Corporate Accounting: Equity and Liabilities Analysis of Westpac and National Australian Bank

The report discusses on national Australian bank and Westpac that elaborates owners’ equity and all the other items in the equity section that shows change in the amount. It will further evaluate the liabilities section by including all the items included in it with the explanation of the changes in the liabilities items. The report also discusses the pros and cons of different sources of finance and compliance and reporting requirements for companies.

Corporate
Accounting

Contents
Introduction...........................................................................................................................................2
Part-A....................................................................................................................................................2
Westpac.................................................................................................................................................2
Part-B....................................................................................................................................................8
Conclusion...........................................................................................................................................10
References...........................................................................................................................................11

Introduction
The report discusses on national Australian bank and Westpac that elaborates owners’ equity
and all the other items in the equity section that shows change in the amount. It will further
evaluate the liabilities section by including all the items included in it with the explanation of
the changes in the liabilities items (Wu, Si, and Wu, 2016). It is perceived that there is a
measurement of until what extend the movement of items of equity and liabilities have been
taken place (Wu, Si, and Wu, 2016). The report will continue by elaborating negative and
positive effect of the raising a source of fund, which has been invested in business in both
small as well as large organisations. The second part of the report elaborates critical
implications of both the source of fund that has used to finance small as well as large
organisation. The movement of items in the balance sheet will foresee the performance of the
listed organisation of (Wu, Si, and Wu, 2016).
Part-A
Westpac
The bank is an Australian bank that has been headquartered in Sydney. The company is
established in 1817 and has a customer base of 14 million customers and 40000 people. The
core business activities include consumer bank, Westpac institutional bank, Westpac New
Zealand, Westpac migrant, Westpac pacific, and rein venture (Westpac, 2018).

(Source: Westpac, 2018)
Identification of the elements of equity and liabilities section with their comparison
from year to year
From the table given above, it is perceived and understood that there is an increase in the
share capital from 2017 to 2018. The reason will include increase in the issuing the share
capital and selling the increased stock finally leading to profitability of the organisation. The
treasury has increased with low amount (Westpac, 2018). The reserves has increased from
2017 to 2018, which has increased due to increase in share premium, which will reflect more
reserves with the company. With the increase in the number of issued shares, ordinary share
capital has led to increase in reserves (Westpac, 2018). The retain earnings for the company
has increased as the company might have undertaken and retained profits form the company.
The non-controlling interest of the company has reduced from 2016 to 2018 (Westpac, 2018).

(Source: Westpac, 2018)
From the data from consolidated statement, it is seen that there are two years as to see the
analysis of increase or decrease for liabilities (Westpac, 2018). Two major components
include deposits, other borrowings, long-term liability, long-term liabilities, and debt
issuances. The proportion of completely long-term debt has been increasing in 2017 and 2018
(Huang, Ritter, and Zhang, 2016). The current and deferred tax liabilities have reflected a
decrease in two years. It is quite possible that the company`s debt as an tax saving strategy
and tool through showing interest as an expense (Westpac, 2018).
NBA (national Australian bank)
The bank is among the largest financial institution in Australia in terms of earnings,
customers, and market capitalisation. The bank is the 50th largest bank in world while

calculating total assets in 2014 and in 2016, it reached 49th largest as of through service
centres, 1590 brands, new Zealand and Asian brands serving nearly 12.7 million customers
(National Australian bank, 2018).
(National Australian bank, 2018)
Identification of elements of the equity and liabilities section and foreseeing the changes
based on year 2017-2018
The above represented data in the financial statements, it is clear that total equity of the NAB
has led to decrease because of decrease in the elements of the total equity including reserves,
retain earning, and equity but certainly reserves has improved from 2017 and 2018. The
contributed equity has increased from 34221 to 35982, reserves has reduced from 237 to 46,
retain earnings has decreased in 16442 from 2017 to 16673 in 2018. The share capital is the
amount that has been gained through the issuance of common shares among the private and
public shares. The organisation maintains an appropriate balance of portion of profits which
is being generated by generating the shareholders equity including capital reserves, unutilized
profits, and the revenue reserves (National Australian bank, 2018). Retain earnings is the

portion of the profits which is being reported with the end of the reporting period in the books
of accounts. The report is based on the mandatory rules and regulations relying on AASB,
AAS, and accounting standards. The liabilities is mainly classified in two parts based on the
tme given for the repayment of the liabilities such as current and non-current liabilities.
The NAB liabilities are given as due to bank accounts, trading instruments, hedging
derivatives, deposits and other borrowing, provisions, due to the controlled interests, other
more liabilities, and other debt issues (National Australian bank, 2018). The provisions has
increased from 2017 to 2018, with 1961 to 2196, other more liabilities have increased from
7980 to 8736., current tax liabilities has reduced from 230 to 103. The bond and subordinate
debt`s balance has increased from 124,871 to 140,222, deposits and other borrowings remain
almost same for both the years. Hedging derivative has increased from 1674 to 2547
(National Australian bank, 2018).
Pros and cons of source of finance
With the ramified economic changes in the business environment, it is seen that the level of
investment cannot retained by a single individual so it led to the creation of dividing the
holding by dividing the investment into small parts. While determining the source of funds,
some of the sources were determined as short term and rest of others are determined as long
term such as capital loans, equity funding, debt, letter of credit, venture funding, and retain
earnings. Source of funds will lead to expansion of business especially debt and equity.
Disadvantage of debt financing
1. Debt reduces the overall profits of the company. With agreeing to avail the collateral
facilities, the organisation often risk their assets.

1. Heavy risk is associated with the principal and interest both. The company will have
to maintain appropriate credit rating in order to receive the finance (Ahmad, and
Zhang, 2018).
2. Organisations often suffer from cash flow issues, which lead to failure of repayments.
Advantages of debt financing
1. Debt helps in retaining control while making and managing the decisions. The
business relationship ends as soon as loan amount is paid (Ahmad, and Zhang, 2018).
2. Debt avails the advantage of tax by paying the interest expense as the tax deductable
element, which effectively reduce the net obligations.
3. It is easy to plan to how principle and the interest paying back in next few months
where it is easy to budget and considerably plan financially (Nguyen, and Rugman,
2015).
Advantages of equity
1. The company possess less risk associated with the equity financing due to which the
company need not to any monthly fix payment. This can be useful with the start-up
business, which do not have positive cash flows every month.
2. The company often faces issues with the credits and equity financing is best choice to
grow business when the debt is offered where the interest rate is quite higher.
3. Equity financing does not opt for taking funds out of the business, they remain
invested, and the share price keeps increasing. Whereas, the debt loan repayment can
take out of organisation’s cash flows, which will lead to reduce the money as being
needed to finance growth (Nguyen, and Rugman, 2015).
Disadvantages of equity

2. The equity investors will expect to receive return on money as the owners must be
willing to share the company`s profitability with the equity partners (Ahmad, and
Zhang, 2018).
3. The equity holders have to give up some control when it takes to add the investors.
Equity partners will have a voice to make the decision of the organisation especially
while considering the big decisions (Ahmad, and Zhang, 2018).
4. Every partners do not agree to the make decision as conflicts can arise from different
perceptions and disagreement management styles (Bellavitis, Filatotchev, Kamuriwo,
and Vanacker, 2017).
Part-B
In most basic sense, the basic rules and regulations for the company are regulated to protect
the business (Bellavitis et al., 2017). While protecting the employees, the company protect
from lawsuits. By following the rules and regulations, it would be easy to understand how is
actually expected to understand by the organisation and ultimately what happens when the
rules and violated (Nguyen, and Rugman, 2015). Compliance will refer to reports, which is
created to comply with standards, regulations, rules, and laws as being set by the government
agencies and regulatory bodies. In large organisations, while ensuring the policies and
procedures, it will lead to meet with the divisional leaders in order to ensure the procedures
and policies are feasible or not (Bellavitis et al., 2017). There is a determination of best
policies for the audience. Further, it is important to make policies to easily access to its
employees. Any failure to comply with the legislations, it is the first step of being fined for
the non-compliance, loss of reputation, loss of potential staff, leading to imprisonment, and
downing time with the loss of productivity. Scale of the business operations determines the
proprietorship, which has been limited by the number of shares, it employees according to the
corporation act, 2001 (Bellavitis et al., 2017). As the scale of operation is based on

investment incurred, the number of shares depends on the scale when the company is
operated through unlimited share capital then it illustrates that it is being limited by the
guarantee with no tough regulations as bring complied according to the requirement of the
law (Bellavitis et al., 2017). Small-scaled organisation will represent through consolidated
revenues, controlling the amount, where the amount is less than 12.5 dollars. On the other
hand, the disclosing company and the large scaled organisation will require the preparation of
the financial statements as needed by the accounting standards (Bidabad, and Allahyarifard,
2019). A large organisation is generally explained, as the preparation of financial statements
is required by ASIC as being issued through instruments with few amendments that will
include specific audited reports (Bellavitis et al., 2017).
NAB has claimed that the company has lessened the complexity of the annual reports so that
it can help it to create it more relevant for the users to understand. The statements includes
both material and immaterial information that is relevant to the understanding. The group
gives special disclosures without creating any doubting changes in the financial year. The
data purely related to acquisition, legislative needs of the corporation Act, 2001, and the
group`s necessary regulators including ASIC (Australian securities and the investment
commission), and the APRA (Australian prudential regulations Authority).
Companies often have strict internal needs that will consist of board o9f directors, annual
directors meetings, updating the laws, availing the stock to the shareholders and further
transcribing the stock transfers. Internal requirements are to ensure where the corporation is
run with integrity, corrupting elements and the free of corruption (Khmel, and Zhao, 2016).
External needs will follow annual reporting statement that necessitates the LLLCs to comply
with the annual reports to keep the recording. All the businesses are sanctioned by state
through which it can conduct business. The company has to follow fair labour standard act
and franchisee tax through which it will have to meet the minimum wages system,

recordkeeping, overtime pay, and the part time workers (Voordijk, Sarmento, and
Renneboog, 2016).
Disclosing companies will lead to the preparation of annual reports where it is quite
necessary to register with an company`s name and it registers in the name of ABN, GSTin,
and tax filing. Several changes are being regulated while preparing the organisation with
employees’ more than 100, consolidated revenues of 50 million and 25 million in gross
assets. Both the bank maintain a disclosing and transparency report in regards to the
incorporation act with its related certifications (Voordijk, Sarmento, and Renneboog, 2016).
A company has to maintain AOA (Article of Association) and (memorandum of association)
MOA while complying with the legal needs of the organisation. The companies are the
disclosing companies as being a bank; it has to be transparent among the clients where it can
release the data that will certainly affect the investment decisions. It has to be considered by
the SEC that will include the relevance to the operational results, financial conditions, and the
management compensation (Voordijk, Sarmento, and Renneboog, 2016).
Conclusion
The above discussion brings out that company has to compare its equity and liabilities
balances in a timely manner of the national Australian bank and Westpac. The company has
to maintain an appropriate level of funds in the company by considering the source of funds it
employs. Organisational operations conduct in an manner where shareholder`s demand and
supply will fluctuate the price of the share, which will affect the investment decision among
the equity shareholders. Organisations will often seek for funds through equity and debt in a
better proportion. A clear understanding based on the understanding of equity and debt has
been given under the source of fund it attains through. It is quite important to note that there
is an accurate examination of increase and decrease in the laid down liabilities and equity
with comparison of year 2017 and 2018.

References
Ahmad, E. and Zhang, X., 2018. Towards monitoring and managing subnational liabilities in
China: lessons from the balance sheet for county K. In Fiscal Underpinnings for Sustainable
Development in China (pp. 71-94). Springer, Singapore.
Bellavitis, C., Filatotchev, I., Kamuriwo, D.S. and Vanacker, T., 2017. Entrepreneurial
finance: new frontiers of research and practice: Editorial for the special issue Embracing
entrepreneurial funding innovations.
Bidabad, B. and Allahyarifard, M., 2019. Assets and liabilities management in Islamic
banking. International Journal of Islamic Banking and Finance Research, 3(2), pp.32-43.
Huang, R., Ritter, J.R. and Zhang, D., 2016. Private equity firms’ reputational concerns and
the costs of debt financing. Journal of Financial and Quantitative Analysis, 51(1), pp.29-54.
Kahiya, E.T., 2017. Export barriers as liabilities: Near perfect substitutes. European Business
Khmel, V. and Zhao, S., 2016. Arrangement of financing for highway infrastructure projects
under the conditions of Public–Private Partnership. IAtSS Research, 39(2), pp.138-145.
National Australian bank, (2018) Annual reports 2018. Available on:
https://www.nab.com.au/content/dam/nabrwd/documents/reports/corporate/2018-annual-
financial-report.pdf [Accessed on: 25/09/2019]
Nguyen, Q.T. and Rugman, A.M., 2015. Internal equity financing and the performance of
multinational subsidiaries in emerging economies. Journal of International Business
Studies, 46(4), pp.468-490.
Voordijk, H., Sarmento, J.M. and Renneboog, L., 2016. Anatomy of public-private
partnerships: their creation, financing and renegotiations. International Journal of Managing
Projects in Business.

Westpac, (2018) Annual reports 2018. Available on:
https://www.westpac.com.au/content/dam/public/wbc/documents/pdf/aw/ic/
2018_Westpac_Annual_Report.pdf [Accessed on: 25/09/2019]
Wu, J., Si, S. and Wu, X., 2016. Entrepreneurial finance and innovation: Informal debt as an
empirical case. Strategic Entrepreneurship Journal, 10(3), pp.257-273.