Accounting and Finance of a University Students' College

Standards on accounting 5 Question 2 6 Reflection report 6 Reference 7 Question 1 Cash flow and liquidity Cash flow from the operation of the company for the year ended 30th June 2016 was $ 437,691 thousands as compared to the $ 340,448 thousand as on 30th June 2015. AASB 107 Note 28b that is stated in the page 112 is no more required after the amendment issued during 2016 March with respect to AASB 107 with the added paragraph under 44A to 44E (Care

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

1CORPORATE ACCOUNTING
Table of Contents
Question 1..................................................................................................................................2
a. Cash flow and liquidity...................................................................................................2
b. AASB 107.......................................................................................................................2
c. Impairment......................................................................................................................2
d. Information regarding dividend payment........................................................................3
e. Other comprehensive income..........................................................................................3
f. Share option plan of executives......................................................................................3
g. Reserves..........................................................................................................................4
h. Remuneration of the auditor............................................................................................4
i. Financial statement preparation......................................................................................4
j. Deferred tax liability.......................................................................................................5
k. Income tax.......................................................................................................................5
n. Standards on accounting.................................................................................................5
Question 2..................................................................................................................................6
Reflection report.....................................................................................................................6
Reference....................................................................................................................................7

2CORPORATE ACCOUNTING
Question 1
a. Cash flow and liquidity
Cash flow from the operation of the company for the year ended 30th June 2016 was $
437,691 thousands as compared to the $ 340,448 thousand as on 30th June 2015. However,
the closing balance for cash reduced to $ 103,631 as on 30th June 2016 as compared to $
153,220 as on 30th June 2015. Therefore, the company’s liquidity position is reducing that
indicated that the company’s ability of paying the short-term liabilities is decreasing
(Harveynorman.com.au 2017).
On contrary, closing cash balance of Woolworths, company’s competitor, is $
956,000 as on 30th June 2016 whereas as on 30th June 2015 it was $ 133,340. Therefore, with
respect to liquidity aspect, Woolworths is in better position (Woolworths.com.au 2017).
b. AASB 107
Note 28b that is stated in the page 112 is no more required after the amendment issued
during 2016 March with respect to AASB 107 with the added paragraph under 44A to 44E
(Carey, Potter and Tanewski 2014)
c. Impairment
If there is any indication that due to any event of loss the expected future cash flows
will be impacted and the amounted can be reliably estimated, the asset will be impaired.
Impairment amount is determined by computing the market value and carrying value of asset
(Amiraslani, Iatridis and Pope 2013). When the carrying amount exceeds the market value,
the difference is charged as impairment. Impairment of asset for Harvey Norman as on 30th
June 2016 is as follows –
 Equity accounted investment - $ 72,35,000

3CORPORATE ACCOUNTING
 Computer software - $ 18,83,000
d. Information regarding dividend payment
Dividend related information is stated in Note 25 of the financial statement for the
year ended on 30th June 2016
e. Other comprehensive income
Other comprehensive incomes are the gains, revenues, losses and expenses that are excluded
from the computation of net income and they are included in the comprehensive income
statement even before the realization of those expenses, gains, revenues or losses (Babalola
and Abiola 2013). As on 30th June 2016 the comprehensive income item for Harvey Norman
were –
 Foreign currency transactions
 Income tax effect on cash flows hedging movement
 Investment of cash flow hedging
 Net gain from investment held for sale
f. Share option plan of executives
The details of share option plan for executives are as follows –
Name of the executive No. of vested
option
Value No. of unvested
option
Value
J. E. Slack-Smith 567,000 $ 159,894 817,000 $ 287,394
D. M. Ackery 567,000 $ 159,894 - -
C. Mentis 567,000 $ 159,894 817,000 $ 287,394
Total 17,01,000 $ 479,682 16,34,000 $ 574,788

4CORPORATE ACCOUNTING
g. Reserves
Reserves related information are stated in Note 24 and the amount of reserves as on
30th June 2016 was $ 155,814,000. Reserves of the company are mentioned below –
 Acquisition reserve
 Cash flow hedging reserve
 Available for sale reserve
 Asset revaluation reserve
 Foreign currency transaction reserves
 Employee equity benefit reserve
h. Remuneration of the auditor
The audit fees proportion was 45% as compared to the other fees like legal fees. This
is acceptable proportion as the services of audit is not availed throughout the year whereas
they legal services are availed for throughout the year. Auditor’s remuneration includes the
following –
 Review of financial report
 Entity’s tax services
 Other services of the company
i. Financial statement preparation
In accordance with Para 71 of AASB 101, any prescribed format like as per function
or nature for presentation of financial statement is not mentioned. However, Harvey Norman
classifies the expenses by function.

5CORPORATE ACCOUNTING
j. Deferred tax liability
The temporary differences are identified as the deferred tax liabilities by the company
(Laux 2013). The company recognized the following as deferred tax liabilities –
 Research and development – $ 17,053,000
 Revaluation of investment properties to the fair values - $ 116,814,000
 Depreciation on the building reversal for investment properties - $ 70,085,000
 Difference among the accounting carrying amount and tax base of computer software
cost - $ 479,000
 Land and buildings revaluation to its fair values - $ 30,677,000
 Non-allowable depreciation for building for the changes in legislative of New Zealand
- $ 17,798,000
 Other items - $ 23,61,000
k. Income tax
Current income tax for the year ended on 30th June 2016 is $ 46,92,000 and the tax as
per income statement is $ 142,423,000. The difference is there as the changes in equity show
the tax along with deferred tax and the income statement shows the paid amount of tax.
n. Standards on accounting
AASB that are issued or amended during the year but Harvey Norman has not yet
adopted those are mentioned below –
 AASB 15 on revenue from the contracts with the customers
 AASB 9 on financial instruments
 AASB 16 on leases

6CORPORATE ACCOUNTING
Question 2
Reflection report
Analysing the annual report of a company like Harvey Norman will definitely help
me to analyse the performance the company from the financial aspect. Analysing the annual
report of the company dated 30th June 2016, I found out that the annual report is an essential
part to the company for its customers, creditors, shareholders and investors to state its
sustainability, liquidity, solvency and profitability position. While going through the report, I
found that the company complies with the framework and guidelines of IFRS and AASB. I
further found that the auditors of the company are responsible for approving that the financial
statements of the company are prepared as per the required standards and they issue their
audit report accordingly. The most important fact regarding the annual report that I found is
that the disclosure notes plays an important role and states the preparation basis of the
financial statements, accounting treatment, concepts used for preparing the statement and
revealing the detailed break-up for each item. Thus, I can state that annual reports of the
company play crucial role in stating its financial position.

7CORPORATE ACCOUNTING
Reference
Amiraslani, H., Iatridis, G.E. and Pope, P.F., 2013. Accounting for asset impairment: a test
for IFRS compliance across Europe. Centre for Financial Analysis and Reporting Research
(CeFARR).
Babalola, Y.A. and Abiola, F.R., 2013. Financial ratio analysis of firms: A tool for decision
making. International journal of management sciences, 1(4), pp.132-137.
Carey, P., Potter, B. and Tanewski, G., 2014. AASB Research Report
Harveynorman.com.au. 2017. Harvey Norman | Shop Online for Computers, Electrical,
Furniture, Bedding, Bathrooms & Flooring | Harvey Norman Australia. [online] Available at:
https://www.harveynorman.com.au/ [Accessed 23 Oct. 2017].
Laux, R.C., 2013. The association between deferred tax assets and liabilities and future tax
payments. The Accounting Review, 88(4), pp.1357-1383.
Woolworths.com.au. 2017. Woolworths.com.au. [online] Available at:
https://www.woolworths.com.au/ [Accessed 22 Oct. 2017].

8CORPORATE ACCOUNTING