Corporate Accounting Assignment: Analysis of Westpac Banking Corp and NAB

This report presents an analysis of banks operating in Australia, that is NAB and the WBC. The two banks latest financial statements were analysed. Based on the analysis, it was found out that the two banks were doing relatively better in terms of cash flow generations.

Corporate accounting Assignment 1
CORPORATE ACCOUNTING ASSIGNMENT
Author
Course Title
Professor
City
Date

Corporate accounting Assignment 2
Table of Contents
Executive Summary...................................................................................................................3
INTRODUCTION......................................................................................................................4
OWNERS EQUITY...................................................................................................................4
Items on Westpac Banking Corp and NAB............................................................................4
Analysis the Debt as well as Equity Position of Westpac Banking Corp and NAB..............5
CASH FLOWS STATEMENT..................................................................................................6
Items Reported in Westpac Banking Corp and NAB Cash Flows Statements.......................6
Analysis of Westpac Banking Corp and NAB based on Cash Flow Statement.....................8
Analysis of Westpac Banking Corp and NAB.......................................................................8
OTHER COMPREHENSIVE INCOME STATEMENT..........................................................9
Items Reported In Other Comprehensive Income Statement.................................................9
The reason why the items reported in other comprehensive income statement are not
recorded in the income statement.........................................................................................10
Analysis of the Other Comprehensive Income between Westpac Banking Corp and NAZ
..............................................................................................................................................10
Whether the Other Comprehensive Income Items ought to be included while assessing
Managers’ Performance........................................................................................................11
ACCOUNTING FOR CROPORATE INCOME TAX............................................................11
The Tax Expenses Reported in Westpac Banking Corp and NAB Latest Financial
Statements.............................................................................................................................12
Effective Tax Rate for the Two Companies.........................................................................12
Comments on the Deferred Tax Assets/Liabilities...............................................................12
Whether There Was an Increase or Decrease in Deferred Tax Assets or Liabilities...........13
Cash Tax Amount for Both Companies...............................................................................13
Cash Tax Rate for Both Companies.....................................................................................13
The reason behind cash tax rate being different from book tax rate....................................13
Conclusion................................................................................................................................14

Corporate accounting Assignment 3
Executive Summary
This report presented analysis of banks operating in Australia; that is NAB and the WBC.
The two banks latest financial statements were analysed. Based on the analysis, it was found
out that the two banks were doing relatively better in terms of cash flow generations. In fact,
it was found out that Westpac Banking Corporation had relatively high equity compared to
NAB. This means that WBC was basically in a better position in managing equity compared
to its counterpart. Further, it was found out that both WBC and NAB experienced steady
financial stability over the past three years of their operations.

Corporate accounting Assignment 4
INTRODUCTION
National Australian Bank and Westpac Banking Corporation are among the largest Australian
financial institutions. To be more specific, WBC is considered as among the big four banks
and second-largest institutions in Australia (Investing 2018). The bank offers or gives
comparable different financial services and products within New Zealand and Australia
(Westpac Group 2017).
NAB on the other hand, is one of the largest banking firms in Australia. The bank offers
different forms of services to its customers including wealth management, investment
banking platform and banking services. In other words, it is amongst Australian big four
banks by market capitalization (NAB 2017). This firm serves around 12.7 million clients
across the globe. As such, the report presents analysis of WBC and NAB based on their latest
financial statements.
OWNERS EQUITY
Items on Westpac Banking Corp and NAB
NAB
There exist a number of items which are reported in both banks statement of owner’s equity.
To start with based on NAB statement of owner’s equity numerous items are reported. The
first item reported is the contributed equity, reserves, non-controlling interest as well as
retained profits. NAB Contributed equity entailed issuance of some ordinary shares transfer
from the equity-based compensation reserves as well as redemption of the national capital
instruments (Investing.com 2018). It reserves included total comprehensive income, transfer
from the equity-based compensation reserves, equity-based compensation and transfer to the
retained profits. Further, NAB retained profit comprised of redemption of the national capital

Corporate accounting Assignment 5
instruments, total comprehensive income, distribution on the other equity instruments,
dividend paid, and transfer to the retained profits (NAB 2017).
NAB: Change in the Items reported in equity statement
Based on the statement, NAB contribution equity increased from 32,524 million to 32,866
million by June 2017. The increase was attributable to continued issuance of ordinary shares
in the year 2017. The bank reserves decreased from 309 million to 190 million. Decrease in
NAB reserves was attributable to negative amount in it total comprehensive income as well
as decrease in transfer to the retained profits as well as transfer from the equity-based
compensation reserves. Retained profit for the bank decreased from 15,719 million to 15,545
million. This was due to increased dividends paid to shareholders.
Westpac
Items reported in Westpac Banking Corporation statement of equity comprised of share
capital, non-controlling interests, retained profits and reserves (Westpac Group 2017). WBC

Corporate accounting Assignment 6
Share capital included exercise of the employees share options, dividend reinvestment plan,
disposal of the treasury shares and purchase of the shares. Reserves for the bank entailed
share based payments as well as other changes. WBC Retained profits included dividends on
the ordinary shares as well as other changes. Finally, WBC non-controlling interest included
other charges.
Westpac: Change items reported in the equity statetement
WBC share capital increased from 33,014 million to 34,394 million. It reserves increased as
from 727 million to 794 million (Westpac Group 2017). Increase in WBC share capital was
as a result of increase in its other comprehensive income. Retained earnings increased from
24,379 million to 26,100 million. The increase was attributable to the increased net profit. It
non-controlling interests decreased from 61 million to 54 million. The decrease was
attributable to upsurge in net interest charges over the year resulting in decreased non-
controlling interest. Westpac Banking Corp total equity increased from 58,120 million to

Corporate accounting Assignment 7
around 61,288 million (Westpac Group 2017). This increase was contributed to to increased
net profit over.
Analysis the Debt as well as Equity Position of Westpac Banking Corp and NAB
Debt and equity position in 2017
As on June 30, 2017
Details about debt and equity NAB
($'000)
Westpac ($'000)
Debt 737,008 790,533
Total equity 51,317 61,342
Debt / Equity ratio 14.
36
12.89
From the above analysis, it is evident that NAB shareholder’s equity was approximately
51,317 million (Investing.com 2018). It total debt was 737,008. This means that NAB is
overlying on debt to finance its operations rather than owner’s equity. On the other hand,
Westpac total debt was 790,533 million in 2017 while its equity was 61,342 (Westpac Group
2017). WBC debt/equity ratio was 12.89 compared to 14.36 for NAB meaning that WBC is
using relatively low amount of debt compared to its counterpart.
CASH FLOWS STATEMENT
Items Reported in Westpac Banking Corp and NAB Cash Flows Statements
NAB: Items in the cash flow

Corporate accounting Assignment 8
From NAB cash flows statement analysis several items were reported. These items are
categorized into three; that is, cash from the operations, the cash from the investments and
finally cash from the financing. Items reported in operating activities were amount of interest
received as well as amount of interest paid. NAB Interest received reduced from $28,338

Corporate accounting Assignment 9
million to $27,176 million whist it interest paid declined from $15,592 million to $14,315
million. Other item reported here is the dividend received. NAB dividend received increased
from 21 million to 36 million (Investing.com 2018). Life insurance was another item which
entailed premiums, investment revenue received as well as other revenue received, policy
payments as well as commission expenses. NAB premium and its other revenue received
decreased from 9,426 million to 76 million whilst it investment revenue received declined
from 1,797 million to 5 million (NAB 2017). There was also net trading income paid which
decreased from 3,351 million to 3,198 million. Additionally, there was operating expense
paid, income tax paid and other operating income received. Besides, there are trading
securities, loans and advances, deposits as well as other borrowings, net movements in the
life insurance liabilities and assets as well as net increase in the deposits with the central
banks.
Items in the investing activities section comprised of the movement in the debt instruments at
the fair value via the other comprehensive income; that is, disposal and purchases and
proceeds from the maturity, movement in the other equity and debt instruments
(Investing.com 2018). Other items were purchases of the controlled entities as well as the
business combination, proceeds from sales of PPE, proceeds on the sales of the joint ventures
and associates, proceed from the sales of the controlled entities as well as purchases of the
PPE.
Items reported in financing activities section include includes repayment of the bonds that
increased from 29,543 million to 32,426 million, proceeds from the other debt issues as well
as repayment of the other debt issues. Other item reported is proceeds from issuance of the
bonds and repayment of the other contributed equity and lastly distribution and dividend paid
that increased from 4,593 million to 4,750 million (Investing.com 2018).

Corporate accounting Assignment 10
Westpac: Items in the cash flow
Westpac Banking Corporation cash flow statement also comprised of numerous items
categorized into cash from the operating activities, cash from the financing activities as well

Corporate accounting Assignment 11
as the cash from the investing activities. Items in operating activities section entails interest
received that decreased from 31,817 million to 31,133 million. Another item was interest paid
that decreased from 16,721 million to 15,415 million (Westpac Group 2017). Dividends
received exclusive of the life business, other non-interest incomes, operating expenses paid
out, dividend received, income tax paid as well as payments to the policyholders as well as
supplier are also other items reported in the section (Investing.com 2018).
Items in the investing activities section comprised of proceeds from the available-for-sale
security, purchase of the available-for-sale security, net movement on the amounts due
from/to the controlled purchase of the PPE, proceeds from the sale of the associates, purchase
of the intangible assets, proceeds from the disposal of the controlled units as well as net
decrease or increase in the investments in the controlled entities. WBC proceeds from the
available-for-sale security increased from 18,779 million to 25,717 million (Investing.com
2018).
Items recorded in the WBC’s financing activities section of comprised of proceeds from the
share entitlements offer, redemption of the loan capital, dividend reinvestment plan, issues of
the loan capital, purchase of the RSP treasury shares, net increase or decrease in the debt
issues, payment of the dividends, proceeds from application of the employees options, shares
purchased for the delivery of the employee share plan, payment of the dividends, net sale of
the other treasury share as well as redemption of the 2006 Trust Preferred security
(Investing.com 2018).
Analysis of Westpac Banking Corp and NAB based on Cash Flow Statement
Based on the above analysis, it is evident that NAB amount of cash from operations
decreased from 14,460 million to 13,217 in the year 2017 (Investing.com 2018). Further, the
total amount in investment activities for NAB decreased from 9,970 million to 313 million in

Corporate accounting Assignment 12
the year 2017(NAB 2017). Additionally, cash from financing undertakings decreased from
9,496 million to around -331 million. The decrease was due to significant decrease in it
proceeds from the issuance of the bonds.
NAB: Table on cash flow movement for the three broad categories
2017 2016 2015
Cash flow from operating
activities
13,217 14,460 14,562
cash flows from investing
activities
313 9,970 694
Cash flow from financing
activities
(331) 9,496 ( 2,610)
Effect on net cash 12,573 13,986 12,646
Westpac Banking Corporation cash from the operating activities as at June 2017 was 2,820
million this was an increase from the past three years since 2015. Its cash flow from the
investing activities was 1,698 million as at June 2017 a major increase from 2015 and 2016.
On the other hand, Westpac Banking cash from the financing activities as at June 2017 was
552 million which an increase from the previous years since 2015 (Westpac Group 2017).
WEB: Table on cash flow analysis based on three categories
Particulars 2017 2016 2015
Cash flow from operating
activities
2,820 5,497 (541)
cash flows from investing (1,698) (7,245) (18,715)

Corporate accounting Assignment 13
activities
Cash flow from financing
activities
552 4,573 5,513
Net change in cash 18,397 17,015 14,770
Comparative Analysis of Westpac Banking Corp and NAB
As on June 30th 2017
Particulars NAB
($'000)
WBC
($'000)
Cash flow from operating activities 13,217 2,820
cash flows from investing activities 313 1,698
Cash flow from financing activities (331) 552
Effect t net cash 12,573 18,397
From the above analysis, it is evident that Westpac was doing better in the past years in cash
flow production compared to NAB. In fact, the assessment indicates that WBC has been in a
good position to produce significant cash flow from investment and financing activities;
therefore, WBC has high amount of cash over the period.
OTHER COMPREHENSIVE INCOME STATEMENT
Items Reported In Other Comprehensive Income Statement
Based on NAB (2017), the main items reported in the bank’s statement of the other
comprehensive income include fair value variations on the financial liabilities that is
designated at the fair value attributable to bank’s own credit risk. The fair value variation

Corporate accounting Assignment 14
reported in the year 2017 was around 11 million which was a major increase from the
previous year (Investing.com 2018). Another item reported in the statement is revaluation of
the land and buildings. The amount for revaluation of the lands and buildings was at 1 million
in the year 2017 compared to -1 million which was reported in 2016. This shows that
revaluation of the lands and buildings increased with significant margin over the period. The
third item reported on the equity statement was currency adjustment on the translation of the
other contributed equity. This amount was at 4 million in 2017, an increase from -183 million
reported in the year 2016. Such means that the amount increased over the year (NAB 2017).
The fourth item was equity instruments at the fair value via the other comprehensive income
which comprised of the tax on the items transferred to the equity directly and revaluation
losses. The tax on the items transferred to the equity increased as from 23 million in 2016 to
around 31 million. All the above items formed the total items which would not at any point
be reclassified to the income statement. Other items reported in the statement include those
items which would be reclassified subsequently to income statement. These items included
the cash flow hedges; that is, losses transferred to income statement and gains on the cash
flow of the hedging instrument. The other item was the foreign currency translation reserves;
that is transfers to income statement on a disposal of the foreign operations as well as
currency adjustments on the translation of the foreign operations. There are also revaluation
gains and gains from the sale transferred to income statement. The items reclassified
subsequent to the income statement plus items that would not be reclassified to the profit or
loss statement forms other comprehensive income.
NAB: Items in the other comprehensive income

Corporate accounting Assignment 15
Items reported in the other comprehensive income in Westpac Banking Corp include gains or
losses on the available-for-sale security; that is, recognized in the equity and transferred to
the income statements (Bradbury 2016). Another item reported in the statement is gains or
losses on the cash flow hedging the instruments; that is, recognized in the equity and
transferred to the income statements. There are also exchange variances on the translation of
the overseas actions which is said to have decreased from 238 million in 2016 to 116 million
in 2017 (Westpac Group 2017). The statement also comprises of income tax on those stuffs
taken to or the one shifted from the equity: that is, available-for-sale security reserves or the
cash flow hedging reserves. There is also the category of share of the associates’ of the other
comprehensive income; that is, the recognized in the equity and shifted in the income
statement.
Westpac: Items in the other comprehensive income

Corporate accounting Assignment 16
The reason why the items reported in other comprehensive income statement are not
recorded in the income statement
Those items in other comprehensive statement are not necessarily reported in the income
statement (Elschner & Vanborren 2009). This is based on the fact that the items are yet to be
realized as incomes thus no need to report them to the income statement till they are realized.
Analysis of the Other Comprehensive Income between Westpac Banking Corp and
NAZ
2017
NAB
($'000)
WBC
($'000)
Items not reclassified to income statement 46 -32
Items reclassified to income statement. (359) 26

Corporate accounting Assignment 17
other comprehensive income (313) (6)
Based on the other comprehensive income statement analysis, it is evident that the two banks
differed significantly. Basically, it is evident that items recorded in Westpac Banking Corp
other comprehensive income statement was higher than that one of NAB.
Whether the Other Comprehensive Income Items ought to be included while assessing
Managers’ Performance
With the fact that items reported in other comprehensive income statement result in a decline
in organization’s net income, the items and in particular other comprehensive income
analysis ought to be included while examining or evaluating managers’ performance
(Bradbury 2016). This is due to the notion that items reported in the statement have
significant impact on the organization’s profitability and in particular net income generation
(Pascan 2014).
ACCOUNTING FOR CROPORATE INCOME TAX
The Tax Expenses Reported in Westpac Banking Corp and NAB Latest Financial
Statements
Tax expenses usually entail income before tax then multiplied by a specific tax rate.
Effective Tax Rate for the Two Companies
Effective tax rate is usually computed by dividing income tax expenses by the EBIT
(Elschner & Vanborren 2009). Therefore, in our case, effective tax rate for NAB and
Westpac Banking Corp would be as shows below:

Corporate accounting Assignment 18
Effective tax rate
2017
NAB Westpac
(A): Income tax expense 2,480 3,518
(B): Profit before tax 8,661 11,515
Effective rate of tax (A x 100/B) 28.63% 30.55%
Based on the above computation, Westpac is found to have relatively higher effective tax rate
in comparison to NAB.
Comments on the Deferred Tax Assets/Liabilities
NAB deferred tax assets was approximately 1,988 in the year 2017 while it had no deferred
tax liabilities within this year. On the other hand, Westpac Deferred tax asset in 2017 was
1,112 million while it deferred tax liabilities in the same year was 10 million (Westpac Group
2017). These are reported in order to provide for provision for the future taxation arising
whenever taxable income is relatively less than income indicated in the profit and loss
statement. To be more specific, deferred tax assets as well as the liabilities are usually
reported in the firms’ balance sheets in order to give a provision for future taxation that might
arise whenever the taxable incomes are significantly lower than the net incomes or the profit
generated before tax.
Whether There Was an Increase or Decrease in Deferred Tax Assets or Liabilities
NAB:

Corporate accounting Assignment 19
Westpac Increase / (Decrease)
2016 2017 Amount
Deferred tax assets 1,925 1,988 63
Deferred tax liabilities - - -
NAB deferred tax assets increased over the year with a significant margin moving from 1,925
million by 2016 to around 1,988 million by 2017. Nonetheless, since there was no deferred
tax liabilities it is evident that the bank deferred neither tax liabilities did not increase nor
decrease. This is based on the notion that there was nothing to increase or decrease.
Westpac:
Westpac Increase / (Decrease)
2016 2016 Amount
Deferred tax assets 1,35
1
1,112 -239
Deferred tax liabilities 36 10 - 26
Westpac deferred tax assets decreased as from 1,351 million in 2016 to 1,112 million in
2017. Its deferred tax liabilities also decreased as from 36 million in 2016 to 10 million in
2017.
Cash Tax Amount for Both Companies

Corporate accounting Assignment 20
Cash tax is usually equals to = the book tax + upsurge in company’s deferred tax liabilities –
increment in company’s deferred tax assets
Therefore, Cash tax amount for NAB = 2,480 + (0) – (1,988-1,925) = 2,417
Cash tax amount for Westpac Banking Corporation = 3,518 + (10-30) – (1,112-1,351) =
3,737
Cash Tax Rate for Both Companies
Cash tax rate is usually computed by dividing cash tax amount by the EBIT.
Cash tax rate for NAB = 2,417/ 8,661 = 27.91%
Cash tax rate for Westpac = 3,737/ 11,515 = 32.45%
Hence, Westpac seems to enjoy relatively higher cash tax rate compared to NAB.
The reason behind cash tax rate being different from book tax rate
Cash tax rate is completely different from the book tax rate since the two are computed
differently; hence, yield different results. In essence, cash tax rate is computed based on
original income tax expense plus the variation in the deferred tax asset and the company’s
deferred tax liabilities while book tax rate is computed by dividing original tax expense by
the reported EBIT (Elschner & Vanborren 2009).
Conclusion
In conclusion, Westpac and NAB are some of the largest banks operating in Australia. In fact,
based on their latest financial statements analysis, it can be concluded that the two banks are
doing relatively better in terms of cash flow generations. Through their owner’s equity
analysis, it can be concluded in the latest financial year 2017/2018 Westpac Banking

Corporate accounting Assignment 21
Corporation had relatively high equity compared to NAB. This shows that WBC is in a better
position in managing equity compared to its counterpart. Besides, it can be concluded that
both WBC and NAB offered steady share price growth lately which is a good picture to
investors and shareholders.

Corporate accounting Assignment 22
REFERENCES
Bradbury, ME 2016, ‘Discussion of ‘Other comprehensive income: a review and directions
for future research,’ Accounting & Finance, 56(1), 47-58.
Elschner, C & Vanborren, W 2009, Corporate effective tax rates in an enlarged European
Union (No. 14). Directorate General Taxation and Customs Union, European Commission.
Investing.com 2018, National Australia Bank Ltd (NAB): Viewed from:
https://www.investing.com/equities/national-australia-bank-limited-ratios (Accessed at 18th
September 2018)
Investing.com 2018, National Australia Bank Ltd (NAB): Viewed from:
https://www.investing.com/equities/national-australia-bank-limited-income-statement
(Accessed at 18th September 2018)
Investing.com 2018, National Australia Bank Ltd (NAB): Viewed from:
https://www.investing.com/equities/national-australia-bank-limited-balance-sheet (Accessed
at 18th September 2018)
NAB 2017, National Australian Bank annual report 2017: Viewed from:
https://www.nab.com.au/content/dam/nabrwd/documents/reports/corporate/2017-annual-
financial-report.pdf (Accessed at 18th September 2018)
Investing.com 2018, Westpac Banking Corporation: Viewed from:
https://www.investing.com/equities/westpac-banking-corporation-ratios (Accessed at 18th
September 2018)

Corporate accounting Assignment 23
Investing.com (2018), Westpac Banking Corporation: Viewed from:
https://www.investing.com/equities/national-australia-bank-limited-balance-sheet (Accessed
at 18th September 2018)
Investing.com (2018), Westpac Banking Corporation: Viewed from:
https://www.investing.com/equities/national-australia-bank-limited-income-statement
(Accessed at 18th September 2018)
Westpac Group (2017), 2017 Westpac Group Annual report: Viewed from:
file:///C:/Users/paul/Desktop/2017_Westpac_Annual_Report_Web_ready_&_Bookmarked.p
df (Accessed at 15th September 2018)
Pascan, ID (2014), ‘Does comprehensive income tell us more about an Entity’s Performance
Compared to Net Income,’ Study on Romanian Listed Entities.