Corporate Accounting: Analysis of Bega Cheese Ltd and Bellamy’s Australia Ltd

The main purpose of this assessment is to analyze the financial statement of the Bega Cheese Ltd and Bellamy’s Australia Ltd. The assessment contains analysis of the cash flow statement and also owner’s equity which are shown in the annual reports of the business for a period of three years. The reporting of taxation and calculation for effective tax rate and cash and book tax rate is also shown in the assessment. The report aims to bring about a comparative study of the items which are included in the financial statements of both the companies.

Running head: CORPORATE ACCOUNTING
Corporate Accounting
Name of the Student:
Name of the University:
Author’s Note

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Executive Summary
The main purpose of this assessment is to analyze the financial statement of the Bega Cheese Ltd
and Bellamy’s Australia Ltd. The assessment contains analysis of the cash flow statement and
also owner’s equity which are shown in the annual reports of the business for a period of three
years. The reporting of taxation and calculation for effective tax rate and cash and book tax rate
is also shown in the assessment. The report aims to bring about a comparative study of the items
which are included in the financial statements of both the companies.

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Table of Contents
Introduction......................................................................................................................................4
Discussions......................................................................................................................................5
Owner’s Equity............................................................................................................................5
Corporate Structure Analysis.......................................................................................................6
Cash Flow Analysis.....................................................................................................................7
Comparative Analysis of Cash Flow statement of Both Companies...........................................8
Insights of Cash flow Statement................................................................................................12
Accounting for Comprehensive Items.......................................................................................12
Reporting of Comprehensive Items...........................................................................................12
Comparative Analysis of Comprehensive items........................................................................12
Accounting for Taxation............................................................................................................13
Effective Tax Rate.....................................................................................................................13
Deferred Tax Assets and Liabilities..........................................................................................14
Calculation of Cash Tax Rate and Book Tax Rate....................................................................14
Cash Tax Rate and Book Tax Rate............................................................................................14
Conclusion.....................................................................................................................................14
Reference.......................................................................................................................................16

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Introduction
The focus of this assessment lies in analysis of the financial statements of two companies
which are engaged in same industry. The company which are considered for this assessment are
Bega Cheese Ltd and Bellamy’s Australia Ltd which are both engaged in providing the
customers with consumer staple food products. The assessment systematically shows
comparative study of the financial elements which are shown in the annual report of the
companies for a period of 3 years. The assessment shows increase or decrease in different
aspects of the business during the three years frame.
Bega Cheese Ltd is engaged in dairy business and predominantly engages in its business
operations in New South Wales of Australia. The company was initially founded as dairy
supplying business or as an agriculture cooperative in Australia. The company is regarded to be
the leading brand which produces cheese in the country. It is estimated that half of the revenues
of the company is generated with the different varieties of cheese products which is offered by
the business (Bega Cheese Ltd. 2018). The company in 2017 has acquired the business
of Mondelez International which has extensive grocery and dairy business both in Australia and
New Zealand. The company has therefore added the popular products such as Vegemite and
Bonox thus providing the business more scope for profitability.
Bellamy’s Australia Ltd is one of the largest Australia food and beverage company and
the company is regarded to be the best and largest in organic infant formula production which are
in high demand among the consumers. The company has its headquarters in Australia and has
operational sites in about 8 other places (Bellamy's Australia Ltd 2018). The company has an

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excellent distribution system which it utilizes effectively for distributing its products across
stores, pharmacy and direct customer through online sales.
The assessment goes into details regarding the equity position of the business and any
changes in the same during the three years period (Brochet, Jagolinzer and Riedl 2013). The
report also looks into the cash flow statement which is prepared by the businesses and also
accounting for taxes for the current year.
Discussions
Owner’s Equity
The owner’s equity represents the equity capital which is utilized by the business for
managing the day to day operations which is associated with the business. The owner’s equity of
a business is represented in the balance sheet of the business. The analysis is to be conducted for
both the companies on the basis of the information which is shown in the annual reports of the
business for the last three years. As per the annual reports of Bega Cheese ltd for 2017, the three
elements which are shown in the owner’s equity section are share capital, reserves and retained
earnings (Vismara 2016). The share capital of the business shows the capital which the business
is able to accumulated by issues of shares and securities of the business. As per the annual report
of 2015, the share capital of the business is shown to be $ 103.942,000 which is shown to be $
224,692,000 for the year 2017. The increase in the share capital of the business suggest that the
business has issued new shares and the same has been issued in 2017 itself. The increase in share
capital also indicates that the liquidity position of the business has improved significantly during
the period. The reserve and retained earning balance which is shown in the balance sheet
represent a part of the profits which the company retains for the purpose of meeting any

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emergency or even financing the fund requirements of the business (Thirumalaisamy 2013). The
reserve balance and the retained earnings balance of the business is shown to have increased
significantly during the year 2017. The increase in reserves and retained earnings of the business
can be considered to be a positive sign for the business as this suggest that the profitability of the
business has increased significantly over the years.
The annual report of Bellamy’s Australia Ltd shows that the business has share capital,
reserves and retained earnings as shown in the annual report of the business. The share capital of
the company for the year 2015 is shown to be $ 39,655,000 and the equity share capital is shown
to have increased significantly during the year 2017 and the same is shown to be $ 53,795,000.
This shows that the business has issued new shares during the year and the rise in share capital is
consistent on year to year basis which shows that the management of the company relies more on
equity capital for the purpose of meeting the financial requirements of the business (Tandon and
Malhotra 2013). The reserves and retained earnings figure of the business has also increased
significantly as per 2017 analysis which is clear indicator that the business of Bellamy’s
Australia ltd is performing efficiently while meeting the expectations of the shareholders of the
company.
Corporate Structure Analysis
The capital structure of the business is an important consideration for formulating the
strategies of the business. The capital structure of a business is made of equity capitals and debt
capital. The mixture of equity and debt capital differs from company to company. The capital
structure of Bega Cheese ltd shows that the business has the policy of using both equity and debt
capital in meeting the financial requirements of the business (Serfling 2016). The debt capital of
the business for the year 2017 is shown to be $ 215,280,000 which was just $ 47,500,000 in

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2016. The debt capital of the business has increased during the year and so has the equity capital
which is used by the business (Antão and Bonfim 2014). The capital structure mix for the
company shows that the managements wants a balanced capital structure which is made of oth
equity and debt caapit.
On the other hand, Bellamy’s Australia Ltd shows a capital structure which signifies that
the management of the company utilizes both equity and debt capital (Jõeveer 2013). The
borrowings of the business for the year 2016 is shown to be $ 130,000 and the same is shown to
have increased significantly to $ 25,264,000 for the year 2017. The increase in debts of the
business is done to meet the expenses of the business and the profit and loss statement also
shows that the business has incurred significant amount of losses in current year. The capital
structure of the business is dominated by equity share capital and a minor portion is contributed
by debt capital.
On the basis of the discussion which is provided above, a comparative analysis can be
conducted. The management of Bega Cheese ltd prefers more of a balanced capital structure
whereas the business of Bellamy’s Australia Ltd relies more on utilization of equity capital in
order to meet the financial requirements of the business.
Cash Flow Analysis
The cash flow statement which is prepared by the business are mainly prepared by
businesses for the purpose of analyzing the cash position of the business and also identify the
cash inflows and outflows of the business. The cash flow statement of Bega Cheese ltd for the
year 2017 comprise of cash from operating activities, cash from investing activities and cash
from financial activities (Barth 2013). The cash flow statement of the business shows favorable

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conditions. The cash flow statement of Bellamy’s Australia ltd is not showing a favorable
position as the cash and cash equivalent balance is shown to have decreased from the previous
year and the same suggest that the liquidity of the business has decreased.
Both the companies show that the main receipts from operating activities of the business
is through sale of the products to customers and the main cash outflow is shown to be related to
the payments which is made to the suppliers and employees of the business. The cash from
investing activities of the business mainly comprise of purchases and sales of assets which are
undertaken by the business during the year (Balsari and Varan 2014). The cash flow from
financing activities of the business for both the companies shows the shares which the
management of the company has undertaken during the year and also the borrowings which is
taken by the business during the year. The cash flow statement of both the companies are
prepared following the conceptual framework which are commonly followed by most of the
businesses.
Comparative Analysis of Cash Flow statement of Both Companies
As per the cash flow statement of Bega Cheese Ltd for the year 2017 the major cash
inflows from operating activities of the business is the cash receipts from customers of the
business which is shown to be $ 1,274,872,000 for the year 2017 and the same is shown to have
increased significantly. Similarly, the cash outflow of the business is the payments which is
made to suppliers and employees of the business. The cash from operating activities of the
business is shown to be positive which is good sign for the business. The cash from investing
activities of the business shows that the main cash inflows is through the sales of property, plant
and equipment and the main outflows is shown to be purchase payments for intangible assets and
other listed shares. The cash flow from financing activities of the business mainly comprise of

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loans proceeds which is taken by the business and the new equity shares which is issued by the
business. A graph is presented below which shows the cash flows of the business:
Particular 2015 2016 2017
Net cash flows from operating activities -$ 17,345.00 $ 58,980.00 $ 57,074.00
Net cash flows used in investing activities -$ 36,416.00 -$ 39,634.00 $ 151,257.00
Net cash flows used in financing activities $ 35,415.00 -$ 19,972.00 $ 257,544.00
2015 2016 2017
$(100,000.00)
$(50,000.00)
$-
$50,000.00
$100,000.00
$150,000.00
$200,000.00
$250,000.00
$300,000.00
$(17,345.00)
$58,980.00 $57,074.00
$(36,416.00) $(39,634.00)
$151,257.00
$35,415.00
$(19,972.00)
$257,544.00
Comparati ve analysis of cash fl ow categories of Bega
Cheese Limited
The above graph effectively shows the cash position of the business for the three years
period. In 2017, the bar graphs are shown to be positive which is a favorable sign for the

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business. The comparison also shows that the business has significantly improved from the
position it was in 2015 and 2016.
As per the cash flow statement of Bellamy’s Australia Ltd, the main cash flows from
operating activities of the business is from the cash receipts from the customers which is shown
to be $ 237,018,000. The cash outflow from operating activities is through cash payments to
suppliers which is shown to be $ 269,433,000 for the year 2017. The cash payments is shown to
be more than the cash inflows of the business which is the main reason for negative balances.
The cash generated from investing activities of the business mainly comprise of cash from sales
of property, plant and equipment and also investments. The main cash outflow is shown to be
payments for purchases of properties and also intangibles during the period. The cash from
financing activities shows that the company mainly relies on debt capital and also issues certain
equity shares to accumulate funds for the business. A graphical presentation of the cash position
of the business is shown below:
Particular 2015 2016 2017
Net cash flows from operating activities $ 4,740.00 $ 8,895.00 $ -45,719.00
Net cash flows used in investing activities $ -387.00 $ -2,402.00 $ -472.00
Net cash flows used in financing activities $ 23,248.00 $ -6,230.00 $ 31,173.00

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2015 2016 2017
$-50,000.00
$-40,000.00
$-30,000.00
$-20,000.00
$-10,000.00
$-
$10,000.00
$20,000.00
$30,000.00
$40,000.00
$4,740.00
$8,895.00
$-45,719.00
$-387.00 $-2,402.00 $-472.00
$23,248.00
$-6,230.00
$31,173.00
Comparati ve analysis of cash fl ow categories of
Bellamy's Australia Ltd
The above graph shows analysis of the cash from three activities of the business for the
last three years period. The cash flow of the business is shown to have decreased in the current
year in comparison to previous year which needs to be considered by the management of the
company.

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Insights of Cash flow Statement
The cash flow statement of both the companies which is presented above shows that Bega
Cheese ltd has a favorable cash position as all the activities of the business is able to generate
cash inflows for the business which is a positive for the business. The capital structure which is
utilized by the business is also shown to be appropriate. On the other hand, the cash flow
statement of Bellamy shows in appropriate cash flows during the period. The cash from
operating activity is shown to be negative which shows operational weakness of the business and
also shows that the management is struggling to keep the liquidity of the business.
Accounting for Comprehensive Items
The comprehensive items which are shown in the profit and loss statement of Bega
Cheese ltd for the year 2017 consist of hedge cash flows and change in values of financial assets
of the business. On the other hand, the items which are included in the profit and loss statement
of Bellamy’s Australia Ltd are hedge cash flow items and exchange difference which arises from
translation of fully owned foreign entities.
Reporting of Comprehensive Items
The comprehensive items of a business are shown separately as they are of extraordinary
nature and does not form part of the ordinary business transactions of the business (Duran and
Lozano-Vivas 2013). These items are separately shown either in income statement or in a
separate statement.
Comparative Analysis of Comprehensive items
The comprehensive items show that the both the companies have made investments in
hedge contracts in order to avoid the risk of fluctuations in foreign exchanges (Firescu 2015).

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The cash flow from hedge contracts has increased for Bega Cheese ltd for the year as shown in
the financial statement of the company. On the other hand, Bellamy’s Australia ltd also shows an
improvement in hedge contracts of the business. Both the business shows increase in
comprehensive items in comparison to previous year figures.
The items which are included in the comprehensive income statement are not regular in
nature and therefore the same should not be included in the decision-making process of the
business. The items fluctuate year to year but the same are not considered in taking decisions.
Accounting for Taxation
The tax expense which is shown in the profit and loss statement of the business for the
year 2017 is shown to be $ 59,290,000 and the same is shown to have significantly increased
during the period.
The tax expenses of the business for the year 2017 for Bellamy’s Australia Company is
shown to be $ 131,000 which is lower than previous year due to the losses incurred by the
business.
Effective Tax Rate

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The effective tax rate of Bega Cheese is shown to be higher as the effective tax rate of
Bellamy’s Australia Ltd is shown to be negative due to the huge loss incurred by the business
during the year.
Deferred Tax Assets and Liabilities
The financial statements which is shown for the both the companies for the year 2017
shows there is no deferred tax assets for both the companies (Laux 2013). The deferred tax
liabilities of both the companies is shown to have increased in 2017 which shows that the tax
liabilities of the business have increased during the previous year.
Calculation of Cash Tax Rate and Book Tax Rate
Computation of Effective Tax Rate
$ $
Particulars Bega Cheese Ltd Bellamy's Australia Ltd
Income Tax Provison $ 59,290,000.00 $ 131,000.00
Add: Increase in DTL $ - $ -
Less: Increase in DTA $ 5,843,000.00 $ 2,037,000.00
Add: Taxes on Finance Costs $ 967,800.00 $ 381,000.00
Cash Tax amount $ 54,414,800.00 -$ 1,525,000.00
EBIT $ 201,264,000.00 $ 593,000.00
Cash Tax Rate 27.04% -257.17%
Cash Tax Rate and Book Tax Rate
The cash tax rate considers only cash expenses of the business and does not considers the
non-cash items for the computations. The computation also considers changes in deferred tax
assets and deferred tax liabilities for the purpose of computing cash tax rate of the business.

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Conclusion
The above analysis shows detail insights on the annual reports which is prepared by the
business both the companies. The items which are included in the annual reports are thoroughly
analyzed in order to understand which company is performing better. The cash position of Bega
Cheese is much better than Bellamy’s Australia Ltd which shows that Bega cheese ltd has grown
tremendously over the three years period while the management of Bellamy’s Australia Ltd
needs to improve the cash position of the business.

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Reference
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