Corporate Accounting and Analysis

This report focuses on the financial statement of Harvey Norman and JB Hi-Fi Company to evaluate the deferred tax payment, cash tax payment rate, cash analysis statement and capital structure of the company.

Running Head: Corporate Accounting and analysis 0
Corporate Accounting and analysis

Running Head: CORPORATE ACCOUNTING
Executive Summary
With the ramified economic changes, every organization needs to follow proper
accounting standards and laws while formulating the financial statement and keeping the
business more transparent towards the stakeholders. It is analyzed that company need to
establish the proper equilibrium between its debt capital and equity capital if it wants to
maintain sustainable business practice. In this report, two companies named Harvey Norman
and JB Hi-Fi Company have been chosen to prepare the report. This financial analysis have
been made to evaluate the consolidated financial statement of two companies to evaluate the
deferred tax payment, cash tax payment rate, cash analysis statement and capital structure of
company.

Running Head: CORPORATE ACCOUNTING
Table of Contents
Executive Summary...............................................................................................................................1
Introduction...........................................................................................................................................4
Answer given to the question no-1........................................................................................................5
Owners’ Equity......................................................................................................................................5
Other Equity Instruments...................................................................................................................6
Reserves............................................................................................................................................6
Retained profits.................................................................................................................................6
Answer given to the question no-2........................................................................................................7
Comparative analysis of JB Hi-Fi Company and Harvey Norman Company both............................7
Answer given to the question no-3........................................................................................................8
Comparative analysis of the cash flow statement of JB Hi-Fi Company and Harvey Norman
Company...........................................................................................................................................8
Answer given to the question no-4......................................................................................................14
Cash outflow from three activities comparative analysis................................................................14
Answer given to the question no-5......................................................................................................16
Comparative analysis of cash flow activities from these three activities.........................................16
Answer given to the question no- 6.....................................................................................................16
Income statement.................................................................................................................................16
Answer given to the question no -7.....................................................................................................17
Answer given to the question no-8......................................................................................................17
Answer given to the question no-9......................................................................................................18
Answer given to the question no-10....................................................................................................18
Answer given to the question no-11....................................................................................................18
Answer given to the question no-12....................................................................................................18

Running Head: CORPORATE ACCOUNTING
Answer given to the question no-13....................................................................................................18
Answer given to the question no-14....................................................................................................19
Answer given to the question no-15....................................................................................................19
Answer given to the question no-16....................................................................................................19
Conclusion...........................................................................................................................................20
References...........................................................................................................................................21

Running Head: CORPORATE ACCOUNTING
Introduction
The financial analysis is the tool which is used to evaluate the business sustainability,
financial leverage and cost of capital of organization. In this report, Harvey Norman and JB
Hi-Fi Company has been selected to analyse the capital structure, inflow and outflow of cash
from the cash flow statement and changes in the cash tax rate as per the income tax rules and
regulation and accounting taxation rules. This report has focused on the financial statement
of these two companies and analysis what changes company might face in its accounting
financial recording of these two companies. It has been analyzed that Harvey Norman has
faced high cash outflow from its business due to its increased investment in its other business.
JB HI Fi Company
The JB Hi-Fi Company has international business functioning and operated its business in
offering DVD, CD and other electronic computer peripherals. The main objective of
company is to achieve 30 % market share in the electronic computer peripherals retail
industry (JB Hi Fi, 2018).
HARVEY NORMAN LIMITED
Harvey Norman Company has been offering furniture and fixtures products such as
DVD, CD and other electronic computer peripherals to its clients in Australia. This company
has indulged in maintaining the high quality of computer peripherals and other deals to its
clients in Australia (Harvey Norman, 2016).

Running Head: CORPORATE ACCOUNTING
Answer given to the question no-1
Owners’ Equity
The owner’s equity could be defined as equity capital invested by the investors. It is
accompanied with the following parts such as common stock, other equity, retained earnings
and accumulation of the comprehensive income gathered by company throughout the time
(Cobiac, Tam, Veerman, and Blakely, 2017).
SHAREHOLDERS’ EQUITY JB HI-FI
LIMITED
HARVEY
NORMAL
LIMITED
Common stock 441,700,000 388,381,000
Other equity 39,100,000 199,000
Retained earnings 463,200,000 2,337,241,000
Accumulated other comprehensive income 3,600,000 185,185,000
Total stockholders' equity 947,600,000 2,911,006,000
(JB Hi Fi, 2018).
It is the part of the equity capital which has been invested by investors in the capital
structure of company. This is the amount available for the company to expand its business
and implement the strategic decisions. These both companies have faced the drastic changes
in its share capital which has been increased throughout the time. It is has been analyzed that
the equity capital of JB Hi-Fi Company has increased to AUD $ 441 million that is 12%
higher and in case of Harvey Norman Company it has increased by 13% and resulted to AUD
$ 388 million. This amount has increased with the increase in the financial leverage. It has
resulted to increase in the overall payment which would strengthen the overall outcomes and
increased debt portion will lower down the cost of capital of Harvey Norman Company.

Running Head: CORPORATE ACCOUNTING
Other Equity Instruments
The equity instrument is the another method to raise funds from the market when
company has been facing issues in raising capital from the market due to high cost of capital.
It is analyzed that these both companies are not using the other equity instruments in raising
funds from the market. It is considered that if company issues shares more in market then it
might negatively impact the return on capital employed of shareholders and also increase the
overall costing of the business. Therefore, these other equity instruments are followed
(Cobiac, Tam, Veerman, and Blakely, 2017).
Reserves
It is the amount of reserve which is set for the particular purpose. It is gathered profit
amount which is collected from the yearly profit of company. It is analyzed that Harvey
Norman Company has kept 4% return on profit throughout the time and increased its reserve
to AUD $ 188 million. It is 18% higher since last year. In addition to this, JB Hi-Fi Company
has increased its reserve to AUD $ 466 million which is 47% higher if it is compared with
Harvey Norman Company (Goh, et al. 2016).
Retained profits
It is the part of the capital which is accumulated out of the available earning. It is
analyzed that JB Hi-Fi Company and Harvey Norman Company both companies have kept
higher retained earnings and as compared to last year their retained earning has increased
drastically. The retained earnings of JB Hi-Fi Company has increased to AUD $ 463 million
which is 12% higher since last year. In addition to this, the retained earnings of Harvey
Norman has also increased to AUD $ 233 million which is 15 % higher since last one year
data. However, if this information is compared with each other companies, then it could be
inferred that JB Hi-Fi Company has kept its overall retained profit way too higher as
compared to Harvey Norman Company (Harvey Norman Company, 2017)

Running Head: CORPORATE ACCOUNTING
Answer given to the question no-2
Comparative analysis of JB Hi-Fi Company and Harvey Norman Company both
The cost of capital and financial leverage both are interrelated to each other. It is
analyzed that JB Hi-Fi Company has higher debt equity and it may be beneficial for the
organization in terms of cost of capital.
Particular JB Hi-Fi
Company and
Harvey Norman
Company both
Total part of the debts 1,544,100,000 1,666,636,000
Total equity portion 947,600,000 2,911,006,000
Debt to equity ratio 1.62 0.57
After assessing the annual report of these two companies, it is analysed that JB Hi-Fi
company will advantage its business as it has been keeping high profitability in its business
and also keeping the high financial leverage. It is considered that high debt funding would be
beneficial for the company as strong profitability will result to keeping the business more
effective and will also lower down the cost of capital. If the same is analyzed in case of
Harvey Norman, it is analyzed that the low deb portion in its business may result to low
financial leverage but at the same time it will influence the overall cost of capital. The
Harvey Norman Company has been keeping high equity portion in its capital structure which
will increase cost of capital and will lower down the overall outcomes throughout the time.
This could be assessed after the annual report of both companies that Harvey Norman has
kept low debt portion as compared to JB Hi-Fi Company. It may negatively impact the

Running Head: CORPORATE ACCOUNTING
business functioning and may also negatively impact the return on capital employed of
Harvey Norman. Company needs to establish the equilibrium point at which it will have
balanced cost of capital and financial leverage (Harvey Norman, (2018).
Answer given to the question no-3
Comparative analysis of the cash flow statement of JB Hi-Fi Company and Harvey
Norman Company
It is analyzed that cash flow statement is the accompanied with the three activities which
shows the inflow and outflow of cash throughout the time. There are mainly three main
activities such as investment, financial and operating activities. The JB Hi-Fi Company has
recorded highest cash inflow from the operating activities and in case of Harvey Norman it
has recorded highest cash outflow from its investing and financial activities (Harvey
Norman, (2017).
The cash flow from all the three activities of the two companies named JB Hi-Fi
Company and Harvey Norman Company has been recorded as fellow.
Operating working capital
It is analyzed that the operating profit has increased by 12% since last three years which has
resulted to AUD $ 2323 million. This amount has shown that cash outflow from the operating
activities which has increased which is way too high. The operating working capital of
Harvey Norman company has increased to AUD $ 1211 million which is way too high since
last one year (Hennighausen, and Heinemann, 2015).
. Acquisition of the assets
Both companies have invested high capital for the business expansion. It is analyzed hat JB
HI- FI Company has invested AUD $ 132 million in acquiring more assets and it has
impacted cash outflow by 12% in the present year. In case of Harvey Norman, It has invested
its capital to buy land and building (Harvey Norman, (2018).
CASH FLOW SAMPLE STATEMENT
JB HI-FI LIMITED

Running Head: CORPORATE ACCOUNTING
2018 ($ IN
000,000)
2017 ($ IN
000,000)
CASH FLOWS AS REPORTED BY THE
INVESTING ACTIVITIES
Payment made for business combination (net basis) - (836.6)
Acquisition of plant & equipment (54.4) (49.1)
cash received from sale of plant & equipment 0.4 0.2
CASH USED BY INVESTING ACTIVITIES (54.4) (885.5)
% CHANGE 93.85%
CASH FLOWS AS REPORTED BY THE
OPERATING ACTIVITIES
Receipts from customers 7551.9 6205.5
Payments made to employees and suppliers (7130.5) (5908.8)
Receipt of interest 0.5 1.7
Payment of interest and other finance cost (15.0) (9.3)
Payment of income taxes (114.8) (98.5)
CASH GENERATED BY OPERATING ACTIVITIES 292.1 190.6
% CHANGE 53.25%
CASH FLOWS REPORTED BY FINANCING
ACTIVITIES
Cash receipt on issue of shares 3.0 395.9

Running Head: CORPORATE ACCOUNTING
(Repayment) or proceeds of borrowings (89.7) 450.0
Payment for issue costs of debt (0.8) (1.7)
Cost of share issue - (9.2)
Dividend payment made to the company’s owners (151.6) (119.1)
Cash (used) or generated by financing activities (239.1) 715.9
% CHANGE (133.40 %)
Cash flow statement in case of Harvey Norman Company
2017 ($ IN
000,000)
2016 ($ IN
000,000)
CASH FLOWS AS REPORTED BY THE
INVESTING ACTIVITIES
Payment for purchasing unit trusts’ units and other
investments
(0.2) (0.7)
Acquisition of plant & equipment & intangible assets (89.4) (68.2)
Purchase of investment property (114.8) (64.3)
cash received from sale of plant & equipment 28.6 9.1
Payment for purchasing equity accounted investments (8.9) (25.3)
Receipt from sale of listed securities - 0.1
Purchase of listed securities (6.5) (0.1)
Grant of loans to joint ventures, joint venture
partners, and unrelated entities
(7.6) (30.4)
CASH USED BY INVESTING ACTIVITIES (198.8) (179.9)

Running Head: CORPORATE ACCOUNTING
% CHANGE (10.51 %)
CASH FLOWS AS REPORTED BY THE
OPERATING ACTIVITIES
Receipts from franchisee 882.5 949.2
Receipts from customers 1992.9 1932.4
Payments made to employees and suppliers (2252.9) (2267.6)
Receipt of distribution from joint venture 11.5 10.6
Payment of GST (44.6) (52.2)
Receipt of interest 5.0 7.6
Payment of interest and other finance cost (19.4) (28.8)
Payment of income taxes (152.5) (115.5)
Receipt of dividend 2.7 2.1
CASH GENERATED BY OPERATING ACTIVITIES 425.1 437.7
% CHANGE (2.88 %)
CASH FLOWS REPORTED BY FINANCING
ACTIVITIES
Cash receipt on issue of shares 1.0 5.0
(Repayment) or proceeds of borrowings (15.3) 0.3
Proceeds from syndicated facilities 70.0 -
Loan receiver or (repaid) to related parties 2.1 (45.9)

Running Head: CORPORATE ACCOUNTING
Dividend payment made to the company’s owners (345) (266.9)
Cash used by financing activities (287.1) (307.4)
% CHANGE 6.60 %
(Harvey Norman, (2018).
Financial activities and changes in the cash flow
It is considered that JB Hi-Fi Company has increased cash outflow from its financial
activities.
These both companies have faced high cash outflow from investing and financial activities. It
is analyzed that Harvey Norman has high cash outflow as it invested AUD $ 112 million in in
buying land and assets. In addition to this, it has also paid AUD $ 143 million to its debt
holders to redeem their debts. It is analyzed that payment for the syndicated facilities and
loan payment by the Harvey Norman has increased by 12% since last year. It is analyzed that
JB Hi-Fi Company has also increased its payment by issue of shares in market. However the
cash outflow from the investing and financial activities have increased by 16% since last
year. It reflects that company has faced high cash outflow and it may result to high cost of
capital. It might destruct the sustainability of the business due to the high financial leverage
(Burkhauser, Hahn, and Wilkins, 2015).

Running Head: CORPORATE ACCOUNTING
Answer given to the question no-4
Cash outflow from three activities comparative analysis
Cash outflow from three activities
JB HI-FI LIMITED HARVEY NORMAN
HOLDINGS LIMITED
2016 2017 2018 2015 2016 2017
Operating
activities
185.1 190.6 292.1 340.4 437.7 425.1
% CHANGE 57.8% 24.88%
Investing
activities
(52.0) (885.5) (54.4) (81.8) (179.9) (198.8)
% CHANGE (4.6%) (143.03%)
Financing
activities
(130.6) 715.9 (239.1) (220.6) (307.4) (287.1)
% CHANGE (83.07%) (30.15%)
(JB Hi Fi, 2018).
It is considered that the operating working capital of JB Hi-Fi Company has gone up to AUD
$ 2343 million in 2017. It has increased due to the increased overall turnover. On the other
hand, operating working capital of Harvey Company has gone up to AUD $ 1343 million in
2017 due to the increased overall turnover and less operating expenses. Investing capital of
Harvey Company has shown the sudden changes of 12% in last year and resulted to AUD $
57.74 million in 2017 and in case of JB Hi FI Company it has increased to 35 million. The
Financial investing activities of Harvey Company has gone up to AUD $ 223 million in 2017
and in case of JB Hi Fi Company it has gone up to AUD $ 26 million in 2017. Nonetheless,
the cash outflow from the investing activities and financial activities of the Harvey Norman is
too higher as compared to JB Hi-Fi Company (Goh, Lee, Lim, and Shevlin, 2016).

Running Head: CORPORATE ACCOUNTING

Running Head: CORPORATE ACCOUNTING
Answer given to the question no-5
Comparative analysis of cash flow activities from these three activities
It is observed that cash outflow of JB Hi-Fi has increased by 54% from operating activities
and resulted to AUD $ 293 million. The investing and financial activities have also increased
by 12% which may also result to increased cash outflow to AUD$ 54.5 million. In case of JB
Hi-Fi Company, the cash outflow from the financial and investing activities has increased to
AUD $ 239.1 million which is 14% higher since last year (Hennighausen, and Heinemann,
2015).
This could be inferred that Harvey Norman has faced high cash outflow from its financial and
investing activities as compared to JB Hi-Fi Company.
Answer given to the question no- 6
Income statement
Comprehensive income statement of JB Hi-Fi Company
(JB Hi-Fi Company, 2017)
Comprehensive income statement of Harvey Company

Running Head: CORPORATE ACCOUNTING
Answer given to the question no -7
It is considered that Comprehensive income statement of both companies records only
that profit and loss which has no relation with the operating activities of he company and
arise due to the changes in hedge funding, taxation policies changes and foreign exchange
reserve. After analysing these annual reports of both companies, it is considered that JB Hi-
Fi Company has faced higher cash inflow due to hedge funding, taxation policies changes
and foreign exchange reserve in its business as it has higher turnover to the foreign countries
(JB Hi Fi, 2018).
Answer given to the question no-8
It is analyzed that comprehensive income statement is the statement which records all
the profit an expense which arise due to the abnormal circumstances and factors (Richardson,
Lanis, and Leung, (2014). These factors are not in the control of the managers and directors.
JB Hi-Fi Company ahs kept AUD $ 2343 million increased by 12% since last two years. In
case of Harvey Norman, Harvey Norman, the income has increased to AUD $ 1234 million
which is 14% higher since last one year. This all profit recorded by these two companies have

Running Head: CORPORATE ACCOUNTING
emerged due to the hedge funding, taxation policies changes and foreign exchange reserve
(Nong, Meng, and Siriwardana, 2017).
Answer given to the question no-9
It is analysed that management performance is measured by evaluating the company’s
achievements, increment in the profit and return on capital employed. It does not include the
profit earned from the abnormal earning and other benefits. Therefore, it could be inferred
that manager’s performance does not include income shown in the comprehensive statement.
It includes such as profit from hedge funding, taxation policies changes and foreign exchange
reserve. This profit does not have any relation with the performance of the management but
influenced by the domestic and international economic factors (Saad, 2014).
Answer given to the question no-10
Computation of the tax amount has been given as below.
 JB Hi Fi Company tax payment =AUD $ 1245 million it is 12 % higher since last year
 The tax payment made by Harvey = AUD $ 1845 million It is 13% higher since last year.
Answer given to the question no-11
The highest tax rate at which income of the company is charged is 29 % which is paid
by the JB Hi-Fi Company (Sawyer, and Sadiq, 2018).
Answer given to the question no-12
These both companies have recorded the deferred tax assets and deferred tax
liabilities in its books of accounts.
 When company pays higher tax payment due to the changes in the taxation rules and
regulation.
 When company has paid tax in advance or there is arrear of tax of last years.

Running Head: CORPORATE ACCOUNTING
Answer given to the question no-13
The recording of the deferred tax assets in case of Harvey is AUD $ 112 and deferred tax
libiliteis recorded is zero. On the other hand, recording of the deferred tax assets in case of
JB Hi-Fi is AUD $ 221 and deferred tax libiliteis recorded is zero.
Answer given to the question no-14
 It is analysed that JB HI- Fi Company paid tax amounting to 125 million in 2017.
 It is considered that Harvey Company has paid AUD 256 million tax to government (Harvey
Norman, (2016).
Answer given to the question no-15
The JB Hi-Fi has higher cash tax rate as compared to Harvey Norman as it has paid
higher tax on its taxable income.
Answer given to the question no-16
The cash rate tax payment is different from the accounting income due to the
differences in laws and regulation as per he accounting and taxation laws. It is also the main
reason of recording of deferred tax assets and liabilities. It is analyzed that if as per the
accounting income tax payment is low as compared to taxable income as per the taxation law
then it will result to deferred tax liabilities and if same is high then it will result to recording
of deferred tax assets (Sowa, et al.2018).

Running Head: CORPORATE ACCOUNTING
Conclusion
These two companies have faced high cash outflow in its business. However, the cash
outflow of Harvey Norman is way too high if it is compared with the cash outflow from the
JB Hi-Fi Company. In context with the Comprehensive income, the hedging funding and
impact of foreign exchange reserve is too high on the JB Hi-Fi Company as it has high
turnover and investment in other countries. In addition to this, the main reason of recording
of deferred tax assets and liabilities is based on accounting rules and regulation and taxation
rules and regulations. Company may find recording of the assets and liabilities if it finds
differences in accounting rules and taxations rules while formulating the financial statement.
Now, it could be inferred that both companies have set harmonization in its international and
domestic reporting framework and it will surely result to easy international financial
reporting.

Running Head: CORPORATE ACCOUNTING
References
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record data: A cautionary tale from Australia. The Journal of Economic Inequality, 13(2),
pp.181-205.
Cobiac, L. J., Tam, K., Veerman, L., and Blakely, T. 2017. Taxes and subsidies for
improving diet and population health in Australia: a cost-effectiveness modelling study. PLoS
medicine, 17(3), pp.25-29
Goh, B. W., Lee, J., Lim, C. Y., and Shevlin, T. (2016). The effect of corporate tax avoidance
on the cost of equity. The Accounting Review, 91(6), 1647-1670.
Harvey Norman, (2016) Annual Report [online] Available from
http://www.harveynormanholdings.com.au/reports-announcements-1/., [Accessed on 27th
September 2018]
Harvey Norman, (2017) Annual Report [online] Available from
http://www.harveynormanholdings.com.au/reports-announcements-1/., [Accessed on 27th
September 2018]
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http://www.harveynormanholdings.com.au/reports-announcements-1/., [Accessed on 27th
September 2018]
Hennighausen, T. and Heinemann, F., 2015. Don't tax me? Determinants of individual
attitudes toward progressive taxation. German Economic Review, 16(3), pp.255-289.
JB Hi Fi, (2016) Annual Report [online] Available from
https://investors.jbhifi.com.au/annual-reports/., ., [Accessed on 27th September 2018]

Running Head: CORPORATE ACCOUNTING
JB Hi Fi, (2017) Annual Report [online] Available from
https://investors.jbhifi.com.au/annual-reports/., ., [Accessed on 27th September 2018]
JB Hi Fi, (2018) Annual Report [online] Available from
https://investors.jbhifi.com.au/annual-reports/., ., [Accessed on 27th September 2018]
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Sawyer, A.J. and Sadiq, K., 2018. Enhanced Tax Reporting Requirements under the BEPS
Project: Preparing the Profession. 16(4), pp.28-39
Sowa, P.M., Kault, S., Byrnes, J., Ng, S.K., Comans, T. and Scuffham, P.A., 2018. Private
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