Corporate Accounting: Analyzing Wesfarmers Ltd.'s Financial Statements

Corporate Accounting
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Table of Contents
Introduction......................................................................................................................................3
1. CASH FLOWS STATEMENT...................................................................................................3
2. OTHER COMPREHENSIVE INCOME STATEMENT............................................................5
3. ACCOUNTING FOR CROPORATE INCOME TAX...............................................................8
Conclusion.....................................................................................................................................11
References......................................................................................................................................12
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Introduction
Evaluation of financial statements of a firm helps in analyzing its performance, assessing its
accounting treatments, evaluating its taxes paid, etc. This report consists of a discussion of
Wesfarmers Ltd., an ASX listed company with largest turnovers in the country of Australia
(Wesfarmers.com.au, 2018). In this report, the cash flow statement of the company is going to be
analyzed along with analyzing Wesfarmers Ltd.’s corporate taxes and other comprehensive
income statement.
1. CASH FLOWS STATEMENT
(i) List of each item in cash flows statement and the understanding of each item
As stated by Reid & Myddelton (2017), a cash flow statement of a company determines the net
cash position of a company through categorizing the cash inflows and outflows as per their
respective activities. The following are the items contained in the cash flows statement of
Wesfarmers Ltd. -
 Cash flows from operating activities - Gordon et al. (2017) stated the net changes taking
place in a company’s cash due to operating such as cash received from sales, etc. is called
cash flow from operating activities. The cash flows of Wesfarmers Ltd. from operating
activities changed from $3365 million in 2016 to $4226 million in 2017
(Wesfarmers.com.au, 2018). This change has possibly taken place due to the increase in
the receipts from customers, reduction in borrowing costs, increase in payment to
employees and suppliers, net movements in financing loans and advance, decrease in
dividends and interest received and reduction in income taxes paid.
 Cash flows from investing activities - Warren and Jones (2018) stated the net changes
taking place in a company’s cash due to investing such as investment in fixed assets is
called cash flow from investing. The cash flows of Wesfarmers Ltd. from investing
activities changed from $2132 million in 2016 decreased to $53 million in 2017
(Wesfarmers.com.au, 2018). These changes have taken place due to the reduction of the
company’s payment on fixed assets, increase in sales of fixed assets, increase in sales of
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associates and businesses, decrease in acquisition of subsidiaries and increase in net
redemption.
 Cash flows from financing activities - As stated by Stevanovic et al. (2017), the net
changes taking place in a company’s cash due to financing such as purchase of equity
capital is called cash flow from financing activities. The cash outflows of Wesfarmers
Ltd. from financing activities have further increased from $1333million in 2016 to
$3771million in 2017 (Wesfarmers.com.au, 2018). This change has taken place due to the
decreased in proceed from borrowings, increase in repayment of debts and decreased in
payment of equity dividends.
(ii) Comparative analysis of your company’s three broad categories of cash flows and
comparative evaluation for three years
The comparative analysis of the company Wesfarmers Ltd.’s three main categories of cash flows
during the past three financial years has been done in the table below -
Particulars 2017 (in $) 2016 (in $) 2015 (in $)
Net cash balance as per operating activities 4226 million 3365 million 3791 million
Net cash balance as per investing activities - 53 million - 2132
million
- 1898
million
Net cash balance as per financing activities - 3771
million
- 1333
million
- 3249
million
(Source: Wesfarmers.com.au, 2018)
As shown in the table above, it can be noticed that the cash flows of the company from operating
activities show a decrease from $3791 million in 2015 to $3365 million to 2016, followed by an
increase again in 2017 to $4226 million (Wesfarmers.com.au, 2018). This indicates that the cash
position of the company has improved from the year 2015 to the year 2017. The comparison of
the cash flows of Wesfarmers Ltd. from investing activities show a net outflow of $1898 million
in 2015, which increased to $2132 million in 2016 and again decreased to $53 million in 2017
(Wesfarmers.com.au, 2018). An improvement can also be noticed in Wesfarmers Ltd.’s cash
flows from investing activities as the net outflow of cash from the company has decreased during
the three past years. However, the cash outflows of the company Wesfarmers Ltd. show an
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