Corporate Accounting: Analysis of CBA and National Bank of Australia

The report is prepared on Commonwealth Bank of Australia and National Bank of Australia with a purpose to determine the consistency in the contents of its annual reports. The report summarizes the presentation, disclosure, compliance with accounting standards and other factors in order to ensure that proper accounting rules have been followed by the banks. It discusses the items of Owner’s equity, cash flow statement, accounting for deferred tax and other comprehensive income statement.

RUNNING HEAD: CORPORATE ACCOUNTING
Corporate accounting

Corporate accounting 2
Executive Summary
The report is prepared on Commonwealth Bank of Australia and National Bank of Australia with
a purpose to determine the consistency in the contents of its annual reports. The report
summarizes the presentation, disclosure, compliance with accounting standards and other factors
in order to ensure that proper accounting rules have been followed by the banks. It discusses the
items of Owner’s equity, cash flow statement, accounting for deferred tax and other
comprehensive income statement. The items are explained in detail and the impact of the same
on company’s financial position is analyzed. The report concludes that the financial reports of
both the banks are prepared by keeping in mind the same rules and regulations in order to
provide relevant information to the stakeholders.

Corporate accounting 3
Contents
Introduction.................................................................................................................................................4
Description of the companies......................................................................................................................4
Owners’ Equity...........................................................................................................................................5
Part 1.......................................................................................................................................................5
Part 2.......................................................................................................................................................7
Cash Flow Statement...................................................................................................................................7
Part 3.......................................................................................................................................................7
Part 4.....................................................................................................................................................10
Part 5.....................................................................................................................................................15
Other Comprehensive Income Statement..................................................................................................16
Part 6.....................................................................................................................................................17
Part 7.....................................................................................................................................................18
Part 8.....................................................................................................................................................18
Part 9.....................................................................................................................................................18
Accounting for corporate income tax........................................................................................................19
Part 10...................................................................................................................................................20
Part 11...................................................................................................................................................21
Part 12...................................................................................................................................................21
Part 13...................................................................................................................................................21
Part 14...................................................................................................................................................21
Part 15...................................................................................................................................................21
Part 16...................................................................................................................................................21
Conclusion.................................................................................................................................................22
References.................................................................................................................................................23

Corporate accounting 4
Introduction
The report provide insights about the importance of complying with the accounting standards
and principles for the purpose of recording, recognizing and presenting the financial information
in the annual reports. It is very important for the companies to properly follow all the rules and
regulations so that reliable and relevant information can be communicated to the investors and
shareholders (Brigham and Ehrhardt, 2013).
The report analyse the financial statements of CBA and National Bank of Australia and discusses
the each line item of the statements prepared. It includes the evaluation of comprehensive
income statement, cash flow statement, balance sheet and reporting of tax expense. The
evaluation is done are compared to each other.
Description of the companies
Commonwealth Bank
CBA is an Australian banking group that is engaged in providing integrated financial services to
the countries like Australia, New Zealand and others. Its core activities include distribution of
financial services. It operates through retail banking services, Bankwest, New Zealand other
divisions. The services offered by the company include business loans, international payments,
insurance services and credit cards. It is listed on ASX and considered as the largest financial
institution in the country (Bloomberg. 2018).
National Bank of Australia

Corporate accounting 5
It is also a financial institution having its operations in Australia, United States and United
Kingdom. It operates through segments like Consumer Banking and Wealth, Corporate and
Institutional banking, Business and private banking and NZ Banking segments. It offers services
like term deposits, savings account, statutory trust and farm management accounts. NBA also
look for provide commercial and personal loans to its clients across the country (Bloomberg.
2018).
Owners’ Equity
Shareholder's Equity
Commonwealt
h bank
National
Australian
Bank
Share Capital
Ordinary Share
capital 34971 34627
Other Equity
Instruments
Reserves 1869 237
Retained profits 26330 16442
Part 1
 Ordinary share capital

Corporate accounting 6
Ordinary share capital is the capital which is given by the proprietors of the business in return of
shares. They are positioned after the inclination shares. The conventional offer capital of the
Commonwealth Bank of Australia is A$34971 and that of the National Australian Bank is
A$34627 which is lower when contrasted with the previous bank. The investor capital of both
the banks have been quickened when contrasted with the earlier year from the yearly reports,
potentially on the grounds that the organizations may have sold the offers which raised the
income and diminished the costs. The offer capital of Commonwealth bank expanded from
A$33845 to A$34971 and that of the National Bank of Australia is A$34285 to A$34627, which
is as yet a moderate raise.
 Other equity Investments
They are the record which fills in as a legitimate proof of the proprietorship right in a firm like
an offer declaration. They are issued to the investors of the organization and are utilized to
support the business.
 Reserves
They represent the amount kept aside by the firm with the purpose of meeting its liabilities that
may arise in future. CBA has reserved worth $1869 and NBA reported the same amounted to
$237. The reserves have been diminished in the event of Commonwealth Bank of Australia
because of the debt repayments.
 Retained earnings
It reflects the amount retained by the company in the business after paying all of its liabilities
and other payments. It is the profit left with the company for paying dividends to its

Corporate accounting 7
shareholders. It tends to be utilized by the organization to pay the obligations and in addition the
future profits. The upsurge in retained income implies the organizations are steady and
beneficial. The RE of NBA has shown an upsurge from $16736 to $16442 while on the other
side; CBA’s earnings reflected an increase from A$23435 to A$26330(Commonwealth Bank,
2018).
Part 2
 Comparative analysis
The relative examination of the investor’s value of both the organizations exhibits the money
related position of the organization. The above components decide how much the proprietors has
put resources into the business and how they are performing in contrast with the previous years
and the contenders as well. The share capital of Commonwealth bank expanded from A$33845
to A$34971 and that of the National Bank of Australia is A$34285 to A$34627, which is as yet a
moderate raise.
Cash Flow Statement
Part 3
 Operating activities
Operating activities are the operations of the business which are straightforwardly identified with
the supply of the merchandise and the administrations to the market. These exercises are
considered as the centre exercises of the organization and precedents of such exercises are
conveying, showcasing and offering of an item or an administration.
Funds from operations

Corporate accounting 8
They are the amount which is utilized by the land speculation trusts to define the cash flow from
their operations.The Funds from operations are ascertained by including back the depreciation
value and subtracting any profit on sale (Collins Hribar and Tian, 2014).
Changes in the Working Capital
Net Working Capital is characterized as the distinction between the current assets and current
liabilities. In this manner an adjustment in the measure of the working capital will be reflected.
Net Operating Cash Flow
Net Operating income alludes to the money sum created by the organization through the income
it acquires, barring costs which are in connection to the long term investment on capital things.
Investing Activities
They are those exercises which will give the future advantage to the organization. The income
from the contributing exercises is a thing which reports the adjustment in the total position of the
organization whether through interest in the advantages and offer of the benefits.
Capital Expenditures
The sum an organization spends with a specific end goal to achieve the settled resources, land,
structures and the gear. It is comprehended that the use on the capital things will give the
advantage to the organization over the long haul (Campbell, 2015).
Net Assets from Acquisitions

Corporate accounting 9
The net resources from acquisitions are fundamentally the sum which is landed subsequent to
including all the above resources and consumptions.
Sales of Fixed Assets and Businesses
It is an ordinary procedure which is attempted either to pick up leverage when the cost is correct
or can empowers the income and benefits or when the piece of the advantage or a whole resource
winds up pointless.
Buy/Sale of Investments
All the transactions related to investments are made from the brokers and purchase of the same is
done with an intention to secure the company. The correct market cost or the positive market
cost when arrives the organization sells the investment.
Financing Activities
This category of activities includes business transactions with creditors and investors. They
generally contribute to the expansion of business operation or enhancing its existing activities. It
is the third category which is reflected in cash flow statement after reporting operating and
investing activities.
Transactions like cash dividends paid, issue of shares and debt, change in long term debt,
payment of financial obligations all appear under the financing activities of the company.
Net Change in Cash
The net change in the money mirrors the expansion or diminishing in the money and the money
counterparts from the beginning stage to the end purpose of a year. The net change is computed

Corporate accounting 10
because of money from working, contributing and the financing exercises (Graham and Lin,
2018).
Free Cash Flow
The free income is estimated by how much measure of the money the organization can produce
in the wake of satisfying for every one of the costs and can be utilized for the extension, profits,
decrease of the obligations and for other purposes.
From the income beneath it very well may be broke down and seen that if there should arise an
occurrence of the Commonwealth bank the net money from working exercises has been
enhanced and come to 2.651 from 0.841 when contrasted with the earlier year fundamentally on
account of the expansion in the assets from tasks and that of the National Australian Bank have
been lessened to 569 from (2327), the organization is attempting to improve.
Part 4
Cash flow Statement Commonwealth
Bank
National Australian
Bank
Fiscal year is July-June. All values
AUD Millions.
2018 2017 2016 2018 2017 2016
Funds from Operations 1580
0
12389 1721
5
1264
8
16787 -
1381
8
Funds from Operations Growth 0.275
3
-
0.280
3
0.346
9
-
0.246
6
2.214
9
-
1.425
1

Corporate accounting 11
Changes in Working Capital -
1462
3
-
13102
-
2169
8
569 -2327 728
Net Operating Cash Flow 1177 -713 -4483 1321
7
14460 -
1309
0
Net Operating Cash Flow Growth 2.650
8
0.841 -
1.618
-
0.086
2.104
7
-
0.809
Net Operating Cash Flow / Interest
Income
0.034
1
0.021
4
0.131
4
0.481
8
0.523 0.461
4
Investing Activities
Capital Expenditures -980 -1097 -1768 -1028 -875 -976
Capital Expenditures (Fixed Assets) -477 -602 -1259 -1028 -875 -976
Capital Expenditures (Other Assets) -503 -495 -509 - - -
Net Assets from Acquisitions - -31 -857 - - -33

Corporate accounting 12
11782
Sale of Fixed Assets & Businesses 181 382 515 2269 52 382
Purchase/Sale of Investments -271 -25 - -1554 2635 -1203
Purchase of Investments -271 -25 - -
2339
6
-
22084
-
2517
4
Sale of investments 2184
2
24719 2397
1
Other Sources - - -
Net Investing Cash Flow -1070 -771 -2110 -313 -9970 -1830
Net Investing Cash Flow Growth 0.387
8
0.634
6
0.640
7
0.968
6
4.448
1
0.740
2
Net Investing Cash Flow / Interest
Income
-
0.031
-
0.023
1
-
0.061
9
-
0.011
4
-
0.360
6
-
0.064
5
Cash Dividends Paid - Total -5366 -6084 -5827 -4750 -4593 -3624
Common Dividends -5366 -6084 -5827 -4750 -4593 -3624

Corporate accounting 13
Cash Dividend Growth 0.118 -
0.044
1
0.060
2
-
0.034
2
-
0.267
4
0.087
8
Change in Capital Stock -40 -64 4025 -400 - 5232
Repurchase of Common & Preferred Stk. -95 -98 -1047 -400 - -1014
Sale of Common & Preferred Stock 55 34 5072 - - 6246
Proceeds from Stock Options 55 34 5072 - - 6246
Issuance/Reduction of Debt, Net - - 3489 4819 14089 -1224
Change in Long-Term Debt - - 3489 4819 14089 -1224
Issuance of Long-Term Debt - - 1029
07
3731
8
43632 2871
7
Reduction in Long-Term Debt - - -
9941
8
-
3249
9
-
29543
-
2994
1
Other Funds 27 61 -67 - - 942
Other Uses - - -67 - - -
Other Sources 27 61 - - - 942
Net Financing Cash Flow -934 10472 1620 -331 9496 1326

Corporate accounting 14
Net Financing Cash Flow Growth 1.089
2
5.464
2
1.205
7
1.034
9
6.161
4
1.410
9
Net Financing Cash Flow / Interest
Income
-
0.027
0.314
4
0.047
5
-
0.012
1
0.343
4
0.046
7
Exchange Rate Effect 715 -318 150 -733 6554 7605
Net Change in Cash -112 8670 -4823 1184
0
20540 -5989
Free Cash Flow 700 -1315 -5742 1218
9
13585 -
1406
6
Free Cash Flow Growth 1.532
3
0.771 -
1.860
1
-
0.102
8
1.965
8
-
0.658
7
Free Cash Flow Yield -
0.034
6
- - 0.082
2
- -

Corporate accounting 15
Part 5
From the comparative analysis of both the organizations which are the Commonwealth Bank of
Australia and the National Australian Bank, the near investigation is essentially embraced to
gauge the monetary connection between the factors more than at least two announcing period.
The most ideal approach to discover the situation in the market is to complete a relative
investigation over an unmistakable timeframe. In addition there are numerous deceitful methods
through which the benefit can be swelled yet under the situation of the income explanation it isn't
conceivable.
The financial analyst not just view the salary explanation, rather they likewise investigate the
income articulations and every one of the action, for example, the income from working
exercises, income from contributing exercises and finally income from the financing
activities(National Bank of Australia, 2018). The distinction between the numerous years can be
accounted for with the assistance of the examination articulation and the information is
additionally exhibited regarding the rates. Since money is unmistakable and it tends to be
estimated along these lines the money is the metric which will give the one type to its logical
counterpart examination between the two associations.
The above analysis properly evaluates the cash flow statement of both the banks and compares
the same against each other. In case of CBA, the net cash flows generated from the operations is
$1177 and NBA’s cash flow from operations is $1321. The net cash flow from investing
activities of CBA is -$1070 whereas NBA reported -$313 which is less risky (Commonwealth
Bank, 2018).

Corporate accounting 16
Other Comprehensive Income Statement
(Source: National Bank of Australia, 2018)

Corporate accounting 17
(Source: Commonwealth Bank of Australia, 2018)
Part 6
In the other comprehensive statement of the banking companies picked mirrors the things that
might be renamed to the benefits or misfortune accordingly and the other way around case. The
reasonable esteem changes on the monetary liabilities have been diverted into the positive figure
from (113) to 11 in the budgetary year 2017. Additionally the expense separated from, on the
typical salary, has been exchanged to the Equity.
The currency adjustments done in case of foreign exchange transactions have reduced and
became negative at -$273 for NBA. However, CBA reported a negative translation tax worth -
$282 along with the reduction in its equity worth $9510 to $9209 in year 2017 (Commonwealth
Bank, 2018).

Corporate accounting 18
Part 7
The line items of Comprehensive income statement are not recorded in the P&L account of the
firm because of the limitations hold by such account. It is as advance articulation and it gives a
broad perspective of how organizations' benefits out of core activities are given in
Comprehensive Income Statement. (Faulkender, Hankins and Petersen, 2018).
Part 8
From the above abstract it can be interpreted that total comprehensive income of the NBA is
$4972 and that of the CBA is $9233. The comparative analysis is completed to mirror the
progressions received by executing the bookkeeping approaches.
The Equity holders are getting the sum at long last. The gain or misfortune on the hedging
instruments is high in case of the Commonwealth Bank in contrast with National Australian
Bank. In the event that these things were incorporated into the income statement there may be an
adjustment in the benefit owing to the investors as it would be included or subtracted from the
total income.
Part 9
No, the comprehensive income will not be incorporated into the assessment of performance of
managers as these salaries may occur and may not and consequently they are not the
unadulterated source or the determinants of the execution of the chiefs (Huang, Lin and
Raghunandan, 2015). The execution of the directors is accounted for through their capacity to
devise the systems and to record the exchanges accurately. However, they will be at risk for their
chronicle and posting of the passage in the under the correct head (Dagwell, Wines and Lambert,
2011).

Corporate accounting 19
Accounting for corporate income tax
Accounting for Corporate
Tax
Commonwealt
h Bank of
Australia
National
Australian
Bank
Tax Expense 3960 2480
Income tax expense 3960 2480
Earnings before Tax 13944 8661
Effective Tax rate 28% 29%
Deferred Tax
Assets/Liabilities (17) 332 1988
2016 340 1925
Deferred tax assets increase 573
Increase/ Decrease -8 63
Income tax provision 3960 2480
Increase/Decrease in Deferred
Tax 565 63
Total taxes 4525 2543

Corporate accounting 20
Other income 5626 4842
Tax paid on other Income 16 14
Unlevered Taxes 4509 2529
Earnings Before Income tax 13944 8661
Cash Tax Rate 32% 29%
Income Tax Provision 3960 2480
Deferred Tax 332 1988
Total Taxes 4292 4468
Interest Income 17600 13182
Tax paid 50.0 37.7
Cash Tax Amount 4242 4430
Part 10
The tax expenses that have been appeared in the most recent year of both the organizations are
A$3960 and A$2480 separately for the Commonwealth bank of Australia and National
Australian Bank (National Bank of Australia, 2018).

Corporate accounting 21
Part 11
The calculation had been appeared above and the powerful expense rate of National Australian
Bank is higher at 29%.
Part 12
The deferred tax can be utilized by the organization to lessen the assessable pay and it is
appeared to be determined sheet under the present resources head. Then again the deferred tax
impose obligation is recorded keeping in mind the end goal to discover how much risk the
organization will pay in future due to the present changes (Bradley, 2017).
Part 13
The deferred tax resource of the Commonwealth Bank of Australia expanded by A$573 and the
liabilities diminished by A$8, anyway if there should arise an occurrence of the National
Australian Bank, the conceded assess resources expanded by A$63.
Part 14
The cash tax amount for the Commonwealth bank is A$4242 and that of the National Australian
Bank is A$4430(Commonwealth Bank, 2018).
Part 15
The cash tax rate of the Commonwealth Bank of Australia is higher in contrast with the National
Australian Bank at 32% (Commonwealth Bank, 2018).
Part 16
The principle reason that the cash tax rate is not the same as the book rate in light of the fact that
the pre assessable salary which is accounted for to the IRS by and large does not compare to the
pre-tax book and consequently makes the brief and in addition the changeless contrasts.

Corporate accounting 22
Temporary difference causes the conceded charge while the perpetual causes the successful
assessment rate (Dyreng, Hanlon, Maydew and Thornock, 2017).
Conclusion
From the above report, it can be concluded that both the banks follows the same accounting
principles and standards for preparing their financial reports. The comparative analysis states that
CBA has performed well in comparison to its competitor NBA.

Corporate accounting 23
References
Bloomberg (2018). Company Overview of Commonwealth Bank of Australia. [Online] Available
at:https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=874262
[Accessed on 28 September 2018].
Bloomberg (2018). Company Overview of National Australia Bank Limited. [Online] Available
at: https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=322495
Bradley, S., (2017). Inattention to Deferred Increases in Tax Bases: How Michigan Home
Buyers Are Paying for Assessment Limits. Review of Economics and Statistics, 99(1), pp.53-66.
Brigham, E.F. and Ehrhardt, M.C., (2013). Financial management: Theory and practice. 4th ed,
USA: Engage Learning.
Campbell, J.L., (2015) The fair value of cash flow hedges, future profitability, and stock
returns. Contemporary Accounting Research, 32(1), pp.243-279.
Collins, D.W., Hribar, P. and Tian, X.S., (2014) Cash flow asymmetry: Causes and implications
for conditional conservatism research. Journal of Accounting and Economics, 58(2-3), pp.173-
200.
Commonwealth Bank, (2018) Annual Report [online] Available from
https://www.commbank.com.au/content/dam/commbank/about-us/shareholders/pdfs/annual-
reports/annual_report_2017_14_aug_2017.pdf [Accessed on 28 September 2018]
Dagwell, R., Wines, G., and Lambert, C. (2011). Corporate accounting in Australia. 2nd,
Australia: Pearson Higher Education AU.

Corporate accounting 24
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.
Faulkender, M.W., Hankins, K.W. and Petersen, M.A., (2018) Understanding the Rise in
Corporate Cash: Precautionary Savings or Foreign Taxes.
Graham, R.C. and Lin, K.C., (2018) The influence of other comprehensive income on
discretionary expenditures. Journal of Business Finance & Accounting, 45(1-2), pp.72-91.
Huang, H.W., Lin, S. and Raghunandan, K., (2015) The volatility of other comprehensive
income and audit fees. Accounting Horizons, 30(2), pp.195-210.
National Bank of Australia, (2018) Annual Report [online] Available at:
https://capital.nab.com.au/docs/NAB-2017-annual-financial-report.pdf [Accessed on 28
September 2018].