Corporate Accounting: Analyzing Nufarm's Financial Statements

This report delves into the financial statements of Nufarm, a global agricultural inputs company, to analyze its performance and financial health. It examines the cash flow statement, other comprehensive income statement, and accounting for corporate income tax. The report provides a comparative analysis of cash flows over three years, explains the components of other comprehensive income, and explores the relationship between tax expense, deferred tax assets/liabilities, and income tax payable. The analysis aims to provide insights into Nufarm's financial strategies and the complexities of corporate tax accounting.

Corporate Accounting
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Table of Contents
Introduction......................................................................................................................................4
CASH FLOWS STATEMENT.......................................................................................................5
(i) From your firm’s financial statement, list each item reported in the CASH FLOWS
STATEMENT and write your understanding of each item. Discuss any changes in each item
of CASH FLOWS STATEMENT for your firm over the past year articulating the reasons for
the change....................................................................................................................................5
(ii) Provide a comparative analysis of your company’s three broad categories of cash flows
(operating activities, investing activities, financing activities) and make a comparative
evaluation for three years.............................................................................................................7
OTHER COMPREHENSIVE INCOME STATEMENT................................................................8
(iii) What items have been reported in the other comprehensive income statement?.................8
(iv) Explain your understanding of each item reported in the other comprehensive income
statement......................................................................................................................................9
(v) Why these items have not been reported in Income Statement/Profit and Loss Statement.10
ACCOUNTING FOR CORPORATE INCOME TAX.................................................................11
(vi)What is your firm’s tax expense in its latest financial statements?.....................................11
(vii) Is this figure the same as the company tax rate times your firm’s accounting income?
Explain why this is, or is not, the case for your firm.................................................................12
(viii) Comment on deferred tax assets/liabilities that are reported on the balance sheet
articulating the possible reasons why they have been recorded................................................13
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(ix)Is there any a current tax asset or income tax payable recorded by your company? Why is
the income tax payable not the same as income tax expense?...................................................13
(x) Is the income tax expense shown in the income statement same as the income tax paid
shown in the cash flow statement? If not why is the difference?..............................................14
(xi)What do you find interesting, confusing, surprising or difficult to understand about the
treatment of tax in your firm’s financial statements? What new insights, if any, have you
gained about how companies account for income tax as a result of examining your firm’s tax
expense in its accounts?.............................................................................................................15
Conclusion.....................................................................................................................................16
References......................................................................................................................................17
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Introduction
This report is divided in to different parts of financial statements. It analyses the financial
statements of Nufarm which is global agricultural inputs company. It supplies the better
standard quality products and services and also maintains the better relations with
customers. The objective of the Nufarm is to grow the better tomorrow by providing the
services and products. It discusses the profit and loss account that shows the income and
expenses of the company. It also evaluates the cash flow statements that denote the cash
inflow and cash outflow. Cash flow statements help the company to ascertain the
profitability and liquidity of the firm.
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CASH FLOWS STATEMENT
(i) From your firm’s financial statement, list each item reported in the CASH
FLOWS STATEMENT and write your understanding of each item. Discuss any
changes in each item of CASH FLOWS STATEMENT for your firm over the
past year articulating the reasons for the change.
Cash flow statements show the changes in income that affects the cash and cash equivalents and
carries out the operating, investing and financing activities.
Operating Activities:
Depreciation and amortisation: It is the expenditure on the fixed assets over the life. It can be
defined as the decrease in the value of fixed assets. Amortisation is the decrease in the value of
intangible assets it can be defined as the method off paying debt over time.
Non-cash materials: Non-cash current assets are consumed by the firm and they are not
converted in to cash. For example, depreciation, amortisation.
Net finance expense: It is the adjusted finance expense that arises from the operating activities.
Interest received: It is the amounts of interest that can be earned form the operating activities.
Dividends received: It is the amount that can be received on the purchase and sale of shares.
Interest paid: Interest is the payment from the borrower or deposit –taking to a depositor and
lender of an amount of sum.
Taxes paid: This expense for the company as they have to pay certain amount of tax.
Investing Activities:
Proceeds from sale of plant, equipment and property: It is the amount which can be earned by
the sale of plant and machinery and the company proceeds the activities from that amount.
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Proceeds from sales of investments and business: In this the company earned the money by
selling the investments and business.
Payments for equipment’s and plant: To invest the assets in company, they have to make
payments for the plant and machinery
Payments of business: The Company purchase the business to run their operations. For this they
have to make certain payment to that business.
Payments for acquired intangibles and development of product expenditure: To purchase the
intangibles and to develop the services and products the company has to make certain payments
(Allen and Seaman, 2017).
Financing Activities:
Debt establishment transaction costs: It includes that cost that can be spending at the time of
establishing company such as preliminary cost.
Proceeds from borrowings: It is the amount which can be established in exchange for a duty to
pay back something.
Repayment of borrowings: It is the situation in which money can be paid back and that can be
hired from a lender.
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(ii) Provide a comparative analysis of your company’s three broad categories of cash flows
(operating activities, investing activities, financing activities) and make a comparative
evaluation for three years.
Particulars 2015 2016 2017 Change
2015-
2016
change
2016-
2017
Change
2015-
2017
Cash flow from operating
activity
228510 137375 55,443 91135 81932 173067
Cash flow from investing
activity
(104099) (138,210
)
(100,758
)
34111 (37452) (71563)
Cash flow from financing
activity
8525 (89,649) (5479) (81124) (84170) (165294)
Operating activities: Operating activities are those activities that can be performed in day to day
activities. It includes the activity of marketing, distributing, and manufacturing that can be
performed in Nufarm Company. From the above table it can observed that the amount received
from the operating activities is $ 55,443 in 2017 and in 2016 it is $137375 and in 2015 it is
$228510 which denotes that in current year the Nufarm does not operate more activities as
compared to the previous year.
Investing activities: In this activity the company purchase and sell the assets to invest more for
their company. From the above table it can observed that cash flow from operating activities is
(100,758) in 2017 and in 2016 it is (138210) and in 2015 it is (104099) which denotes that in
2017 they make less payments for the purchase of tangible and intangible assets(Watson, 2018).
Financing activities: It includes those activities which are related to the finace such as issuing
shares and debentures, repaying loans etc. The above table shows the amount of finace activities
in 2017 it is (5479) and in 2016 it is $(89649) and in 2015 it is $8525 this all amount denotes that
in 2017 they Nufarm company finance less transactions as compared to the previous years and
they have to make less paymnets for that.
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OTHER COMPREHENSIVE INCOME STATEMENT
(iii) What items have been reported in the other comprehensive income statement?
Comprehensive income is that income that can be bypass from the income statements, as the
items of these statements are not realised and they have the losses and gains that can be available
from the foreign currency and sale of securities. The Nufarm Company has divided
comprehensive income in to two parts that is certain items that are reclassified in to profit and
loss account and other items which are not reclassified to profit and loss account. It includes the
foreign exchange translation and their differences to the operations of foreign. It also includes
the value of cash flow hedges and value of net investment hedges. Amount not reclassified to the
profit and loss account that is Actuarial gains on the benefit plans and income tax on the payment
transactions.
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(iv) Explain your understanding of each item reported in the other comprehensive income
statement
Comprehensive income statements include those items which are unrealised and they have not
been executed in present, they have to be executed in future. It includes the items that can be
reclassified in to profit and loss account and certain items which are not reclassified in to profit
and loss account.
 Foreign exchange translation difference due to foreign operations: It is the method of
foreign entity from the currency financial statements. In 2017 it is (29,099) and in 2016 it
is (64,880).
 Fair value of cash –flow hedges: The cash flow hedge helps to remove the variability of
the cash flows that can be arise from the assets and liability. In 2017 it is $2479 and in
2016 it is (1497).
 Fair value of investment hedges: It is the procedure to mitigate the risk of change in the
value of investments or a liability or a firm unrecognised commitment. In 2017 it is $
4019 and in 2016 it is 5487.
 Fair value of available for sale financial assets: It is the method that depicts the change
in the value of financial assets. In 2017 it is 1342 and in 2016 it is $(448).
 Gains and losses on benefit plans: It is the difference between the pension payments
that can be made by the employer and the amount which is expected by them.
 Income tax on the share-based payment transactions: This situation arises in case
when the services and goods are based on the price of company’s equity. This amount is
paid by the company.
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(v) Why these items have not been reported in Income Statement/Profit and Loss
Statement
It can be stated that the income statements consists the realised items and the comprehensive
income statements includes the unrealised items that can be executed in future. The profit and
loss account and income statements includes all the expenditure and incomes and on the
comprehensive statements includes the losses and gains that can be arise due to the foreign
currency, hedging business, pension plans and fair value of tangible and intangible assets.
It can be observed that these items are not recorded under the profit and loss account as they are
not realized and they are recorded below the profit and loss account so that stakeholder or
shareholder can determine the amount of equity(Cuccia, 2018).
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ACCOUNTING FOR CORPORATE INCOME TAX
(vi)What is your firm’s tax expense in its latest financial statements?
Tax expenses are those expenses that can be paid by the company and that can be calculated with
the proper tax rate. The income tax expense is recorded under the income statements and in year
2017 it was $(57,205) and in 2016 it is $(22,161) which means that the Nufarm has to pay more
amount of tax in the current financial year as they purchase more assets for the activities. It is the
actual tax and company has to pay that much amount.
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(vii) Is this figure the same as the company tax rate times your firm’s accounting income?
Explain why this is, or is not, the case for your firm.
From the financial statements of Nufarm Company, it can be analyse that the amount of tax
expense is not similar to the profit of the company. The income tax rate is 30% and it is based on
the Australian tax laws. It can be stated that the tax expense does not consist the income or
losses, amortisation and depreciation. But to calculate the company has to consider these all
items (Annual report, 2017).
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(viii) Comment on deferred tax assets/liabilities that are reported on the balance sheet
articulating the possible reasons why they have been recorded.
Deferred tax Assets: It is recorded under the balance sheet of the company. This situation arises
when the company paid more tax and that are due in the form of tax relief. In this case, the firm
will pay either more levies or they pay the amount of tax early and allowed to receive the money
back from the tax authorities.
Deferred tax liabilities: It is the tax that can be accessed or it can be due in the current year but
did not paid yet. It is the difference between the amount of taxes that has to be due in the future
and taxes should be paid in present.
It can be observed that the deferred tax assets and liabilities are the overpaid or advance tax and
that can be paid by the Nufarm Company. These are set off by the government in the form of tax
reliefs, rebates and other benefits(Kemp, 2018. ).
(ix)Is there any a current tax asset or income tax payable recorded by your company? Why
is the income tax payable not the same as income tax expense?
The Nufarm Company does not have any income tax payable which means they will not pay any
amount of income tax or there is no tax due on their part. The Nufarm has incurred the $(57,205)
amount of tax expense which depicts that they have to pay that much sum of money. It can be
stated that the amount of income tax expense and income tax payable are not similar as the
amount of payable is emerged as the liability under the balance sheet until it is paid off or
written. The amount of tax expense is the actual Income tax and that can be calculated by
formula. The income tax expense is $(57, 2015)and income tax payable is nil and they are not
same(Kirkland, 2016).
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(x) Is the income tax expense shown in the income statement same as the income tax paid
shown in the cash flow statement? If not why is the difference?
It can be said that the figures of both are not same. As the amount of tax expense for the current
financial year is $(57,205) and taxes paid is $(19,909). So it can be analyse that the expense is
more than the tax paid and there is difference of $(37296). It can also be analyses that the income
tax expense ids calculated by the formula and they are the actual taxes that can be paid before the
tax. But the tax paid can be different (Morini and Pellegrino, 2018).
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(xi)What do you find interesting, confusing, surprising or difficult to understand about the
treatment of tax in your firm’s financial statements? What new insights, if any, have you
gained about how companies account for income tax as a result of examining your firm’s
tax expense in its accounts?
The Nufarm is a leading company in Australia and it can be compete with the other technologies.
It is interesting but difficult also as to know the analysis of tax in the financial statements as the
company includes so many adjustments, data interpretation. This all information is difficult to
analyse with the different techniques and formulas It is easy for the company to develop and
leads in to market as they did not have any income tax payable that means there is no liability to
pay in future, they can easily generate profit (Balakrishnan, et. al., 2018).
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Conclusion
The above report, analyses the different concepts of financial statements. Nufarm Company
provides the innovative solutions to their customers to gain experience. They also extend their
activities in different countries. With the help of income statements they analyse the performance
of the company as the income statements depicts the expenditure and income. Cash flow
statements show the cash inflows and outflows in the company that helps the company to
understand better.
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References
 Allen, E. and Seaman, J., 2017. Distance education enrolment report 2017.Digital
Learning Compass.
 Annual report, 2017. Nufarm. [Online] Annual report. Available at:
https://www.nufarm.com/Assets/37567/1/NufarmAR17_Final.pdf[Accessed on: 24 May
2018].
 Balakrishnan, K., Blouin, J. and Guay, W., 2018. Tax Aggressiveness and Corporate
Transparency. The Accounting Review.
 Cuccia, A., 2018. Potential of IFRS 8: Managerial" customization", relevance of
subsidiaries and separate financial statements. FINANCIAL REPORTING.
 Kemp, W.C., 2018. An Introduction to Case Reports: The Fundamentals of
Accounting (Doctoral dissertation, The University of Mississippi).
 Kirkland, R., 2016.Literature and culture in Northern Ireland since 1965: moments of
danger. Rutledge.
 Morini, M. and Pellegrino, S., 2018. Personal income tax reforms: A genetic algorithm
approach. European Journal of Operational Research, 264(3), pp.994-1004.
 Watson, L., 2018. The Deferred Tax Asset Valuation Allowance and Firm
Creditworthiness. The Journal of the American Taxation Association, 40(1), pp.81-85.
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