................................................................................................................................29
Part xv:............................................................................................................................................30
Part xvi:...........................................................................................................................................31
References:......................................................................................................................................33

CORPORATE ACCOUNTING 4
Introduction:
The company chosen for review are Adalta Limited and Acrux Limited. Both of these
companies belong to the sector of Pharmaceuticals.
Adalta limited is the company deals in the technology that copies the shape and the stability
of the crucial antigen binding domain that was initially discovered in the sharks and then
were successfully developed as the human protein. It contains a unique I-body which is then
used for the purposes of treating the serious illnesses or the diseases. The initial focus of such
a company was the creation of the pipeline for the drugs, and were used for the purposes of
treating the fibrotic diseases (Adalta, 2018).
The seocn company is Acrux limited which is the company which is concerned with the
development and the commercialisation of the topical pharmaceuticals. The company came
into being in the year 1998 and uses many of the in house facilities and capabilities. The
company has successfully developed and commercialised through many of the licensees
through a number of different topically applied pharmaceuticals products in the countries of
the US and Europe. The company is in the course of developing an increased range of the
generic products for the market of the United States and the company had achieved this
through its on-site laboratories so that the products could be brought into the market at lower
prices (Acrux, 2018).
Owners’ equity:
Part i:
The following are the desired statements:
Adalta:

CORPORATE ACCOUNTING 5
Owner's equity:
(Amounts in
$ in millions)
Particula
rs
2017 2016 Understandin
g
Change Change in %
Issued
capital
175,60,338.0
0
81,5
0,331.
00
this is the
amount of the
money that
each
shareholder
has invested
in the
company
could be due
to new
capital/invest
ment by the
shareholders
115.46%
Reserves 3,908.0
0 3,908.
00
this is the
amount of
money that
the company
has put aside
fom the net
profits earned
in the
previous
years for
some
could be due
to addition of
previous
years profit
0.00%

CORPORATE ACCOUNTING 6
contingency
that may
arise in future
or for future
unforseen
circumstances
Retained
earnings
-
98,18,868.00
-
69,86,
351.00
these are the
part of the
profits earned
in the
previous
years after
paying off
dividend etc
could be due
to previous
year’s profits
being
transferred
in this
account
40.54%
Total 77,45,378.0
0
11,6
7,888.
00
Acrux:
Particulars 2017 2016 Understandi
ng
Change Cha
nge

CORPORATE ACCOUNTING 7
in %
Contributed
equity
95,
873.00
95,
873.00
this is the
amount of
the money
that each
shareholder
has invested
in the
company
could be due
to no change
in the new
capital/inves
tment by the
shareholders
0.00
%
Retained
earnings
1,
215.00
1,
454.00
these are the
part of the
profits
earned in
the previous
years after
paying off
dividend etc
could be due
to previous
years
profits/(losse
s) being
transferred
in this
account
-
16.44
%
Reserves -
53,163.00
-
53,438.00
this is the
amount of
money that
the company
has put
aside fom
the net
could be due
to addition
of previous
years
profit/(losses
)
-
0.51
%

CORPORATE ACCOUNTING 8
profits
earned in
the previous
years for
some
contingency
that may
arise in
future or for
future
unforseen
circumstanc
es
Total 43,
925.00
43,
889.00
Part ii:
The following is the desired analysis:
Adalta Acrux

CORPORATE ACCOUNTING 9
Particulars 2017 2017
Issued capital
17,560.3
4
95,873.0
0
Reserves 3 79/87
-
53,163.00
Retained earnings
-
9,818.87
1,215.0
0
- -
Total
7,745.3
8
43,925.0
0
Cash flow statement:
Part iii:
Adalta:
Cash flow statement:
(Amounts in
$ in millions)
Particulars 2017 2016 Unders
tanding
Change in %

CORPORATE ACCOUNTING 10
Cash flows from operating
activities:
Payments to suppliers and
employees
-
46,32,076.00
-
20,61,6
56.00
these
are the
amount
s that
are
paid to
the
supplie
rs and
the
employ
ees for
the
services
that
they
have
rendere
124.68%

CORPORATE ACCOUNTING 11
d
R & D tax incentive 7,38,046.0
0
8,
78,394.
00
amount
s
receive
d by
the
compan
y
toward
s
researc
h and
develop
ment
-15.98%
Interest received 1,47,483.0
0 8,902.0
0
Amoun
ts
receive
d from
the
compan
y
toward
s the
loan
given to
1556.74%

CORPORATE ACCOUNTING 12
the
outside
rs
Grants received 19,724.0
0 -
amount
s
receive
d by
the
compan
y
toward
s grants
#DIV/0!
Net cash provided by
operating activities
-
37,26,823.00
-
11,74,3
60.00
Cash flows from investing
activities:
Proceeds from disposal of
property, plant and
equipment
1,000.0
0 -
these
are the
amount
s that
the
#DIV/0!

CORPORATE ACCOUNTING 13
compan
y has
receive
d from
the sale
of
assets
held by
them
Payments for property,
plant and equipment
-
6,745.00 -
these
are the
amount
s that
the
compan
y has
paid
from
the
purcha
se of
assets
#DIV/0!
Payments for other assets -
2,600.00 -
these
are the
amount
#DIV/0!

CORPORATE ACCOUNTING 14
s that
the
compan
y has
paid
from
the
purcha
se of
assets
Net cash used in investing
activities
-
8,345.00 -
Cash flows from financing
activities
Proceeds from convertible
notes
- 16,
25,000.
00
amount
s
receive
d from
the
convert
ible
notes
-100.00%

CORPORATE ACCOUNTING 15
Proceeds from share
capital
100,00,000.0
0 54.00
amount
s
receive
d from
the
issue of
new
shares
of the
compan
y
18518418.52%
Proceeds from option
conversions
58,984.0
0 -
amount
s
receive
d from
the
issue of
new
options
of the
compan
y
#DIV/0!
Payment of share issue
costs
-
5,84,757.00 -
amount
s paid
toward
#DIV/0!

CORPORATE ACCOUNTING 16
s the
share
issue
costs
Net cash used in financing
activities
94,74,227.0
0
16,
25,054.
00
Net decrease in cash and
cash equivalents
57,39,059.0
0
4,
50,694.
00
Net
cash
from
aggrega
te of
the
activtie
s in the
year
Cash and cash equivalents
at start of period
4,85,558.0
0 34,864.
00
Cash in
the
start
Cash and cash equivalents
at end of period
62,24,617.0
0
4,
85,558.
00
Net
cash at
the end
of the

CORPORATE ACCOUNTING 17
year
Acrux:
Particulars 2017 2016 Understan
ding
Change Chan
ge in
%
Cash flows from operating
activities
Receipts from product
agreements
21,82
2.00
28,20
8.00
these are
the
amounts
received
by the
company
towards
the
agreement
s entered
into for its
products
could be
due to
lesser
revenue
from
product
agreeme
nts
-
22.64
%
Payments to suppliers and
employees
-
10,748.0
-
7,923.00
these are
the
maounts
could be
due to
an
35.66
%

CORPORATE ACCOUNTING 18
0 paid by the
company
towards
the
payments
to the
suppliers
and the
salaries of
the
employees
increase
in the
salaries
and
wages to
the
employe
rs and
more
purchas
es from
the
supplier
s
Interest received 63
7.00
51
5.00
amounts
received
by the
company
on the
investment
s amd
eoutside
could be
due to
more
invetsm
ent
made by
the
compan
y
23.69
%
Income tax paid -
6,335.00
-
4,294.00
this is the
amount of
could be
due to
47.53
%

CORPORATE ACCOUNTING 19
money
paid by the
company
to Income
tax
authorities
for the
income
earned
during the
year
more
income
earned
during
the year
Net cash flows used in
operating activities
5,37
6.00
16,50
6.00
Cash flows from investing
activities
Payment for property, plant
and equipment
-
629.00
23
6.00
amounts
paid by the
company
towards
the
purchase
of
property,
could be
due to
addition
al
paymen
ts
towards
plant
-
366.53
%

CORPORATE ACCOUNTING 20
plant and
equipment
purchas
e made
during
the year
Net cash flows used in investing
activities
-
629.00
23
6.00
Cash flows from financing
activities
Equity dividends paid
-
-
9,992.00
amounts of
dividends
paid to
shareholde
rs
Could
be due
to no
dividen
d paid
during
the
current
year
-
100.00
%
Net cash flows used in financing
activities -
-
9,992.00
Net decrease in cash and cash
equivalents
4,74
7.00
6,75
0.00
Net cash
from

CORPORATE ACCOUNTING 21
aggregate
of the
activties in
the year
Cash and cash equivalents at
start of period
29,22
7.00
23,08
2.00
Cash in
the start
Cash and cash equivalents at
end of period
33,97
4.00
29,83
2.00
Net cash at
the end of
the year
Part IV:
The following is the desired comparative statement:
Adalta Acrux
Particulars 2017 2016 2015 2017 2016 2015
Net cash from
operating
activities
-
3,726.82
-
1,174.36
-
1,382.44
5,
376.00
16,5
06.00
10,5
19.00
Net cash from
financing
activities
-8 10/29
- -
-
629.00
-
236.00
-
66.00

CORPORATE ACCOUNTING 22
Net cash from
investing
activities
9,4
74.23
1,6
25.05
1,0
35.00 -
-
9,992.00
-
13,322.0
0
Total 5,7
39.06
4
50.69
-
347.44
4,
747.00
6,2
78.00
-
2,869.00
Part v:
In respect of Adalta, it could be said that the company could have been facing some cash
shortage during the year 2015 but then the company had picked up and in the next years, the
company has had a positive cash balance.
In respect of Acrux, it could be said that the company could have been facing some cash
shortage during the year 2015 but then the company had picked up and in the next years, the
company has had a positive cash balance.
Also, when comparing the 2, the following could be said:
 In year 2017, Adalta was better in terms of cash in hand
 In year 2016, Acrux was better in terms of cash in hand
 In year 2015, Adalta was better in terms of cash in hand
Other comprehensive income statement:
Part vi:
Adalta:

CORPORATE ACCOUNTING 23
Statement of profit and loss and the other comprehensive income
(Amounts in $)
Particulars 2017 2016
Revenue
Interest Received 1,70,926.00 8,902.00
Other Revenue 17,96,754.00 7,38,046.00
Total revenue 19,67,680.00 7,46,948.00
Expenses
Cost of services -35,98,678.00 -14,13,975.00
Depreciation and amortisation expenses -5,435.00 -684.00
Employee benefit expense -4,04,669.00 -2,24,620.00
Travel expense -76,575.00 -57,127.00
Board fees -2,07,037.00 -50,000.00
Patent and legal costs -73,310.00 -44,556.00
Other expenses -4,34,493.00 -1,19,042.00

CORPORATE ACCOUNTING 24
Profit (loss) before income tax -28,32,517.00 -11,63,056.00
Tax expense - -
Profit (loss) for the year -28,32,517.00 -11,63,056.00
Acrux:
Statement of comprehensive income
(Amounts in $ in
thousands)
Particulars 2017 2016
Revenue 23,934.00
28,557.
00
Employee benefits expense -4,277.00
-
3,582.00
Directors’ fees -382.00
-
284.00
Share options expense -279.00
-
275.00

CORPORATE ACCOUNTING 25
Depreciation and amortisation expense -1,560.00
-
1,492.00
Impairment losses -10,680.00 -
Occupancy expense -493.00
-
417.00
External research and development
expense -3,239.00
-
1,430.00
Professional fees -1,827.00
-
632.00
Royalty expense -136.00
-
988.00
Foreign exchange loss -457.00
-
772.00
Other expenses -698.00
-
593.00
(Loss)/profit before income tax -94.00
18,092.
00
Income tax expense -149.00
-
5,111.00
Net (loss)/profit for the year -243.00 12,981.

CORPORATE ACCOUNTING 26
00
Total comprehensive income for the year -243.00
12,981.
00
Both of the companies have the same statement of profit and loss account and the statement
of comprehensive income.
Part vii:
There are many of the items that are not allowed to be reported in the financial
statements due to their nature. These could be nay expenses such as the unrealised
expense etc. and since, these items have no effect on the income or the expense of the
company, these are not required to be reported in the statement of profit or loss. These
are the expenses that are not allowed to be reported under the Generally Accepted
Principles of Accounting and hence, these are not disclosed in the statement of profit of
loss. But since these items relates with the regular transactions of the company,
therefore, these are reported in the statement of comprehensive income instead which is
quiet fine.
If these could have been shown in the financial statements, then the company could have
paid an income tax on these which would not have been alright. That would have resulted
in an inaccurate picture of the financial statements of the company (Accounting tools, 2018).

CORPORATE ACCOUNTING 27
Part viii:
The following is the desired statement:
Adalta Acrux
Particulars 2017 2016
Comprehensive income
-
2,832.52
-
243.00
In the present case, the company does not have a separate statement of comprehensive
income. It has combined in the net income that has been earned during the year and the
income shown in the statement of comprehensive income.
Part ix:
There are many of the items that are not allowed to be reported in the financial statements
due to their nature. These could be nay expenses such as the unrealised expense etc. and
since, these items have no effect on the income or the expense of the company, these are not
required to be reported in the statement of profit or loss. These are the expenses that are not
allowed to be reported under the Generally Accepted Principles of Accounting and hence,
these are not disclosed in the statement of profit of loss. But since these items relates with the
regular transactions of the company, therefore, these are reported in the statement of
comprehensive income instead which is quiet fine.

CORPORATE ACCOUNTING 28
If these could have been shown in the financial statements, then the company could have paid
an income tax on these which would not have been alright. That would have resulted in an
inaccurate picture of the financial statements of the company
Accounting for corporate income tax:
Part x:
The expenses that pertain to taxes are the amounts that are paid in by the company on the net
revenue that the company has generated during the year. But there is only a small part which
is paid in by the company in the current year since the company always pays in the taxes in
small amounts. And these amounts are indicated in the statement of cash flows.
Part xi:
The following is the desired table:
Effective tax rate
Adalta Acrux
Particulars 2017 2017
Effective tax rate: 0% -159%
Income taxes -
149.0
0
Earnings before taxes
-
28,32,517.00 -94.00

CORPORATE ACCOUNTING 29
Both of the companies have reported a loss during the year and hence, the effective rate of the
income tax is in negative.
Part xii:
There are few of the expenses that are not allowed to be reported in the income statement due
to their timing difference. The timing difference arises due to the taxation rules and
regulations. There are some cases when the company did not pay the amount within some
specified date and as the result, the company could not deduct that expense in that year and
so, it can now claim the deduction of the expense in the next year. In such cases, though the
expense is deductible but only in the next year (Taxman, 2018).
Part xiii:
There are few of the expenses that are not allowed to be reported in the income statement due
to their timing difference. The timing difference arises due to the taxation rules and
regulations. There are some cases when the company did not pay the amount within some
specified date and as the result, the company could not deduct that expense in that year and
so, it can now claim the deduction of the expense in the next year. In such cases, though the
expense is deductible but only in the next year. Hence, these are the cases that serve as the
assets for the company.
In respect of Adalta, there has been no deferred tax assets or no deferred tax liabilities.
In respect of Acrux, there has been an increase in the amounts of the deferred tax assets and
the company has no deferred tax liabilities..
Part xiv:
The following is the desired computation:
Particulars Adalta Acrux

CORPORATE ACCOUNTING 30
Net income
-
28,32,517.00
-
243.00
Less: deferred tax assets -
92.0
0
Income on which taxes
would have been paid
-
28,32,517.00
-
335.00
Part xv:
Both of these companies have a loss and so, the cash effective tax rate would not be possible.
Particulars Adalta Acrux
Income tax
provision - -
Increase in deferred
tax assets -
92.0
0
Current income
taxes -
92.0
0
Other income
17,96,754.0
0 -
Taxes paid on other - -

CORPORATE ACCOUNTING 31
income
Unlevered cash
taxes -
92.0
0
EBITA
-
28,32,517.00
-
243.00
Cash tax rate 0.00% -37.86%
Part xvi:
The cash tax rate is always different from the amount of the taxes that are paid in by the
company. The company usually as a general practise follows the rule of paying off the taxes
that pertains to the previous year and records the tax expense of the current year as “income
taxes payable”. But there is only a small part which is paid in by the company in the current
year since the company always pays in the taxes in small amounts. And these amounts are
indicated in the statement of cash flows. Also, the company does have the deferred tax assets
and the deferred tax liabilities that are considered while paying the taxes of the current year.
And it is due to this reason that the cash tax rate and the other tax rate are very much
different.
Conclusion:
The above report talks about the equity breakup of the company. The equity or the
contributed capital as it is generally called is one of the most important components when it
comes to the calculating in the debt to equity ratio. This is very much fine. The amount that
has been invested into the company has to be determined and the return that the company is

CORPORATE ACCOUNTING 32
able to generate on it is also very important since every shareholder would like to have a
return on his investment.
The statement of cash flows have bene discussed above, the various difference have ben
calculated and the reasons for such changes have been listed down. This statement of very
important since it shows in the cash that is readily available in the hands of the company to
meet its cash expenses or other such expenses.
Deferred taxes have been discussed, Adalta does not have any deferred taxes but Acrux has.
These assets or liabilities are very much important for the company. Both of the companies
have reported losses during the year and hence, there is as such no effective tax rate.

CORPORATE ACCOUNTING 33
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Available at: https://www.accountingtools.com/articles/what-is-other-comprehensive-
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and-deferred-tax-liability-dtl.aspx [Accessed 2 Sep. 2018].
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[Accessed 17 Sep. 2018].

CORPORATE ACCOUNTING 34
www.adalta.au. (2018). Annual report 2015. [online] Available at:
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