CORPORATE ACCOUNTING CORPORATE ACCOUNTING CORPORATE ACCOUNTING Name of the university Student ID

The reason of decrease was that the receipts from the customers in the year 2017 were significantly high if it is compared with the receipts of the year 2016. Answer (ii) Particulars 2017 ($'000) 2016 ($'000) 2015 ($'000) Net cash used in operating activities -4,401.00 34,770.00 -38,623.00 Net cash (used in) / provided by investing activities -66,430.00 -66,430.00 Net cash (used in) / provided

Running head: CORPORATE ACCOUNTING
Corporate accounting
Name of the student
Name of the university
Student ID
Author note

CORPORATE ACCOUNTING 1
Table of Contents
Answer (i)...................................................................................................................................2
Answer (ii).................................................................................................................................3
Answer (iii)................................................................................................................................4
Answer (iv).................................................................................................................................4
Answer (v)..................................................................................................................................5
Answer (vi).................................................................................................................................5
Answer (vii)...............................................................................................................................5
Answer (viii)..............................................................................................................................6
Answer (ix).................................................................................................................................6
Answer (x)..................................................................................................................................6
Answer (xi).................................................................................................................................7
Reference....................................................................................................................................8

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The ASX listed company XERO Limited offers the platform for the online accounting
and the business services for the small scale business entities. The company provides XERO
software that is service software and it can be accessed from internet cloud through the
standard browser (Xero Accounting Software 2018.). The objective of this report is to
analyse the company’s cash flow statement, balance sheet and other comprehensive income
statement for last 3 years that covers 2015, 2016 and 2017.
Answer (i)
Looking into the annual report of XERO Limited it is recognised that the company’s
cash flow statement is divided into 3 parts – cash flows from operating activities, cash flow
from investing activities and cash flow from financing activities.
 Net cash flow or cash used in operating activities – this includes all the cash flows or
the cash used in the operational activities of the company like payment of tax, receipt
of interest and payment made to suppliers. Generally the operating activities of the
company includes the non-cash expenses like depreciation, net income and changes in
the working capital (Chang et al. 2014). There is significant decrease in the cash
flows from operating activities of the company over the years from 2016 to 2017. The
reason of decrease was that the receipts from the customers in the year 2017 were
significantly high if it is compared with the receipts of the year 2016.
 Net cash used in or provided by the investing activities – cash flow from investing
activities records the cash generated from or cash used in the investing activities of
the company (Sarfaty 2015). Financing activities of XERO Limited includes
capitalised cost for development, cost of rental bonds and amount spend for
purchasing plant, equipment and property.
 Net cash provided by or used in the financing activities – cash flow from financing
activities records the cash generated from or cash used in the financing activities of

CORPORATE ACCOUNTING 3
the company. Financing activities of XERO Limited includes proceeds from and
payments towards short-term deposits and repayment of the management loan.
Answer (ii)
Particulars
2017
($'000)
2016
($'000)
2015
($'000)
Net cash used in operating activities
-
4,401.00 34,770.00
-
38,623.00
Net cash (used in) / provided by investing activities
-
66,430.00
-
53,820.00
-
49,758.00
Net cash provided by (used in) financing activities 60,057.00 66,241.00 132,154.00
2017 ($'000) 2016 ($'000) 2015 ($'000)
-100,000.00
-50,000.00
-
50,000.00
100,000.00
150,000.00
Net cash used i
n operating act
ivities
Net cash (used
in) / provided b
y investing acti
vities
Net cash provi
ded by (used in
) financing acti
vities
 Operating activities – operating cash usage of the company over the past 3 years are
in decreasing trend. It can be observed from the above presented graph and table that
the cash used for the operating activities of the company reduced from $ 38,623
thousand to $ 34,770 thousand over the years from 2015 to 2016. However, it
significantly reduced to $ 4,401 thousand in the year 2017 as the company received $
288,448 thousand from the customer during the year (Xero Accounting Software
2018).

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 Investing activities – investing cash usage of the company over the past 3 years are in
increasing trend. It can be observed from the above presented graph and table that the
cash used for the investing activities of the company increased from $ 49,758
thousand to $ 53,820 thousand over the years from 2015 to 2016 and it further
increased to $ 66,430 thousands in the year 2017 (Xero Accounting Software 2018.)
 Financing activities – cash generated from financing activities of the company over
the past 3 years are in decreasing trend. It can be observed from the above presented
graph and table that the cash generated from the financing activities of the company
significantly reduced from $ 132,154 thousand to $ 66,241 thousand over the years
from 2015 to 2016 and it further increased to $ 60,057 thousands in the year 2017.
Reason of significant reduction over the years from 205 to 2016 is that the company
did not issue any shares in 2016 and proceeds from the short-term deposits were
significantly reduced from $ 403,000 thousands to $ 210,000 thousands over the years
from 2017 to 2016 (Xero Accounting Software 2018).
Answer (iii)
Other comprehensive loss of XERO Limited for the year ended 2017 amounted to $
68,442,000 as compared to $ 86,185,000 for the year 2016. Various items recognized by the
company under its comprehensive income statement are movement in the cash flow hedges
that amounted to $ 20,29,000, translation of the international subsidiaries amounted to $
14,15,000 and other comprehensive income amounted to $ 615,000.
Answer (iv)
The cash flow hedges that is included in the comprehensive income statement of the
company is the derivative in FECs (Forward exchange contracts) for reducing risks in such a
way that the changes in the exchange rates will have an impact on the cash flows of the
company. The hedges are recognized as highly probable under the forecasting of the
transactions. Further the difference in exchange rates arises from the translation of

CORPORATE ACCOUNTING 5
international subsidiaries is recorded as the separate component of equity. Amount of
differences are recognized under the statement of comprehensive statement only when the
foreign operations are disposed-off (Titman, Keown and Martin 2017).
Answer (v)
Items of expenses and incomes those are not recognized under the income statement
or comprehensive income statement of the company are recorded under the statement of
comprehensive statement (Sethi 2016). The statement helps the user to get better and clear
picture of the company’s profitability position. The amount of losses or incomes those are
already been recognized are recorded in the income statement. However, the unrealized items
of investments are included in the other comprehensive income statement (Warren and Jones
2018). It helps the investors and financial analysts to measure the fair value of the investment
of the company.
Answer (vi)
The net income remains with the company after paying off the expenses and adjusting
for various non-assessable and disallowed items are considered as the amount chargeable to
tax. The tax is applicable at the rate enacted or substantially enacted by the jurisdiction
(Weygandt, Kimmel and Kieso 2015). Further the amount of tax expenses is adjusted for
deferred tax assets or deferred tax liabilities that arise due to temporary differences. Income
tax expenses for XERO Limited as per the latest financial report is $ 19,87,000 as compared
to $ 15,12,000 for the previous year.
Answer (vii)
The income tax rate applicable to the company by the appropriate authority is 28%.
Net loss of the company before tax payment for the year ended 2017 amounted to $
67,070,000. However, Income tax expenses for XERO Limited for the same period amounted
to $ 19,87,000. However, the tax expenses do not match with the applicable rate on the
income of the company as the company had loss for the period (Narotzki 2017). The reason
of difference is that the expenses of income tax includes the adjustments for prior period,
effect of the prior period’s development and research credit, utilisation of tax loss, deferred
tax and impact of changes in the foreign currency.

CORPORATE ACCOUNTING 6
Answer (viii)
The company recognizes the deferred tax with regard to the temporary differences
among the asset’s and liability’s carrying amount determined for the purpose of recording in
the financial statement and the amount determined for the purpose of taxation. Further, the
deferred tax amount is determined on the basis of expected method in which the carrying
amount of the liabilities and assets are realised at the end of the period through the applicable
tax rate on the company (Laux 2013). The amount for deferred tax is recorded in the financial
statement up to the amount that is apparent to be available from future taxable profit against
of which the asset is usable. Amount of deferred tax assets recorded by the company under
the non-current section of balance sheet for the year ended 2017 was $ 20,65,000.
Answer (ix)
Income tax or current tax payable by the company for the year ended 2017 by XERO
Limited was amounted to $ 11,05,000. On the other hand, the income tax expenses for the
company as per the latest financial report is $ 19,87,000. Expense of income tax is the
amount the company is liable to pay as per the applicable taxation rules. However, the
payable amount of income tax is computed through applying the applicable tax rates on the
company (Melloni, Lai and Stacchezzini 2018). The income tax expense is recorded in the
income statement of the company whereas the current tax is recorded in the cash flow
statement of the company. Owing to all these differences the amount of current tax does not
match with the amount of income tax expenses.
Answer (x)
The income tax expenses for the company as per the latest financial report is $
19,87,000. On the other hand, the income tax paid as recorded in the cash flow statement of
the company was $ 20,93,000. The amount of tax expenses under the income statement of the
company varies from the amount recorded as income tax paid in the cash flow statement as
the income tax paid is the amount of tax on the operating activities of the company. On the
other hand the income tax expenses is the amount of tax applicable on the revenue of the
company left after paying off all the expenses like operating expenses, investing expenses,
selling and administration expenses and financing expenses (Maaloul and Zéghal 2015).

CORPORATE ACCOUNTING 7
Answer (xi)
Difficult and confusing part – the most confusing and difficult pat was the treatment of
deferred tax. The deferred tax is recognised for the temporary difference. However, no
particular indication is mentioned that can be considered as the benchmark for temporary
differences. Whether the difference will be temporary or permanent that will be determined
on the basis of the knowledge, experience and judgement of the user. Therefore, someone
mat treat the particular difference as temporary whereas the same may be treated by someone
else as permanent. Therefore, the treatment of permanent as well as temporary difference is
not easy and confusing.
New insights – one new insight obtained from analysing the financial statement of the
company is that the income tax expenses and income tax paid by the company is not same
and not calculated or treated in the same way. The income tax paid is the amount of tax on
the operating activities of the company whereas the income tax expenses is the amount of tax
applicable on the revenue of the company left after paying off all the expenses like operating
expenses, investing expenses, selling and administration expenses and financing expenses.

CORPORATE ACCOUNTING 8
Reference
Chang, X., Dasgupta, S., Wong, G., and Yao, J. 2014. Cash-flow sensitivities and the
allocation of internal cash flow. The Review of Financial Studies, 27(12), 3628-3657.
Laux, R. C. 2013. The association between deferred tax assets and liabilities and future tax
payments. The Accounting Review, 88(4), 1357-1383.
Maaloul, A. and Zéghal, D., 2015. Financial statement informativeness and intellectual
capital disclosure: An empirical analysis. Journal of Financial Reporting and
Accounting, 13(1), pp.66-90.
Melloni, G., Lai, A. and Stacchezzini, R., 2018. Integrated reporting and narrative
accountability: The role of preparers. Accounting, Auditing and Accountability Journal, p.1.
Narotzki, D., 2017. Corporate Social Responsibility and Taxation: A Chance to Develop the
Theory.
Sarfaty, G.A., 2015. Measuring corporate accountability through global indicators. The Quiet
Power of Indicators: Measuring Governance, Corruption, and Rule of Law, p.103.
Sethi, S., 2016. Globalization and self-regulation: The crucial role that corporate codes of
conduct play in global business. Springer.
Titman, S., Keown, A.J. and Martin, J.D., 2017. Financial management: Principles and
applications. Pearson.
Warren, C.S. and Jones, J., 2018. Corporate financial accounting. Cengage Learning.
Watson, L., 2015. Corporate social responsibility research in accounting. Journal of
Accounting Literature, 34, pp.1-16.
Weygandt, J.J., Kimmel, P.D. and Kieso, D.E., 2015. Financial and managerial accounting.
John Wiley and Sons.
Xero Accounting Software. 2018. Online Accounting Software – Free Trial, Free Support |
Xero. [online] Available at: https://www.xero.com/ [Accessed 21 May 2018].

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