Adslot Limited Financial Analysis

This assignment delves into the financial analysis of Adslot Limited's annual report. It examines the company's income tax expenses and payable, comparing figures from the income statement and cash flow statement. The analysis also explores the company's tax treatment strategies by referencing their notes and tax reconciliation statements.

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

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Table of Contents
Answer to Question 1......................................................................................................................1
Answer to Question 2......................................................................................................................1
Answer to Question 3......................................................................................................................2
Answer to Question 4......................................................................................................................2
Answer to Question 5......................................................................................................................3
Answer to Question 6......................................................................................................................3
Answer to Question 7......................................................................................................................4
References........................................................................................................................................5

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Answer to Question 1
According to the latest annual report of Adslot Limited, there are three major items of
equity for the company; they are Issued Capital, Reserves and Accumulates Losses. Issued
capital is the equity shares that Adslot Limited used to raise capital. Rise in issued capital can be
seen in 2017 from 2016 that is $ 137,949,047 in 2017 and $ 120,693,650 in 2016 (adslot.com
2018). Reserves refer to the extra amount of money shareholders pay in excess of the par value
of the shares (Brigham and Houston 2012). There is a decrease in reserves for Adslot Limited in
2017 as compared to 2016; that is $389,929 in 2017 and $404,736 in 2016. Accumulated loss is
the negative retained earnings due to the extra payment of dividends. The annual report of Adslot
Limited states that Adslot Limited witnessed more accumulated losses in 2017 as compared to
2016; that is $(98,109,46) in 2017 and $(89,478,859) in 2016 (adslot.com 2018).
Answer to Question 2
Like other business expenses, Income Tax Expenses is considered as a major expenditure
for businesses. However, in case companies have net loss before tax, they can obtain the
advantage of tax benefits, as the companies do not provide tax on net loss. Adslot Limited has
loss before income tax of $8,600,201 in 2017 and $8,116,346 in 2016. The income tax rate of the
company for 2017 was 27.5% and the rate was 30% in 2016. In this tax rates, Adslot Limited had
tax benefits of $2,365,055 in 2017 and $2,434,904 in 2016. However, it needs to be mentioned
that the company has several tax reconciliation on the calculated tax expenses, Adslot Limited
had final tax expenditures of $29,986 in the year 2017 and $22,139 in the year 2016 (adslot.com
2018).

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Answer to Question 3
The earlier discussion shows that Adslot Limited should have a tax benefit of $ 2,365,055
in 2017 and $ 2,434,904 in 2016 at a tax rate of 27.5% and 30% in 2017 and 2016 respectively.
However, the reported tax expenditure of the company is $29,986 in the year 2017 and $22,139
in the year 2016 (adslot.com 2018). Thus, it can be observed that there is a difference in tax
expenditure and some specific factors are responsible for this as these items are adjusted after the
tax period (Burman and Phaup 2012). The first factor is ‘Other Non-Allowable Items’ and these
items are required to be deducted from the income before income tax. Under this, $11,789 and
$8,154 has been added with the tax benefit for 2017 and 2016 respectively. The next item is
‘Share Based Expenses during the Year’ and these expenses are subject to tax deduction. Thus,
$90,878 and $132,041 has been deducted for the year 2017 and 2016 respectively. The next item
is ‘Research and Development Tax Concession’; and $1,710,848 and $1,545,105 has been
deducted in 2017 and 2016 respectively. In addition, $667,198 in 2017 and $1,068,079 in 2016
has been added due tax losses in deferred tax assets; and $ 145,644 in 2017 and $296,336 in
2016 has been deducted for net foreign exchange differences (adslot.com 2018).
Answer to Question 4
Deferred tax asset is the situation when companies pay excess amount of taxes (Laux
2013). On the other hand, deferred tax liabilities arise when there is a difference between profit
and tax carrying value (Harrington Smith and Trippeer 2012). In case of Adslot Limited, it can
be seen that the company has reported about both deferred tax assets and liabilities in their
financial statements. In 2017 and 2016, Adslot Limited had deferred tax liability of worth
$36,370 and $39,617 respectively. Moreover, the company had $36,370 and $39,677 as deferred
tax liabilities respectively (adslot.com 2018). The main reason for deferred tax asset in Adslot

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Limited is due to the temporary difference in the expected tax rate to be applied. Deferred tax
liabilities arise due to not-recognition of assets due to temporary difference in applied tax rate.
Answer to Question 5
Current tax assets and income tax payable are two of the major components of the
taxation of the business organizations and the same concept is applicable for the taxation
treatment of Adslot Limited. From the latest annual report of Adslot Limited, it can be observed
that the company has not reported anything about current tax assets and income tax payable in
the financial statements of 2017 (Rego and Wilson 2012). In this context, it needs to be
mentioned that there is a difference between income tax expenses and income tax payable.
Income tax expenses refer to the amount of income tax needs to be paid for the current year. On
the other hand, income tax payable may include the amount of income tax needs to be paid for
the last year also. For this reason, difference can be seen in the amount of income tax payable
and income tax expenses (Thomas and Zhang 2014).
Answer to Question 6
The analysis of the latest annual report of Adslot Limited shows that there is a difference
between the tax expenditure in income statement and cash flow statements. As per income
statement, the amount of tax expenses is $29,986 and $22,139 in 2017 and 2016 respectively. As
per the cash flow statement, Adslot Limited does not have any income tax received or paid.
However, in 2016, the company received $17,187 as income tax (adslot.com 2018). There is a
specific reason for this difference. Income statement shows the tax expenditure of current year of
the company. However, cash flow statement shows the increase and decrease in current assets

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and liabilities. For this reason, income tax in cash flow may include current tax assets, liabilities
and tax payable. This aspect makes the difference (Higgins 2012).
Answer to Question 7
The above analysis shows that Adslot Limited does not have anything confusing
regarding their tax treatment of business as the company uses to provide proper justification and
clarification of all tax treatments in the notes of financial statements. The tax reconciliation
statement of Adslot Limited is an interesting aspect as the company has mentioned about the
factors affecting the tax expenses along with the amounts. One can get effective insight about the
tax treatment by the companies by observing the taxation treatment of Adslot Limited.

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References
Adslot.com. (2018). Annual Report 2017. [online] Available at: https://www.adslot.com/wp-
content/uploads/2017/12/adslot-annual-report-2017.pdf [Accessed 17 Jan. 2018].
Brigham, E.F. and Houston, J.F., 2012. Fundamentals of financial management. Cengage
Learning.
Burman, L.E. and Phaup, M., 2012. Tax expenditures, the size and efficiency of government, and
implications for budget reform. Tax Policy and the Economy, 26(1), pp.93-124.
Harrington, C., Smith, W. and Trippeer, D., 2012. Deferred tax assets and liabilities: tax benefits,
obligations and corporate debt policy. Journal of Finance and Accountancy, 11, p.1.
Higgins, R.C., 2012. Analysis for financial management. McGraw-Hill/Irwin.
Laux, R.C., 2013. The association between deferred tax assets and liabilities and future tax
payments. The Accounting Review, 88(4), pp.1357-1383.
Rego, S.O. and Wilson, R., 2012. Equity risk incentives and corporate tax
aggressiveness. Journal of Accounting Research, 50(3), pp.775-810.
Thomas, J. and Zhang, F., 2014. Valuation of tax expense. Review of Accounting Studies, 19(4),
pp.1436-1467.

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