Corporate Accounting Analysis Report

This report analyzes the financial statements of three companies to evaluate their financial stability. It focuses on equity, debt, cash flow, comprehensive income, and corporate income tax implications.

Corporate Accounting
1

Executive Summary:
This report has been prepared so that information regarding the interim financial statements of
the company can be analysed. In this report the annual financial statements of three companies
have been analysed so that their financial stability in the market can be analysed. The report has
focuses on the financial statements of the company to analyse the implications in the corporate
accounting. The items have been analysed of the equity, debt, cash flow and the comprehensive
income statement. The issues regarding the corporate income tax has also been referred.
2

Contents
Executive Summary:........................................................................................................................2
Introduction:....................................................................................................................................5
Equity and liability:.........................................................................................................................6
1):.................................................................................................................................................6
2):.................................................................................................................................................6
3):.................................................................................................................................................7
Australian Agricultural Limited:.................................................................................................7
Cash Flow Statement.......................................................................................................................7
4):.....................................................................................................................................................7
5):.....................................................................................................................................................8
6):...................................................................................................................................................11
Other compressive income:...........................................................................................................12
7):...............................................................................................................................................12
8):...............................................................................................................................................12
9):...............................................................................................................................................14
10):.............................................................................................................................................15
Corporate Income Tax:..................................................................................................................16
11):.............................................................................................................................................16
3

12):.............................................................................................................................................17
13):.............................................................................................................................................18
14):.............................................................................................................................................19
15):.............................................................................................................................................19
16):.............................................................................................................................................20
17):.............................................................................................................................................21
Conclusion:....................................................................................................................................22
References:....................................................................................................................................23
4

Introduction:
This report is prepared so that the knowledge can be gained regarding the corporate accounting
and the financial information. In this report three companies Australian Agricultural Company
Limited, Australia Bauxite Limited and Australian Dairy Farms Group are taken. The annual
report of the past three years has been analysed so that the information about the equity, debt, the
activities of the cash flow statements, the items of the comprehensive statement and the
calculation of the book and the cash tax will be evaluated.
Australian Agricultural Limited: It is the beef and the agricultural company which was
founded in the 1824 and has the headquartered in the Brisbane, Australia. The company operates
feedlots and it covers the large area of the land around 7 million hectares.
Australian Bauxite Limited: This Company was founded in the year 2009 and has the
headquartered in the New South Wales, Australia. The company has been dealing into the
industries like fertilisers and the cement and selling the tonnes of the bauxite around 30000
amounting.
Australian Dairy Farms Group: This Company was operating the processing segments of the
dairy farms and was founded in the 1992 and has the headquartered in the Australia. It is the
Australian national body which mainly funds the products of the dairy and the other dairy
snacks.
5

Equity and liability:
1):
Australian Agricultural Limited: The items recorded in the equity are retained earnings which
have increased from last past three from the negative balance of the 8969 in the year 2015 to the
130424 in the year 2017. The contributed equity and reserves are also recorded. The total equity
of the company has increased from the last three years in the year 2017 with the amount of the
1017743 from the 762298.
Australian Bauxite Limited: The items recorded in the equity are accumulated losses, issued
capital and the reserve. There is no as such major difference is there but the total equity of the
company has increased from the last year. In the year 2015 the equity of the company was
16884000 which has increased in the year 2017 with the 17315000.
Australian Dairy Farms Group: In this company the items of the equity which are recorded are
reserves, retained earnings and the issued capital. The major change has been occurred is in the
reserves as it was 5056 in the year 2015 but in the year 2016 it was nil and in the year 2017 it
was 363360. The total equity of the company has risen as in the year 2015 it was 27446181 and
in the year 2017 it was 28664198.
2):
Australian Agricultural Limited: The items recorded in the debt are the borrowing and the long
term liabilities of the company. As equity of the company is increasing so the debt of the
company is also increasing. The total debt in the year 2015 was 451793 which have increased in
the year 2016 with the 496983 and in the year 2017 it was 1017743.
Australian Bauxite Limited: The debt recorded in this company was trade and other payables,
employees benefit provisions, and the other liabilities. The debt of the company has declined in
the year 2016 as in the year 2015 it was 2877052 which has declined with the 1508517. In the
year 2017 the debt of the company has increased with the amount of the 1565000.
6

Australian Dairy Farms Group: The debt of the company includes the items of the borrowings
and the provisions. The borrowings of the company have increased from the previous years as in
the year 2015 it was 6407942 and in the year 2017 it was 10418278. The total debt of the
company has declined in the year 2017 but in the year 2016 it has increased with the rapid rate.
3):
Australian Agricultural Limited:
Year 2015 2016 2017
Equity 762298 886136 1017743
Debt 451793 496983 527912
Australian Bauxite Limited:
Year 2015 2016 2017
Equity 16,964,656 16,883,754 17315000
Debt 2,877,052 1,508,517 1565000
Australian Dairy Farms Group:
Year 2015 2016 2017
Equity 25086678 27446181 28664198
Debt 7599864 17248542 14389208
7

Cash Flow Statement
4):
Australian Agricultural Limited: The cash flow statement of the company includes the three
activities operating, investing and financing which shows the relationship between the cash
inflow and cash outflow of the company. the operating activity of the company has the items of
the interest received, receipts from the customers, payment of the interest and the finance cost,
investing activity includes the items of the payments and the proceeds from the plant, equipment
and the property and the financing activity includes the items of the proceeds and the repayments
of the borrowings.
Australian Bauxite Limited: The operating activity of this company includes the items
of the cash inflow and outflow such as the interest paid and received, etc. the investing activity
includes the items of the purchase and the sale of the assets such as the acquisition of the plant
and equipment, investment, government fund refunded, etc. The financing activity has the items
of the share issuing costing, proceeds from the share, etc.
Australian Dairy Farms Group: The cash flow statement of the company includes the items of
the investing, operating and financing in which the operating activity have the items of the
finance cost, interest received, etc. The investing activity of the company has the items of the
payments and the proceeds from the sale of the property, plant and equipment. The financing
activity includes the items of the proceeds from the CBA facility, repayments of the loan, etc.
5):
Australian Agricultural Limited:
Operating events Investing Events Financing Events
2017 29,260 -28,386 27,874
8

2016 21,789 -19,415 2,374
2015 -75,881 -66,317 -56,909
2015-16 7,471 -8,971 25,500
2016-17 97,670 46,902 59,283
2015-17 105,141 37,931 84,783
Australian Bauxite Limited:
Operating events Investing Events Financing Events
2017 716,000 808,000 -
9

2016 -409,457 1,257,952 -497,987
2015 -6,084,462 1,519,457 1,351,001
2015-16 1,125,457 -449,952 497,987
2016-17 5,675,005 -261,505 -
2015-17 6,800,462 -711,457 -
Australian Dairy Farms Group:
Operating events Investing Events Financing Events
2017 306,362 -12,392,985 -189,931
10

2016 -527,873 -1,011,399 12,216,252
2015 -768,829 -24,093,738 27,996,507
2015-16 834,235 -11,381,586 -12,406,183
2016-17 240,956 23,082,339 -15,780,255
2015-17 1,075,191 11,700,753 -28,186,438
6):
Australian Agricultural Limited: The operating activity of the company has increased as in the
year 2015 it was 75881 which has increased in the year 2016 with the 21789 and in the year
2017 it was 29260. The investing activity of the company has increased in the year 2016 but in
11

the year 2017 it has again declined. In the year 2015 it was 66317 2016 it was 19415 and in the
year 2017 it was 28386. The financing activity of the company has increased as in the year 2015
it was 56909 and in the year 2017 it was 27874.
Australian Bauxite Limited: The operating activity of the company has increased from the
previous year as in the year 2015 it has the negative balance of the 6084462 and in the year 2016
it was 409457 and in the year 2017 it was 716000. The investing activity of the company has
also increased as in the year 2015 it was 1519457 and in the year 2016 it was 1257952 and in the
year 2017 it was 808000. The financing activity of the company has declining as in the year 2015
it was 1351001, 2016 it was 497987 with the negative balance and in the year 2017 it was nil.
Australian Dairy Farms Group: The operating activity of the company has increased in the year
2016 but in the year 2017 it was declined. The investing activity of the company has declined in
the year 2016 but it has increased in the year 2017. The financing activity of the company has
increased from the last three years. In the year 2017 it was 189931 and in the year 2015 it was
27996507.
Other compressive income:
7):
Australian
Agriculture
Ltd
Revaluation reserve of fixed assets, change in cash hedge are terms which
are disclosed in the comprehensive report of income. Net profit for the year
was $ 71586 in 2017 but comprehensive income was $ 102065 in the same
year (AAL, 2017).
Australian
bauxite Ltd
As per the comprehensive report of ABL, no items are reported in the
statement of comprehensive income.
Australian
farms group
All reclassified and unclassified items that are not related with operational
events are required to be disclosed in the financial statements of the
company. During the year 2016 and 2017, no figures are reported in a
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comprehensive report (AFG, 2017).
8):
Statement of comprehensive income and profit statement both are utilised to evaluate the
incomes that are generated by a firm during the year. The comprehensive statement shows
relevant information about increment or reduction in those items which are not related with
operational activities but make considerable impact on the overall stability of organisation (Li,
2017). For example, Change in fair value of assets is not related with operating activities but
makes a vital impact on the financial strength of the company. Items that are reported in profit
statement is related totrading activities and required to be made as per IFRS notifications. For
instance, all incomes and associated costs are needed to be disclosed in profit statement but some
items are not includable in income account and the same is required to be reported in a
comprehensive statement (Li, 2017). Cash flow hedges are the best example of a comprehensive
statement which not shown in income account due to GAAP regulations.
13

9):
Australian Agriculture Ltd
Australian bauxite Ltd
Australian farms group
14

10):
Managerial performance can be calculated through the investigation of profit summary and
organisational performance. Analysis of profit trends, the incrementin revenue, the accuracy of
budgeted figures and cost control are an effective way to determinate the wellness of
organisational efforts. Items that are reported in the comprehensive statement present the impact
of those items which are yet to be realised and not related toorganisational procedures. For
instance, profit or loss from alteration in the fair value of assets is not related to trading events
and managers cannot control the market prices of fixed assets (Li, 2017). Additionally, exchange
loss arises due to currency differences which are not controllable for the managing authorities.
Thus, terms of the comprehensive statement are majorly related toNon-operating activities so not
relevant for the evaluation of managerial performance.
15

Corporate Income Tax:
11):
Taxes are those legal duties that are required to be by an individual or commercial against the
income that has been earned during the year. Each business organisation that is like AAL, ABL
and AFG which is working in Australia should pay taxes as per the guidelines of the Australian
government.
Australian Agriculture Ltd
Income tax liability depends on the income that is generated by a firm during the relevant year.
The annual income tax liability of AAL was 2433 in 2015 because total income of the company
was only 12056. In 2016, good increments in net profit were generated by the company so
annual tax liability reached to 29275 with a minor reduction tax obligation for 2017 was 24713
(AAL, 2017).
Australian bauxite Ltd
From the analysis of ABL, it is found that the company is occurring losses regularly and
improvement is required to maintain the sustainability. Loss of 1044 was generated by the
company from operations which reduced to 163 in 2016. With a dramatic change, the income of
179 was generated by the company in 2017. No tax expenses are reported by the company
during these years.
Australian farms group
From the financial statements, it is outlined that the company is facing losses continuously so tax
expense is not reported in the income statement. As disclosed in income account, net losses were
2051668 in 2015 and 2179348 in 2017 (AFG, 2016).
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12):
Items
Australian
Agriculture
Ltd
Australian
bauxite Ltd
Australian
farms group
Income tax 24713 0 0
EBT 96299 179 -2179348
The effective rate of Tax
Income tax / income before tax
25.66% 0% 0%
The effective tax rate is a term which indicates the applicable rate of taxes that are required to be
followed by a company to pay-of its tax obligations. In the above calculation, ETR of AAL is
25.66%. ABL and AFG are facing losses regularly and income tax expenses of both companies
were nil in 2017 so ETR is not determinable.
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13):
DeferredTax Assets (DTA):
DTA stands for those figures that are recorded in the assets side of the financial position
statement and can be claimed as a deduction against the tax obligation of the current year
(Cleartax, 2018). It is the sum of those loss credits and extra tax payments that are made by the
company in previous years and available for the set-off.
Deferred tax liabilities (DTL):
DTL stands for those figures that are recorded in the liability side of the financial position
statement and required to be paid along with current year tax liability. It is the sum of all those
obligations which are needed to be included in the payment of current tax duties (Cleartax,
2018).
Australian
Agriculture Ltd
In the financial position report, DTL of $ 27184 wasrecorded as deferred
tax liability in 2015 and amount of the same was reached to $ 80433 in
2016. With a considerable increment, total DTL was $ 118171 in 2017
(AAL, 2017). There are no DTA reported in last three years.
Australian
bauxite Ltd
DTA or DTL is the result of temporary alteration in a tax rate of some
specific transactions. During the last three years, no DTA or DTL was
recorded by the company (ABL, 2017).
Australian
farms group
From the final information, it is concluded that no figures for the DTA or
DTL were disclosed during last three years.
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14):
Particulars Australian Agriculture Ltd Australian bauxite Ltd Australian farms group
2017 2016
Chang
e 2017 2016
Chang
e 2017 2016
Chang
e
Deferred
tax
obligation
s 27184 80433 27184 0 0 0 0 0 0
Deferred
tax assets 900 675 225 0 0 0 0 0 0
15):
Particulars
Australian
Agriculture
Ltd
Australian
bauxite Ltd
Australian
farms group
Book tax -7 49 0
Temporary differences, prior
period losses and other R & D
claims
24720 -49 0
Cash Tax 24713 0 0
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There is a huge difference between the two terms book tax and cash tax. There are several
components and items like depreciation, time difference, prior items and other claims which
make difference in the amount of cash taxes and book taxes (Marques, et. al., 2017). In respect of
AAL, the amount of cash tax was 24713 in 2017. Amount of book-tax on the income of ABL
was $ 49 in 2017 but the amount of cash tax was nil due to the availability of adjustable events.
In respect of AFG Ltd, the company is facing losses continuously so the amount of book tax and
cash tax is nil.
16):
Evaluation of cash tax:
Items
Australian
Agriculture
Ltd
Australian
bauxite Ltd
Australian
farms
group
Income tax 24713 0 0
EBT 96299 179 2179348
Cash rate
Income tax / EBT
26% 0% 0%
Tax rates that are applicable to the corporate companies of Australia are between the rates of
26% to 30% as per the nature of the sector. From the above calculations, it is found that the cash
rate of AAL is 26%. In respect of ABL, Cash rate of the company is not determinable and will be
20

assumed zero because there was no tax payment made by the company in 2017 (ABL, 2017).
Similarly, cash rate of AFG is also not determinable because the tax payment of company was
zero in the year 2017.
17):
Values of book tax and cash tax remains different from each other and there are numerous
components that are responsible for the same. Like, claims of previous years can be claimed
against the book taxes which make a significant alteration in figures of cash taxes. Values of
deferred terms are also liable to create diversification among book and cash tax amounts
(Marques, et. al., 2017). For instance, the book of tax of AAL was 24720 in 2017 which is highly
different from cash tax figures. Book-tax of ABL was $ 49 in 2017 but the amount of cash tax
was nil because claimable amounts of historical tax credits were available with the company.
Deprecation is another reason which creates a difference in net organisational profits and the
same reflects in net tax liability (Merritt, 2019). Actually, only WDV is allowed under the
taxation system but SLM can be used under the accounting system. Due to these reasons, cash
tax remains different from book tax amounts.
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Conclusion:
From the above report it is concluded that it is very important for the investors first to analyse the
financial information about the company before making any investment. This information can be
ascertained in the company by analysing the annual report to know about the items of the debt,
equity, inflow and the outflow of the cash, etc. the comparative analysis is also done of the last
past three years of the three companies and their financial stability is evaluated. The calculation
of the book and cash tax is also done so that the difference between both of them can ascertain.
With the help of the financial statements of the company the evaluation of the tax expense is
easily done and helps in identifying the financial stability of the companies.
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References:
 AACL, 2016. [online] Annualreports.com. Available at:
http://www.annualreports.com/HostedData/AnnualReportArchive/a/ASX_AAC_2016.pdf
[Accessed 1 Feb. 2019].
 AACL, 2017. [online] Annualreports.com. Available at:
http://www.annualreports.com/HostedData/AnnualReports/PDF/ASX_AAC_2017.pdf
[Accessed 1 Feb. 2019].
 ABL, 2016. Annual finical results and annual report [online] www.asx.com.au. Available at:
http://www.australianbauxite.com.au/site_folders/241/170330_2016_ABx_Annual_Report_t
o_Shareholders_v15.pdf [Accessed 1 Feb. 2019].
 ABL, 2017. Annual finical results and annual report [online] www.asx.com.au. Available at:
https://www.asx.com.au/asxpdf/20180329/pdf/43stlv24k92jyw.pdf [Accessed 1 Feb. 2019].
 AFG, 2016. Annual finical results and annual report [online] adfl.com.au. Available at:
https://www.asx.com.au/asxpdf/20160831/pdf/439vb16fgj7lfg.pdf [Accessed 1 Feb. 2019].
 AFG, 2017. Annual finical results and annual report [online] adfl.com.au. Available at:
http://adfl.com.au/wp-content/uploads/2017/03/20170831-AHF-Annual-Report.pdf[Accessed
1 Feb. 2019].
 Cleartax, 2018. All about Deferred Tax Liability or Deferred Tax Asset &its Accounting.
[online] Cleartax.in. Available at: https://cleartax.in/s/deferred-tax-asset-deferred-tax-
liability-dta-dtl [Accessed 1 Feb. 2019].
 Li, A., 2017. Net Income Vs. Comprehensive Income. [online] Bizfluent. Available at:
https://bizfluent.com/info-8754360-net-income-vs-comprehensive-income.html [Accessed 1
Feb. 2019].
 Marques, M.T., Nakao, S.H. and Costa, P.D.S., 2017. BOOK-TAX DIFFERENCES AND
CAPITAL STRUCTURE. RAM. Revista de Administração Mackenzie, 18(6), pp.177-200.
 Merritt, C., 2019. The Difference Between Income Tax Expense & Income Tax Payable.
[online] Smallbusiness.chron.com. Available at: https://smallbusiness.chron.com/difference-
between-income-tax-expense-income-tax-payable-60779.html [Accessed 1 Feb. 2019].
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