Cleanaway Waste Management Financial Analysis

This assignment delves into the financial reporting practices of Cleanaway Waste Management Limited, focusing specifically on their taxation policies and treatments. It requires an analysis of income tax expenses versus payments, the explanation of deferred tax assets and liabilities, and an evaluation of how the company's tax position is viewed by authorities. The assignment emphasizes understanding the complexities of income tax accounting and its presentation in financial statements.

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

1
CORPORATE ACCOUNTING
Table of Contents
Requirement i).................................................................................................................................1
Requirement ii)................................................................................................................................2
Requirement iii)...............................................................................................................................2
Requirement iv)...............................................................................................................................3
Requirement v)................................................................................................................................4
Requirement vi)...............................................................................................................................4
Requirement vii)..............................................................................................................................5
References list:.................................................................................................................................6

2
CORPORATE ACCOUNTING
Requirement i)
After conducting the analysis of annual report of Cleanaway waste management limited,
it has been found that the items of equity comprised of issued capital, retained earnings and
reserves. Other items involve non controlling interests and parent entity interests. The value of
total equity for the financial year 2017 and 2016 is reported at $ 1825 million and 1781.5
million.
Issued capitals are the capital that has already been issued to shareholders of company
and it represents the share of stocks that has been offered for sale to investors. Shares that are
issued correspond to amount of subscribed share capital. Retained earnings are the earnings that
are reinvested by company into the business and they are not distributed to shareholders by way
of dividends (Henderson et al., 2015). Reserves are one of the components of shareholder equity
and it appears on the liabilities side of balance sheets.

3
CORPORATE ACCOUNTING
Requirement ii)
Tax expenses of Cleanaway waste management limited as mentioned in the latest annual
report for the financial year 2017 and 2016 stood at $ 36.5 million and $ 18.5 million
respectively.
Requirement iii)
The accounting income of company as depicted in the annual report of Cleanaway waste
management limited for both the financial year 2017 and 2016 is recorded at $ 109 million and $
61.6 million respectively. Corporation tax rate that is applicable to company is 30%. Now, the
accounting income times the company tax rate for both the years stood at ($ 109* 30%= 32.7)
and ($ 61.6* 30%=18.48). On other hand, income tax expenses for both the years stood at $ 36.5
million and $ 18.5 million respectively. From the computation of the above figures, it can be
seen that the income tax expenses is not same accounting income times the taxation rate. Income
tax expenses is more than accounting income tax expenses and the differences in these value is
attributable to the fact that the accounting treatment of taxation is different from that of
accounting income (Warren & Jones, 2018). The accounting treatment of taxation and financial
accounting are different that led to differences between the accounting income times the taxation
rate and income tax expenses. Accounting for income taxation is regarded as difficult because of
difference between tax accounting treatment and financier accounting treatment (Cortesi et al.,
2015).

4
CORPORATE ACCOUNTING
Requirement iv)
Cleanaway waste management limited has reported net deferred tax assets under the head
noncurrent assets and the total amount reported on $ 89.5 million in financial year 2017 and
110.3 in financial year 2017. Organization has reported deferred tax assets in their balance sheet
because amount of taxation recorded in the income statement is lower than the tax that is to be
paid to taxation authority. Presence of deferred tax assets is indicative of the fact that company
might receive tax benefits in future.
Requirement v)
The income tax payable by company in the financial year 2017 and 2016 is recorded at $
16.7 million and 10.7 million. There has increase in income tax payable in the current financial
year and there are no current tax assets that are held by company in both the financial year.
Income tax payable is the amount of tax that is due and must be paid and income tax expense is
the estimation of the amount of tax that is owed by company as per the taxation standard. Income

5
CORPORATE ACCOUNTING
tax payable is the liability of company that should be actually paid and income tax expense is the
estimation appearing on the income statement (Hoskin et al., 2014).
Requirement vi)
The income tax paid as stated in the cash flow statement for the financial year 2017 and
2016 is recorded at ($ 8.6) million and $ 7.4 million respectively. Financial year 2017 recorded
income tax paid by amount ($ 8.6) million and there was tax refunding of $ 7.4 million. On other
hand, income tax expense recorded in the both the years as depicted in the income statement
stood at $ 36.5 million and $ 18.5 million respectively. It is clear indicated by the figure that
income tax expenses is not same as income tax paid. Income tax paid is the actual amount of tax
that has been paid by organization, whereas income tax expenses is the estimation of the amount
of taxation that is required to be paid to government or taxation authority.
Requirement vii)
Analysis of annual report of Cleanaway waste management limited provides users with
the knowledge about different types of taxation and the treatment in different account. All the
entry relating to taxation has been presented in the annual report in a segregated way that assist
users in clear and proper understating of the concept of taxation. Deferred tax assets and deferred

6
CORPORATE ACCOUNTING
tax liabilities have been explained in separate section along with its components (Hoyle et al.,
2015).
Net profit after the income tax that are attributable to equity holders are used for the
computation of basic earnings per share. Moreover, the computation of share based payment
expense is done by deducting net taxation. Franking credits have also been explained in relation
to treatment for taxation. Offsetting of deferred tax assets and deferred tax liabilities are done
when it is enforceable legally and is related to current taxation that is levied by taxation
authority. Settlement of current tax liabilities and assets is done by organization on a net basis or
else there will be simultaneous realization of tax assets and liabilities (Wong & Yeung, 2014).
Amounts that are directly recognized in equity incorporate the deferred and current tax balances.
The particular aspect of tax position of the group is currently being viewed by taxation authority
of New Zealand

7
CORPORATE ACCOUNTING
References list:
Cortesi, A., Tettamanzi, P., Scaccabarozzi, U., Spertini, I., & Castoldi, S. (2015). Advanced
Financial Accounting: Financial Statement Analysis–Accounting Issues–Group
Accounts. EGEA spa.
Henderson, S., Peirson, G., Herbohn, K., & Howieson, B. (2015). Issues in financial accounting.
Pearson Higher Education A
Horton, J. (2018). Advanced Financial Accounting and Reporting: Theory, Practice and
Evidence. Routledge.
Hoskin, R. E., Fizzell, M. R., & Cherry, D. C. (2014). Financial Accounting: a user perspective.
Wiley Global Education.
Hoyle, J. B., Schaefer, T., & Doupnik, T. (2015). Advanced accounting. McGraw Hill
Warren, C. S., & Jones, J. (2018). Corporate financial accounting. Cengage Learning.
Williams, J. (2014). Financial accounting. McGraw-Hill Higher Education.
Wong, S. T., & Yeung, C. S. (2014). Advanced Financial Accounting. Pearson Education Asia
Limited.

8
CORPORATE ACCOUNTING