Corporate Accounting Report

This report analyzes the corporate accounting practices of Qantas Airways Limited and Alliance Aviation Services Limited, two Australian public limited companies. It examines key financial statements, including owner's equity, cash flow statements, other comprehensive income statements, and corporate income tax. The report provides a comparative analysis of both companies, highlighting their financial performance and capital structure.

CORPORATE ACCOUNTING

EXECUTIVE SUMMARY
Corporate accounting can be termed as the major branch which directly deals with
organization's system, preparation of financial statements with its appropriate analysis and
interpretation of fiscal outcomes. The present report will discuss about two public limited
companies which are listed on Australian Securities Exchange as Qantas Airways Limited and
Alliance Aviation Services Limited. Further, it had been stated that, cash flow statement is
classified in three broad categories in which operating section plays major role for generating
cash. It could be elaborated that, actual profit could be attained through adjusting other
comprehensive income statement. Further, it could be summed by reflecting corporate income
tax which plays very efficient role for absorbing effective tax rate, cash tax rate and cash tax
amount.

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
OWNER'S EQUITY........................................................................................................................1
1. Discussing changes in each component of equity...................................................................1
2. Providing comparative analysis of debt and equity position of both the firms.......................2
CASH FLOW STATEMENT..........................................................................................................4
3. Discussing changes in cash flow items over the past years....................................................4
4. Comparative analysis of broad categories of cash flow statement.........................................5
5. Comparison of both companies from the above analysis........................................................7
OTHER COMPREHENSIVE INCOME STATEMENT................................................................7
6. Stating items of other comprehensive income statement of both organization......................7
7. Reason for not including items in Profit and Loss statement..................................................8
8. Comparative analysis of other comprehensive income statement..........................................8
9. Performance evaluation must be considered in other comprehensive income (OCI)...........10
ACCOUNTING FOR CORPORATE INCOME TAX..................................................................11
10. Stating tax expenses of both organization...........................................................................11
11. Calculation of effective tax rate..........................................................................................11
12. Comment on deferred tax asset and liabilities....................................................................11
13. Presenting changes in deferred tax asset and liabilities......................................................12
14. Calculating cash tax amount with book tax, deferred tax asset and liabilities....................13
15. Calculating cash tax rate.....................................................................................................13
16. Providing difference among book and cash tax rate...........................................................14
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15

INTRODUCTION
Corporate accounting can be termed as the major branch which directly deals with
organization's system, preparation of financial statements with its appropriate analysis and
interpretation of fiscal outcomes. The present report will discuss about two public limited
companies which are listed on Australian Securities Exchange as Qantas Airways Limited and
Alliance Aviation Services Limited. Both these organizations are comprised in transportation
industry. This report will state financial statements in detailed aspect with reference to owner's
equity and various alteration from past three years. It will provide comparative analysis of
capital structure of both organization. It will also articulate about cash flow statements and
classification of its broad categories in past three years. In the similar aspect, it would state items
of other comprehensive income statement and reason for not considering it in profit and loss
statement. This report will also show various working on corporate income tax with the latest
financial statements of both companies. It ill calculate effective tax rate and amount by stating
reasons of creating deferred tax asset and liability. Last but not least, it will conclude by stating
variations among cash tax and book tax rate.
OWNER'S EQUITY
1. Discussing changes in each component of equity
Qantas Airways Limited
2016 2017
% change
in 2016 2017 2018
% change
in 2017
Issued
Capital 3625 3259 -10.10% 3259 2508 -23.04%
Treasury
shares -50 -206 312.00% -206 -115 -44.17%
Reserves -220 12 -105.45% 12 479 3891.67%
Retained
earning -100 472 -572.00% 472 1084 129.66%
Equity to
members of
Qantas 3255 3537 8.66% 3537 3956 11.85%
Non- 5 3 -40.00% 3 3 0.00%
1

controlling
interest
Total Equity 3260 3540 8.59% 3540 3959 11.84%
Interpretation: The above table is depicting changes in owner's equity from year 2016 to
2018 of Qantas Airways limited. It comprises issued capital, treasury shares, retained earnings
and reserves. In the same series, it will exclude non controlling interest for getting outcome of
total equity. The capital which was issued was decreasing by 10.10% from year 2016 to 2017
and its reserves were moving towards positive aspect (Schaltegger, Etxeberria and Ortas, 2017).
By considering aggregate of total equity which is raising by 8.66% in this stated duration. In the
similar context, from year 2107 to 2018 its total equity is increasing by higher proportion of
11.84% as compared to previous year.
Alliance Aviation services Limited
2016 2017
% change
in 2016 2017 2018
% change
in 2017
Contributed
equity 180483 181035 0.31% 181035 183498 1.36%
Reserves -113031 -112333 -0.62% -112333 -112652 0.28%
Retained
earning 59533 75660 27.09% 75660 87016 15.01%
Total Equity 126985 144362 13.68% 144362 157862 9.35%
Interpretation: The above table is indicating each element of total equity of Alliance
Aviation Services Limited which are contributed equity, retained earnings and reserves. From
year 2016 to 2017 its contributed equity and retained earning is moving positively by 0.31% and
27.09% respectively. Aggregately, these elements of equity had given impact on total equity
which increased by 13.68% in year 2017. From year 2017 to 2018, it is increasing from 1.36% of
contributed equity and retained earnings with 15.01%. Hence, total equity is raising by 9.35% in
year 2018 which is lesser than 2017.
2. Providing comparative analysis of debt and equity position of both the firms
2

2018 (Million)
Qantas Airways
Limited 2018 (000)
Alliance Aviation
services Limited
Debt 404 9.26% 61913 28.17%
Equity 3959 90.74% 157862 71.83%
Total 4363 100.00% 219775 100.00%
Qantas Airways Limited
9.26%
90.74%
Debt
Equity
Interpretation: The above pie chart is depicting capital structure of Qantas Airways
Limited. The company has 9.26% debt against organization's equity. It could be interpreted that
its high reliance on equity which is threat to business as it is overcapitalised. In the similar
aspect, it also creates capability of dilution of existing shareholder's holdings.
Alliance Aviation Services Limited
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28.17%
71.83%
Debt
Equity
Interpretation: In the above pie chart, it had signified capital structure Alliance Aviation
Services Limited which has high debt as compared to equity. The optimal ratio is of 40:60 which
is not followed in this situation. It has 28.17% of debt and 71.83% as equity which is not good
indicator for organization. In simple words, it is overcapitalised and helps in diluting holdings of
existing shareholders.
CASH FLOW STATEMENT
3. Discussing changes in cash flow items over the past years
The statement of cash flow consists of three broad categories such as operating, investing
and financing activities.
Qantas Airways Limited: The first item is cash receipts and payments from customers,
suppliers and employees. The amount of receipt is increasing along with payments of suppliers
and employees as well. In the year 2017, cash generated from operations was decreasing. The
cash related to redundancies, turnaround and record results bonuses as well as wage freeze is
decreasing from 2017 to 2018. It is also considering interest paid and received as well as
dividends with perspective of investment in equity method. The income tax related to foreign
was paid in decreased format. The main outcome as net cash from operating activity was raised
by 26.33% in 2018 (Liu and et.al., 2017).
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In context of investing activity, it will consider payments for intangible assets, plant and
equipment which is raised by $591 million. Along with this, interest paid and capitalised with
qualifying asset is decreasing with 41 million. It has stated proceeds from disposal of controlled
entity, property, equipment and plant. As controlled entity was absence in 2017 and its disposal
is reduced directly by 50%. The payments for investment under equity method is reduced as it is
an aircraft company. It will exclude aircraft operating lease refinancing which is decreased by
301 million. Hence, net cash used for the purpose of investing activity is increased by 7.58%.
In the similar aspect, cash flow from financing activity is very important for Qantas
Airways Limited because it is increasing by more than 50%. It consists of payments for share
buyback and treasury shares which is increasing and decreasing respectively. It will also consider
proceeds and repayments of borrowing which are changing in a positive aspect. The net receipts
about aircraft security deposits and debt in context of hedge was absence in 2018 as it was $8
million in 2017. The dividends paid to shareholders are decreasing and to non-controlling
interest was nil in 2018 but in 2017, it was $3 million.
Alliance Aviation Services limited: The cash in context of operating activity is
increasing by 76.31%. It consists of receipts via customers and payments to suppliers which is
increasing by huge proportion. The amount of interest received and paid is considered as they
both have huge variation in which payment is decreased and receipt of interest is increased by
$73000. Further, it will also include payment of income tax which is approx. similar to that of
previous year (Annual Report of Alliance Airlines, 2017).
In the similar aspect, cash from investing activity considers payments via plant,
equipment and property is increased from previous year with absence of its proceeds. The cash
outflow from investing activity is increasing but with small proportion of 10.37% as compared to
both; operating and financing activities.
Alliance Aviation Services Limited has also presence of financing activity which is
increasing from huge percentage as 113.33%. It comprises proceeds and repayments of
borrowings along with the dividend paid as well.
4. Comparative analysis of broad categories of cash flow statement
Qantas
Airways
Limited
2016 (base
year) 2017 % 2017
2017 (base
year) 2018 % 2018
5

Net cash
from
operating
activity 2819 2704 -4.08% 2704 3416 26.33%
Net cash
from
investing
activity 1923 2046 6.40% 2046 2201 7.58%
Net cash
from
financing
activity 929 854 -8.07% 854 1296 51.76%
Alliance
aviation
Services
Limited 2016 2017 % 2017 2018 %
Net cash
from
operating
activity 25486 21702 -14.85% 21702 38263 76.31%
Net cash
from
investing
activity 18500 13463 -27.23% 13463 14859 10.37%
Net cash
from
financing
activity 5492 6917 25.95% 6917 14756 113.33%
6

Interpretation: The above tables are signifying three broad categories of cash flow
statement on basis of both organization. It could be observed that, cash generated from operating
activities is higher than compared to both activities. While observing change, Qantas Airways
Limited had shown huge change in financing activity which is more than 50% and Alliance
Aviation services Limited with 113.33% in similar category.
5. Comparison of both companies from the above analysis
Particulars % 2017 (Qantas) % 2017 (Alliance) % 2018 (Qantas) % 2018 (Alliance)
Net cash from
operating activity -4.08% -14.85% 26.33% 76.31%
Net cash from
investing activity 6.40% -27.23% 7.58% 10.37%
Net cash from
financing activity -8.07% 25.95% 51.76% 113.33%
Interpretation: Qantas Airways Limited had show negative change in operating and
financing activity in year 2017 but in year 2018, each activity was also moving positive side.
However, Alliance Aviation Services Limited was negative in operating and investing activity in
year 2017 but in 2018, it shown high differences in 2018 with positive impact.
OTHER COMPREHENSIVE INCOME STATEMENT
6. Stating items of other comprehensive income statement of both organization
Qantas Airways Limited: In this statement, it has stated effective portion of alteration in
valuation of cash flow hedge and its transfer of hedge reserve associated to Consolidated profit
and loss statement (Annual Report of Qantas, 2017). It will recognise cash flow hedge in
effective aspect with context of capitalised asset. In the similar aspect, alteration in hedge reserve
for option of time value with net of tax. The most important item of other comprehensive income
statement, is of foreign currency translation of various controlled entities and investments with
context of equity method. Along with this, it will also include share of various comprehensive
income related to investments. Further, there are various items which will also give effect on
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comprehensive income statement such as actuarial gains and fair value advantage on investment
as well.
Alliance Aviation Services Limited: It had considered cash flow hedge reserve which is
applicable for recording losses and gains with context of hedging instrument in cash flow. The
amount would be reclassified to loss or profit which is linked with hedge transaction which
impact both. In the similar aspect, it will also state expense of income tax relate to cash flow
hedge reserve (Annual Report of Alliance Airlines, 2018).
7. Reason for not including items in Profit and Loss statement
It is considered as very expansive view of net profit. In previous year, alterations in net
profit could be deemed outside with context of it core operations. It is volatile and allowed for
flowing towards shareholder's equity. It includes those expenses, losses, revenues and gains
which are not yet realized. Most common example is bond portfolio which is not yet sold so in
this context interim adjustments are considered in this other comprehensive income statement.
The items which changes business entity's equity without engaging investment of owner
or creation of its distribution. It does not affect net income and retained earning of organization
as well. The items of OCI of current year will impact alteration in accumulate other
comprehensive income which is replicated as other element of stockholder's equity.
8. Comparative analysis of other comprehensive income statement
Year
(Qantas) 2016 (Base) 2017
% change in
2017 2017 (base) 2018
% change in
2018
Statutory
profit 1029 853 -17.10% 853 980 14.89%
Cash flow
hedges (net
of tax) -187 46 -124.60% 46 559 1115.22%
transfer of
hedge
reserve 198 -6 -103.03% -6 -230 3733.33%
Effective
cash flow -40 -2 -95.00% -2 16 -900.00%
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hedge
Changes in
hedge
reserve 35 -22 -162.86% -22 51 -331.82%
Foreign
currency
translation of
controlled
entities 2 -4 -300.00% -4 3 -175.00%
Foreign
currency
translation of
investments
under the
equity
method 24 -9 -137.50% -9 -3 -66.67%
Share of
other
comprehensi
ve
income/(loss)
of
investments -2 2 -200.00% 2 4 100.00%
Items that
will not
subsequently
be
reclassified
to profit or
loss
Benefit of -209 175 -183.73% 175 84 -52.00%
9

actuarial
gain(net tax)
Fair value
gains on
investment
(net tax) 0 0 0.00% 0 1 0.00%
Other
comprehensi
ve income -179 180 -200.56% 180 485 169.44%
Total
comprehensi
ve income 850 1033 21.53% 1033 1465 41.82%
Alliance Aviation services Limited
Year
(Alliance) 2016 (Base) 2017
% change in
2017 2017 (base) 2018
% change in
2018
Profit 13489 18547 37.50% 18547 18111 -2.35%
Other
comprehensi
ve income
Items
classified in
loss or profit
Fair value of
cash flow
hedge
(change) -142 142 -200.00% 142 0 -100.00%
Income tax 43 -43 -200.00% -43 0
Other
comprehensi -99 99 -200.00% 99 0 -100.00%
10

ve income
Total
comprehensi
ve income 13390 18646 18646 18111
9. Performance evaluation must be considered in other comprehensive income (OCI)
The Income statement or profit and loss has benefits and drawbacks as well. It accurately
reflects past profitability position of organization and growth of earnings is referred as initial
determinants of share price performance of business entity but its is subjective measure which
starts manipulation. Majorly companies has presence of fair amount of charges and expenses
which impact quarterly or on annual basis.
In this context, FASB (Financial Accounting Standards board) has emphasized an
important financial measure such as other comprehensive income as it is known as very major
tool. Its main objective is to issue guidance for improving consistency, comparability and
transparency with context of financial reporting. For attaining this, It has to raise the item's
prominence of reporting items in OCI.
ACCOUNTING FOR CORPORATE INCOME TAX
10. Stating tax expenses of both organization
Qantas Airways Limited: The expense of income tax consists of current and deferred
tax. Current tax is referred as expected taxable income and payable for the year by implying
enacted tax rate or sustainability at balance date with adjustment to tax payable with
consideration of past year. In the similar aspect, deferred tax is associated with temporary
variations among amount of liabilities and asset for purpose of financial reporting and amount
used for taxation perspective. Qantas Airways Limited gives for income tax in Australia and
overseas jurisdiction with existence of liability.
Alliance Aviation services limited: It is also comprised of current tax and deferred tax
expense.
Company Tax expense (2018)
Qantas Airways limited $411000
Alliance Aviation Services Limited $7991000
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11. Calculation of effective tax rate
2018
Alliance Aviation service
Limited
Qantas Airways services
Limited
Income tax expense 7991 411
earnings before tax 26102 1391
Effective tax rate 30.61% 29.55%
The above table has articulated effective tax rate of both organization. As they both have
very minor variations but Alliance Aviation services Ltd has high effective rate.
12. Comment on deferred tax asset and liabilities
Deferred tax asset: It is referred as asset of organization's balance sheet which might be
used for decreasing taxable income. These are recognised for purpose of deductible differences
and unused tax losses with presence of probable future taxable amount with its availability for
optimising temporary losses and differences.
Deferred tax liability: It is a tax which has assisted and due for its current period but not
yet paid. Generally, it traces fact about will of company in future to repay more income tax due
to transaction which took place in present scenario.
13. Presenting changes in deferred tax asset and liabilities
2016 (base
year) 2017
% change in
2017
2017 (base
year) 2018
% change in
2018
Qantas Airways
Limited
Deferred tax
asset 39 0 0.00% 0 0 0.00%
Deferred tax
Liability 0 353 100.00% 353 910 157.79%
12

2016 (base
year) 2017
% change in
2017
2017 (base
year) 2018
% change in
2018
Alliance
Aviation
services
Limited
Deferred tax
asset 0 31 100.00% 31 0 0.00%
Deferred tax
Liability 993 0 0.00% 353 910 61.21%
The above group has presence of gain of$24.2 million income tax gain in current year. In
this duration its outright deduction with context of ongoing capital maintenance program with
outcome in net deferred tax liability which is stable with previous year (Annual Report of
Qantas, 2018).
14. Calculating cash tax amount with book tax, deferred tax asset and liabilities
Qantas Airways Limited
2017 2018
Total tax provision 328 411
Change in deferred tax increase 39 0
Change in deferred tax decrease -353 -557
Cash tax 14 -146
Alliance Aviation
Services limited
2017 2018
Total tax provision 1064 7991
Change in deferred tax increase -31 31
Change in deferred tax decrease 993 -557
Cash tax 2026 7465
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15. Calculating cash tax rate
Qantas Airways Limited
2017 2018
Total tax provision 328 411
Change in deferred tax increase 39 0
Change in deferred tax decrease -353 -557
Cash tax 14 -146
earnings before tax 1181 1391
Cash tax rate 1.19% -10.50%
Alliance Aviation
Services limited
2017 2018
Total tax provision 1064 7991
Change in deferred tax increase -31 31
Change in deferred tax decrease 993 -557
Cash tax 2026 7465
earnings before tax 19611 26102
Cash tax rate 10.33% 28.60%
16. Providing difference among book and cash tax rate
Book tax rate is rate which is specified through financial statements of organizations as it
is identified through GAAP. It is formed for creating appropriate picture to state its outcome.
However, cash tax is replicated as tax amount which is paid to different government authorities
such as internal revenue services as they are associated with actual income amount which is
defined under tax laws via government operations (Jaafar, Halim and Janudin, 2017).
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CONCLUSION
From the above study it had been concluded that, corporate accounting is very vital for
each business entity. It had shown its importance in this report on basis on Qantas Airways
Limited and Alliance Aviation services Limited. It is articulated that transportation industry has
major significance of corporate accounting for extracting its financial performance and wealth of
business entity. In the similar aspect, it had reflected capital structure of both organization and
risk associated with it. Further, it had been stated that, cash flow statement is classified in three
broad categories in which operating section plays major role for generating cash. It could be
elaborated that, actual profit could be attained through adjusting other comprehensive income
statement. Further, it could be summed by reflecting corporate income tax which plays very
efficient role for absorbing effective tax rate, cash tax rate and cash tax amount.
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