Corporate Accounting | Sample Assignment

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

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Table of Contents
Cash Flow Statement.......................................................................................................................2
Significant Items of the Cash Flow Statement............................................................................2
Comparative Analysis of Three Classification of Cash Flow Statement....................................4
Other Comprehensive Income Statement........................................................................................5
Items reported as Other Comprehensive Income.........................................................................5
Understanding of Items shown under Comprehensive Income...................................................6
Reporting of Comprehensive Income..........................................................................................6
Accounting for Income Tax.............................................................................................................7
Current Tax Expenses..................................................................................................................7
Tax rate Charged by the business................................................................................................7
Deferred Tax Assets and Liabilities............................................................................................8
Current Tax Assets and Liabilities..............................................................................................9
Difference in Income tax expenses and Income Tax paid...........................................................9
Review of the Tax policy of the business....................................................................................9
Reference.......................................................................................................................................11
Appendix........................................................................................................................................13

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Cash Flow Statement
Significant Items of the Cash Flow Statement
The cash flow statement is prepared by the company in order to show to the shareholders
of the company various activities which results in cash inflows and cash outflows in a business.
The main purpose of Cash flow statement is to determine the firm’s liquidity position and the
cash and cash equivalent balance at the end of the year (Reid and Myddelton 2017). For the
purpose of this assignment, Blackmores ltd has been selected and the financial statement of
Blackmores ltd is to be analyzed which will be discussed in the coming paragraphs.
The cash flow statement of Blackmores ltd has been classified into three activities which
are cash from operating activities, cash from investing activities and cash from financing
activities. The important items which are included in cash from operating activities are revenue
made from the customers, payments made to suppliers and income tax. The revenue which is
collected from the people for the sales of goods generates cash which are recorded in the cash
flow statement of the business. The revenue which is collected from the customers has slightly
decreased from 2016. The net revenue which the company has generated is $ 763,413,000 in
2017 and it was $ 766,436,000 for the year 2016. Then there is a payment which are made to the
suppliers and employees of the business. The cash spent amounts to $ 668,103,000 for the year
2017 which has increased from previous years. This signifies that the expenses which are
expenses of the company has increased. The income tax which is shown in the operating
activities part of the cash flow statement reveals that the income tax which is shown is only part
of the operating activities of the business which means that such is only the provision which the
company expects the business will be incurring in as income tax during the year.

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The investing activities of the business which is shown in the cash flow statement refers
to the various investments which are undertaken by thee management of the company during the
year. The significant items which are present in the investing activities of the business are
payments made for property, plant, equipment and intangibles which relates to the business
purchasing the particular asset or making additions to the existing asset. The additions which are
made to the properties, plants and equipment have been the highest in 2017 which is shown as $
14,567,000. Another significant item which is shown in the cash flow statement under investing
activity is interest received which means the amount of money received as interest for any
investment which has been undertaken by the company (Bhandari and Iyer 2013). The interest
received in 2017 is shown to be $ 384000 which has fallen from the previous year.
The financing activities of the business shows certain significant items which are loan
taken or loan repaid during a particular year and the dividend which is paid by the company.
Loan refers to the borrowings which are undertaken by the business for financing the activities of
the business and using the same as capital for the business. In 2015 as shown in the financial
statements, the company repaid a significant amount of loan which is shown at $ 29,000,000. In
2016 and 2017 the company took loan for the amount $ 11,357,000 and $ 23,727,000. The loan
taken by the business is used for financing of the activities of the business. The dividends which
are paid by the business refers to sharing of profits which is generated by the business and
declared as dividends during a particular period (Farshadfar and Monem 2013). The dividend
which is paid by the management has increased during 2016 and 2017 which suggest that the
company has issued more equity shares during 2016 and 2017.

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Comparative Analysis of Three Classification of Cash Flow Statement
As shown in the financial statements of Blackmores ltd, the cash flow statement is
classified on the basis of operating, investing and financial activities. The analysis of the three
classifications of the cash flow statement is shown in the table below with the help of charts:
Particular 2015 2016 2017
Net cash flows from operating
activities
71127
83,676 45,634
Net cash flows used in investing
activities
-3191
39,939 14,212
Net cash flows used in financing
activities
-51703
41,546 33,741
2015 2016 2017
-60000
-40000
-20000
0
20000
40000
60000
80000
100000
71,127
83,676
45,634
-3,191
39,939
14,212
-51,703
41,546
33,741
Comparative analysis of cash flow categories of
Blackmores Limited
As per the chart which is shown above, in 2015 the cash from operation is shown as $
71,127,000 which of a significant amount as shown in the financial statements. The cash from
investing activities and cash from financing activities are negative as shown in the chart above.

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The cash from investing activities is shown at a negative figure of $ 3191000 and the cash from
financing activities of the business is shown as $ 51703000 which is also shown in negative. In
2016, the cash which is generated from all the activities of the business is favorable and is shown
significantly higher than the amount results shown in the previous year. This shows that the
operation of the business has increased from the previous year and it also shows that the business
has developed from the last year. In 2017, the cash from operating activities have decreased from
previous year which is evident from the cash flow statement. The cash flow investing activities
and financing activities also show favorable results, however the figures have decreased from
previous year which shows that the business in 2017 has not engaged much in investing and
financing activities which is the basic reason for the cash which is generated is lower than
previous year’s results (Gupta et al. 2014).
Other Comprehensive Income Statement
The comprehensive income statement which is shown in the annual reports of the
company deals with certain item which are not shown in the financial statement of the business.
the comprehensive income statement shows revenues, finance cost, tax expenses, revenue from
discontinued operations (Khan and Bradbury 2014). As per the financial statements of
Blackmores ltd, the company has not prepared a separate statement for comprehensive income
but have shown the components of the other comprehensive income in the statement of income
itself.
Items reported as Other Comprehensive Income
As per the financial statements which is prepared for Blackmores ltd, the items which are
reported in other comprehensive income head are exchange difference which may have arise due

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to translation difference of currencies of foreign entities and Cash which is generated from hedge
contracts which are shown in the financial statements net of tax (Huang, Lin and Raghunandan
2015). The above mentioned two items are shown in the income statement of the company.
Understanding of Items shown under Comprehensive Income
The exchange difference which arises from the translation of foreign currencies from
foreign entities reflects that the company is engaged in foreign trade and therefore in order to
show any income or expenses to ascertain the accurate profit, the business needs to translate the
money receive in terms of value used in home country. There are times when the translation
value fluctuates and therefore it is uncertain and nay difference which arises in revenue
generated and actual money received is shown in the comprehensive income statement. The
money which is generated from hedge contracts arises in a similar manner (Weil, Schipper and
Francis 2013). Hedging is term where the investor involves in activities of buying and selling on
the basis of market price of stocks in order to generate profits. The generation of profits depends
on the fluctuation of prices. Hence it is shown in the statement of income as an item of
comprehensive income which is added to net profit after tax to reveal the actual profit made by
the business from all activities.
Reporting of Comprehensive Income
The items of comprehensive income are recorded separate below the income statement or
all together separately because such items are of extra ordinary nature and does not related to day
to day business activity of the company. Comprehensive income is the mixture of other
comprehensive income and standard net income (Zhang and Andrew 2014). The items which are
reported in the comprehensive income statement is to disclose to the users of the financial

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statements all the business activities from which the business has generated revenues or incurred
expenses as the case may be and also because such items cannot be displayed in the income
statement of the company.
Accounting for Income Tax
Current Tax Expenses
The current tax expenses of Blackmores ltd which is shown in the financial statement of
the company for the year 2017 is shown to be $ 24,023,000 which has decreased from previous
year’s tax expenses which was shown as $ 43,391,000. The main reason for this reduction in tax
expenses can be attributed to the fall in the profit before taxes during the year 2017.
Tax rate Charged by the business
The net profit which is generated by the business for the year 2017 and 2016 respectively
as shown in the financial statements of the company is $ 58,208,000 and $ 100,020,000
respectively. The tax expenses which are charged by the company for 2017 and 2016 as shown
in the financial statement of the company is $ 24,023,000 and $ 43,391,000 respectively. The tax
rate which is applicable in Australia and which is complied by Blackmores ltd in the preparation
of the financial statement of the company is 30% (Robinson, Stomberg and Towery 2015). The
tax rate which if charged on the net profit of the company gives different results of tax expenses
which are lower than what is being paid by the business (Dhaliwal et al. 2013). This suggest that
there are certain deferred tax assets and deferred tax liabilities which are present in the financial
statement of the company. The financial statements of the company also show certain items
which are of comprehensive nature on which tax rate is also applicable as per the Australian tax
laws. Another reason for the difference between the tax expense applicable and the amount

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which is incurred in the financial statement is due to different tax rate which is charged on
extraordinary items which are present in the financial statements.
Deferred Tax Assets and Liabilities
Deferred tax asset arises when the company has paid taxes in excess amount than what
was required. On the other hand, deferred tax liabilities are completely opposite of deferred tax
assets. This happens when the tax liability paid by the company is less as compared to what is to
be paid as per accounting income (Laux 2013). As per the financial statement of Blackmores ltd,
the deferred tax assets of the company are shown as $ 29,461,000 for the year 2017 which has
increased from the previous year’s figure slightly. The deferred tax liability which is shown in
the financial statement of the company amounts to $ 10,224,000. The deferred tax assets of the
business arise due to temporary differences between the items which are recorded between two
different reporting period. Another reason for the deferred tax assets and liabilities is due to the
expense which are recurring in the financial statements of previous years which have been
carried forward from previous year.
Deferred tax assets and liabilities are considerations in financial statements only if they
can be used to set off current tax assets against current tax liabilities and the deferred tax assets
and liabilities relate to the same business and for the same accounting period under same tax
laws (Kasipillai and Mahenthiran 2013). The amount which is shown in the financial statement
of the company relates to the tax carried forward in previous year and also the tax expenses
which are related to the current year.

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Current Tax Assets and Liabilities
There are no current tax assets as per the financial statement of Blackmores ltd and the
current tax liabilities of the business is shown as $ 1,811,000 for the year. The Current tax
liabilities which are shown in the financial statements accrue to the current year. Accounting
always recognizes transactions on accrual basis which is a fundamental concept of accounting an
therefore the income tax payable amount will be shown in the financial statement of the
company. The figure of income tax payable is not same as income tax expenses because income
tax payable also contains taxes which are carried forward from previous year and also due to
deferred tax assets and liabilities which are recorded in the financial statements of the business.
Difference in Income tax expenses and Income Tax paid.
The income tax expenses which is shown in the statement of profit and loss account for
Blackmores ltd is $ 24,023,000 and the actual tax which is paid by the business as per the cash
flow statement of the company shows that the business has incurred $ 43,779,000 for the year.
The difference between the two amounts is because of sets off with deferred tax assets and
deferred tax liabilities of the business. The difference in the timing of charging the tax for the
business might be another reason for the difference between income tax expenses recorded and
income tax paid as per the financial statements of the business.
Review of the Tax policy of the business.
The analysis of the financial statements of the company revealed that the annual accounts
are prepared as per the relevant provisions and standards which are applicable to the business.
The financial statement. The company has a current tax liability and a deferred tax liability
which is shown in the notes to accounts and the combined figures comes under the statement of

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profit and loss of the company. The company follows all the relevant standards which are
applicable in Australia and has efficiently shown the treatment of tax in the financial statement
of the company.

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Reference
Bhandari, S.B. and Iyer, R., 2013. Predicting business failure using cash flow statement based
measures. Managerial Finance, 39(7), pp.667-676.
Dhaliwal, D.S., Kaplan, S.E., Laux, R.C. and Weisbrod, E., 2013. The information content of tax
expense for firms reporting losses. Journal of Accounting Research, 51(1), pp.135-164.
Farshadfar, S. and Monem, R., 2013. Further evidence on the usefulness of direct method cash
flow components for forecasting future cash flows. The international journal of
accounting, 48(1), pp.111-133.
Gupta, J., Wilson, N., Gregoriou, A. and Healy, J., 2014. The value of operating cash flow in
modelling credit risk for SMEs. Applied Financial Economics, 24(9), pp.649-660.
Huang, H.W., Lin, S. and Raghunandan, K., 2015. The volatility of other comprehensive income
and audit fees. Accounting Horizons, 30(2), pp.195-210.
Kasipillai, J. and Mahenthiran, S., 2013. Deferred taxes, earnings management, and corporate
governance: Malaysian evidence. Journal of Contemporary Accounting & Economics, 9(1),
pp.1-18.
Khan, S. and Bradbury, M.E., 2014. Volatility and risk relevance of comprehensive
income. Journal of Contemporary Accounting & Economics, 10(1), pp.76-85.
Laux, R.C., 2013. The association between deferred tax assets and liabilities and future tax
payments. The Accounting Review, 88(4), pp.1357-1383

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Reid, W. and Myddelton, D.R., 2017. Cash flow statement. In The Meaning of Company
Accounts (pp. 16-16). Routledge.
Robinson, L.A., Stomberg, B. and Towery, E.M., 2015. One size does not fit all: How the
uniform rules of FIN 48 affect the relevance of income tax accounting. The Accounting
Review, 91(4), pp.1195-1217.
Weil, R.L., Schipper, K. and Francis, J., 2013. Financial accounting: an introduction to
concepts, methods and uses. Cengage Learning.
Zhang, Y. and Andrew, J., 2014. Financialisation and the conceptual framework. Critical
perspectives on accounting, 25(1), pp.17-26.

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Appendix

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