Corporate Accounting: Cash Flow, Other Comprehensive Income Statement, and Corporate Income Tax

This article provides an analysis of the cash flow statement, other comprehensive income statement, and corporate income tax of Cromwell Property Group. It includes a discussion of the items under the cash flow statement, the reasons for the difference in reported taxation expenses and taxation expenses as per the applicable tax rate, and the presence of both deferred tax assets and deferred tax liabilities. The article also explains the difference between income tax expenses and income tax payable.

Running head: CORPORATE ACCOUNTING
Corporate Accounting
Name of the Student
Name of the University
Author’s Note

1CORPORATE ACCOUNTING
Cash Flow Statement
Requirement [i]
The items under the 2017 Consolidated Statement of Cash Flows of Cromwell Property
Group are discussed below:
Cash Flow from Operating Activities: The main items of Cromwell Property Group under this
head are receipts and payments for the course of operations, interest and distributions received
and payment of finance cost and income tax (cromwellpropertygroup.com, 2018).
Decrease in the receipts in the course of operations can be seen in 2017 as compared to
2016 that is $342 million from $354.7 million and decrease in revenue might be the reason for
this. After that, increase in payment in the course of action can be seen in 2017 as compared to
2016 that is ($154.4 million) from ($150.2) million and increase in credit purchase might be the
reason for this (cromwellpropertygroup.com, 2018). Decrease in interests received in 2017 can
be seen than 2016 that is $2.1 million from $4.2 million and decrease in investment by the
company can be the reason for this. Distribution received is the distribution of profit and increase
in this item can be seen that is $24.6 million in 2017 and $8.7 million in 2016. Increase in the
payment of finance cost is there in 2017 as compared to 2016 that is ($55.4 million) and ($54.8
million) respectively. Lastly, increase in profitability leads to the increase in tax payment by the
company; that is ($4.6 million) and ($3.5 million) in 2017 and 2016 respectively
(cromwellpropertygroup.com, 2018).
Cash Flow from Investing Activities: Cromwell Property Group has recorded many items
under this head of cash flow. Cromwell Property Group had to pay for purchasing the investment

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property that leads to the increase to ($139.3 million) in 2017 from ($74.9) million in 2016.
However, decrease in the proceeds from the sales of the same can be seen. After that, decrease in
the payment for equity investment can be seen that is ($17.9 million) in 2017 and ($18.6) million
in 2016 (cromwellpropertygroup.com, 2018). Decrease in the payment of intangible assets can
also be observed in 2017 that is ($0.4 million) and ($0.9 million) in 2016. At the same time,
increase in the payment for property, plant and equipment can be seen that is ($1.3 million) in
2017 and ($0.7 million) in 2016 and the intention to increase the asset base can be the reason
behind it. There has been decrease in the proceeds from the repayment of related party loans in
2017 that is $1.2 million from $12.6 million in 2016. It can be observed that Cromwell Property
Group has made some major acquisition of the disposal group in 2017 that is ($145.6 million) in
2017 where there was not any this kind of acquisition in 2016 (cromwellpropertygroup.com,
2018).
Cash Flow from Financing Activities: The presence of many items can be seen under this head
of cash flow of Cromwell Property Group. There is major increase in the proceeds from bank
borrowings in 2017 that is $302.7 million from $186.9 million in 2016 and drawn of loans is the
major reason for this. At the same time, Cromwell Property Group has made major repayment of
bank and other borrowings that is ($95.6 million) in 2017 and ($79.8 million) in 2016
(cromwellpropertygroup.com, 2018). Minor increase in the proceeds from the stapled securities
can be seen in the year 2017 that is $1.1 million from $1 million in 2016. Due to the increase in
the profitability of Cromwell Property Group, the company paid increased dividends in 2017 as
compared to 2016 that is ($139.9 million) from ($130.9 million). Cromwell Property Group has
not made any payment for the issue of equity for the year 2017 as compared to ($0.1 million) in
2016. Lastly, Cromwell Property Group has paid ($2.6 million) for the settlement of the

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derivatives financial instruments and this outflow was nil in 2016 (cromwellpropertygroup.com,
2018).
Requirement [ii]
2017 ($'M) 2016 ($'M) 2015 ($'M)
(250.0)
(200.0)
(150.0)
(100.0)
(50.0)
-
50.0
100.0
150.0
200.0
154.3 159.1 144.2
(189.7) (176.0)
(51.4)
59.9
(50.8)
(94.0)
Cash Flow from Operating
Activities
Cash Flowv from Investing
Activities
Cash Flow from Financing
Activities
Figure 1: Analysis of the Cash Flow Heads of Cromwell Property Group from 2015 to 2017
(Source: cromwellpropertygroup.com, 2018)
As per the above figure, there is major increase in the cash inflow from operating
activities in Cromwell Property Group from 2015 to 2016; that is $144.2 million and $159.1
million in 2016 respectively. Increase in the receipts in the course of operations is the prime
reason for this increase. However, decrease in this cash inflow can be seen in 2017 that is $154.3
million. Decrease in receipts and increase in payment in the course of operations is the major
reason for this (cromwellpropertygroup.com, 2018).

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It can also be observed from the above figure that there is a continuous increasing trend
in the cash outflow from investing operations in Cromwell Property Group; that is ($51.4
million), ($176 million) and ($189.7 million) in 2015, 2016 and 2017 respectively. Major
increase in payments in some of the heads like payment for investment properties, borrowings,
loans, property, plant and equipment and others is the main reason for this increase
(cromwellpropertygroup.com, 2018).
Improvement in the cash flow under financing activities in Cromwell Property Group can
be seen that is ($94 million), ($50.8 million) and $59.9 million in 2015, 2016 and 2017
respectively. Some of the major aspects like proceeds from bank borrowings, issue of stapled
shares and others are responsible for this (cromwellpropertygroup.com, 2018).
Other Comprehensive Income Statement
Requirement [iii]
From the 2017 Consolidated Statements of Comprehensive Income, it can be observed
that Cromwell Property Group has reported three items under the other comprehensive income
statement. They are ‘Items that may be reclassified to profit or losses, ‘Exchange differences on
translation of foreign operations’ and ‘Income tax related to these items’
(cromwellpropertygroup.com, 2018).
Requirement [iv]
Understanding about the above-mentioned items is provided below:
Reclassification of profit or loss is considered as one major aspect for the business
organizations as it helps in protecting the integrity of profit or loss so that the users of the

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financial statements can be provide with the relevant information about the profit and loss related
transactions that occurred at the current financial year. Moreover, it assists in improving the
comparability of the similar items recognized either profit or loss (Hodgson & Russell, 2014).
Exchange difference of the transactions of foreign operations is considered as another
major aspect for the business organizations that help the business entities in converting the
foreign currency of the cross-border subsidiaries into the current in which the parent company
continues their financial reporting (Hutson & Laing, 2014). Thus, it is provided with great
importance at the time of business consolidations so that the determination of foreign currency
into the actual currency can be done. This technique demands the companies to re-measure the
foreign currencies so that the profit o loss from the cross-border subsidiaries can be recorded in
the currency of the parent company (Jacque, 2013).
The Australian taxation law puts the obligation on the companies to impose taxation of
the following two aspects. For this reason, this taxation expense in recorded under the other
comprehensive income statement.
Requirement [v]
The statement of other comprehensive income provides the users with the mix view about
the actual profit and comprehensive profit of the companies so that the companies can present a
diversified picture of company profitability (Eaton, Easterday & Rhodes, 2013). Cromwell
Property Group prepared the other comprehensive income statement so that they can provide the
company with all the required information about the above-discussed items of other
comprehensive income. In this context, it needs to be mentioned that other comprehensive
income statement is a mixture of standard income and other comprehensive income. Thus, in the

6CORPORATE ACCOUNTING
presence of all the above factors, the above-discussed items of other comprehensive income do
not come under the income statement or the profit or loss statement of the business entities
(Khan & Bradbury, 2014).
Accounting for Corporate Income Tax
Requirement [vi]
It is the obligation on Cromwell Property Group to carry out their taxation operation as
per the regulation of Australian taxation law. The applicable tax rate for the company for the
year 2017 and 2016 are 30%. According to the financial statements, the reported income tax
expenses for Cromwell Property Group for the year 2017 and 2016 are $1.5 million and $3.5
million respectively (cromwellpropertygroup.com, 2018).
Requirement [vii]
From the analysis of the financial statements of Cromwell Property Group, it can be seen
that the company has difference in reported taxation expenses and taxation expenses as per the
applicable tax rate. There are some reasons for this difference. Fair value impairment is one of
the reasons and the group had to charge income tax on these after the reporting period. The next
reason is the acquisition of some entities by Cromwell Property Group trust and the company
had to adjust tax on this transaction. Change in the recognized tax losses is the next reason for
the difference. Due to this, Cromwell Property Group had to adjust taxation on this item after the
reporting period. One major reason is the adjustments of the taxation expenses for the company
with the taxation expense of 2017 and 2016. This adjustment also led to the difference in the
taxation expenses (cromwellpropertygroup.com, 2018).

7CORPORATE ACCOUNTING
Requirement [viii]
The presence of both deferred tax assets and deferred tax liabilities can be seen in the
financial statements of Cromwell Property Group. The reported differed tax assets by the
company for the years 2017 and 2016 are $3.4 million and $1.3 million respectively. On the
other hand, the reported deferred tax liabilities for the years 2017 and 2016 are $0.9 million and
$1.9 million (cromwellpropertygroup.com, 2018). According to the taxation policy of Cromwell
Property Group, the main reason for the company for reporting both differed tax assets and
liabilities is the tax rate difference when recovering the assets and settlements of liabilities. The
factors responsible for the reporting of deferred tax assets are employee benefits, transactions
costs, investment scheme investments, tax losses recognition and unrealized foreign currency
loss or gain. On the contrary, the right of the management for intangible asset is the reason for
deferred tax liabilities (Laux, 2013).
Requirement [ix]
The financial statements of Cromwell Property Group show both the presence of current
tax assets and income tax payable or current tax liability. The current tax assets of Cromwell
Property Group for the years 2017 and 2016 are $1.2 million and $1.7 million respectively. On
the other hand, the recorded current tax liability for 2017 and 2016 is $1.7 million and $2.2
million respectively (cromwellpropertygroup.com, 2018). There is one major reason that creates
difference between income tax expenses and income tax payable. Income tax expenses refer to
the taxation expense for the present financial year that Cromwell Property Group is needed to
pay in the next year. However, income tax payable refers to that amount of income tax that the
company is required to pay due to the less than required payment of the taxation expenses for the
last year due to the different in tax rate or any other reason.

8CORPORATE ACCOUNTING
Requirement [x]
Cromwell Property Group has reported different taxation expenses in income statement
and cash flow statement. The taxation expenses of Cromwell Property Group as per income
statement for the years 2017 and 2016 are $1.5 million and $3.5 million respectively; and the
taxation expenses for the group for 2017 and 2016 are $4.6 million and $3.5 million respectively
(cromwellpropertygroup.com, 2018). Hence, difference can be seen. The income statement of the
company includes the taxation expenses for the present financial year that needs to be paid in the
next year. However, the cash flow statements include the taxation expenses; and it can be the
advance payment of tax for the next year or the payment of income tax payable for the last year.
This is the main reason for the difference (McGee, 2014).
Requirement [xi]
It is interesting to observe the way Cromwell Property Group has carried out their
taxation accounting by complying with all the required regulations and standards of Australian
taxation law. For this reason, it is hard to find any confusing or surprising factor in the taxation
operation of Cromwell Property Group. At the same time, the taxation treatment of Cromwell
Property Group provides the users with the new insight about the adjustments of the elements in
tax reconciliation statements so that there is not any taxation deficiency. Moreover, Cromwell
Property Group has provided all the required clarifications and justifications about the taxation
treatment of Cromwell Property Group so that the users do not face any difficulty in
understanding the taxation adjustments.

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References
Hodgson, A., & Russell, M. (2014). Comprehending comprehensive income. Australian
Accounting Review, 24(2), 100-110.
Hutson, E., & Laing, E. (2014). Foreign exchange exposure and multinationality. Journal of
Banking & Finance, 43, 97-113.
Jacque, L. L. (2013). Management and control of foreign exchange risk. Springer Science &
Business Media.
Eaton, T. V., Easterday, K. E., & Rhodes, M. R. (2013). The presentation of other
comprehensive income. The CPA Journal, 83(3), 32.
Khan, S., & Bradbury, M. E. (2014). Volatility and risk relevance of comprehensive
income. Journal of Contemporary Accounting & Economics, 10(1), 76-85.
Laux, R. C. (2013). The association between deferred tax assets and liabilities and future tax
payments. The Accounting Review, 88(4), 1357-1383.
McGee, R. W. (2014). The Ethics of Tax Evasion: A Case Study of Brazil. In Handbook of
Research on Economic Growth and Technological Change in Latin America (pp. 374-
393). IGI Global.
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2017-Annual-Report-final-web.pdf

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(2018). Cromwellpropertygroup.com. Retrieved 24 May 2018, from
https://www.cromwellpropertygroup.com/__data/assets/pdf_file/0023/22919/
AnnualReport_CMW_2016.pdf
(2018). Cromwellpropertygroup.com. Retrieved 24 May 2018, from
https://www.cromwellpropertygroup.com/__data/assets/pdf_file/0022/22918/
AnnualReport_CMW_2015.pdf