Corporate Accounting

Change in common stock – (2016-17) = 57/1524*100 = 3.74% (2017-18) = 14/1581*100 = 0.89% As per above calculations it is understand that change in common stock is due to increase in other comprehensive income. Change in common stock – (2016-17) = 57/1524*100 = 3.74% (2017-18) = 14/1581*100 = 0.89% As per above calculations it is understand that change in common stock is due to increase in

CORPORATE
ACCOUNTING

Table of Contents
INTRODUCTION ..........................................................................................................................1
MAIN BODY...................................................................................................................................1
Overview of the company...........................................................................................................1
Evaluation of equities..................................................................................................................1
Other Comprehensive Income Statement:..................................................................................9
Accounting for corporate income tax .......................................................................................12
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Corporate Accounting is a process of measurement, recording and interpretation of
financial statements of company. It is carried out specifically for large company not for small
company, sole traders and partnership firms. There are following topics are covered such as
overview of the company, owners equity evaluation in describe each item of equity and changes
in last 3 years. Abacus property group and BWP trust are the companies that deals in real state
business are taken to assess the concept of corporate accounting. It shows comparative analysis
of debt and equity, cash flow statement analysis in showing financial statement and comparative
analysis, evaluation of other comprehensive income statement and corporate income tax analysis
for both the companies (Bennett, Schaltegger and Zvezdov, 2013).
MAIN BODY
Overview of the company
Abacus property group -
Abacus property group was established in 1996 and listed in ASX in 2002, company are
also included in S&P/ASX 200 index (Epstein, 2018). This company is a leading wide-ranging
property group and specialize in investing in core group property in Australia. Company have
investment objective for investors with increasing returns and reliable. They are provide
opportunities to maximize security holder value and total returns for long term.
BWP group -
This company are related to strategic marketing practice with a different variation. BWP
was founded by retailers for the understanding of consumer markets, retail and it's challenge.
company realize that to actuation of behavioral change, and they firstly connect with hearts and
minds. They believe in to create and domain with human connections (Feng, and et. al., 2011).
Evaluation of equities
1. Abacus Property Group
Equity and retained
earnings
2018 ($) 2017 ($) 2016 ($)
Common stock 1595 1581 1524
Other equity 4 6 7
1

Retained earnings 253 164 -23
Accumulated other
comprehensive income
18 14 8
Interpretation – common stock continuously increased from last three years, other
equity decreased in 1% from 2016 to 2018, retained earnings frequently increase change past
three years and accumulated other comprehensive income increases from 2016 to 2018.
Change in common stock –
(2016-17) = 57/1524*100 = 3.74%
(2017-18) = 14/1581*100 = 0.89%
As per above calculations it is understand that change in stock increase by 3.74% in
2016-17 due to increase in reserves and retained earnings. However change in stock increase by
0.89% in 2017-18 which is competitively lower than the last year due to increasing share holders
capital.
Change in other equity-
(2016-17) = (1)/7*100 = -14.29%
(2017-18) = (2)/6*100 = -33.33%
As per above calculations that change in equity decreased by (14.29%) in 2016-17 due to
sale of some part of equity. All the same change in equity decreased by (33.33%) in 2017-18
which is competitively higher than the last years due to decreasing other equity.
Change in Retained earnings -
(2016-17) = 187/(23)*100 = -813.04%
(2017-18) = 89/164*100 = 33.09%
As per following calculations change in retained earnings increased by (813.04%) in
2016-17 due to increase profit. And change in retained earnings increased by 33.09% in 2017-18
which is competitively higher than to last year due to increase profit.
Change in Accumulated other comprehensive income -
(2016-17) = 6/8*100 = 75%
(2017-18) = 4/14*100 = 28.57%
Following calculations change in comprehensive income increase by 75% in 2016-17 due
to increase other sources. However change in comprehensive income increase by 28.57% in
2017-18 which is comparative lower than the last years due to other sources.
2

BWP Trust
Equity and retained
earnings
2018 ($) 2017 ($) 2016 ($)
Common stock 946 946 946
Other equity -2 -5 -10
Retained earnings 890 821 710
Interpretation – common stock are not changes from past three years and holders are
stable. Other equity in negative way, continue decreasing from 2016 to 2018. Retained earnings
continue increasing of BWP trust from last three years.
Change in other equity
(2016-17) = 5/(10)*100 = -50%
(2017-18) = 3/(5)*100 = - 60%
As per the calculations that change in equity decreased by (50%) in 2016-17 due to sale
of some part of equity. All the same change in equity decreased by (60%) in 2017-18 which is
competitively higher than the last years due to decreasing other equity.
Change in Retained earnings
(2016-17) = 111/710*100 = 13.52%
(2017-18) = 69/821*100 = 8.40%
As per following calculations change in retained earnings increased by 13.52% in 2016-
17 due to increase profit. And change in retained earnings increased by 8.40% in 2017-18 which
is competitively higher than to last year due to increase profit.
2.
Companies Debt Equity
Abacus property group 694 1870
BWP trust 257 1833
Interpretation – As per information abacus property group debt higher than to BWP
trust (437) so abacus property group pays more debt to comparative to BWP trust so that APG
gain lower profit. Equity in opposite that BWP trust getting lower fund comparative to APG.
3

Cash flow statement analysis
3. Abacus property group
Operating activities 2018 2017 2016
Cash flow from
operations
96989 102248 103595
Changes in working
capital
97277 13962 -12060
Stock 1524 -22043 2433
Bills payable 23476 15617 -7320
Other liabilities/assets 72277 20388 -7173
Net operating cash
flow
194266 116210 91535
Investing activities
Capital expenditure -2105 -1100 -3555
Capital expenditures
(fixed assets)
-2105 -1100 -3555
Sale of fixed
assets&
businesses
2089 72698 3768
Purchase/sale of
investment
-231768 99481 -192193
Purchase of
investments
-416408 -235943 -347257
4

Sale/maturity of
investments
184640 335424 155064
Net investing cash
flow
-231784 171079 -191980
Financing activities
Cash dividend paid-
total
-93745 -63767 -92228
Common dividends -93745 -63767 -92228
Change in capital
stock
-42.00% 13337.00% 7264.00%
Repurchased of
common&
preferred stock
-42 -4213 -234
Sale of common&
preferred stock
- 17550 7498
Proceeds from stock
options
- 17550 7498
Issuance/reduction of
debt, net
- - 190680
Change in long term
debt
- - 190680
Issuance of long term
debt
- - 233787
Reduction in long term
debt
-43107
Net financing cash in
flow
84588 -274844 105716
5

Net change in cash 46989 12475 5404
Free cash flow 192161 115110 87980
Interpretation As above the table in this cash flow every year coming changes in each
item from 2016 to 2018. In operating activities cash flow operations decreasing from last three
years because changes in current assets and current liabilities and that are also reason for changes
in working capital (Fisher and Krumwiede, 2012). Increasing stock, bills payable and other
liabilities cause of increase in current assets and decrease in current liabilities from 2016 to 2018.
changes in current assets and current liabilities effected to net operating cash flow. In investing
activities capital expenditures increases on fixed assets foe the reason of maintenance. Capital
expenditure growth 2.34%(2016), 69.06%(2017), -91.36% (2018). Purchase and sale of
investments are increasing because change in company's cash position.
BWP trust
Operating activities 2018 2017 2016
Cash flow from
operations
113205 112454 107871
Changes in working
capital
-429 -611 -1495
Receivables -231 -163 1824
Bills payable - - -
Other liabilities/assets -198 -448 -3319
Net operating cash
flow
112776 111843 106376
Investing activities
Purchase/sale of
investment
12840 973 -5988
Purchase of
investments
-3108 -2279 -13507
Sale/maturity of 15948 3252 7519
6

investments
Net investing cash
flow
12840 973 -5988
Financing activities
Cash dividend paid-
total
-113446 -110041 -105736
Common dividends -113446 -110041 -105736
Change in capital
stock
- - -
Sale of common&
preferred stock
- - -
Proceeds from stock
options
- - -
Issuance/reduction of
debt, net
- -113446 -110041
Change in long term
debt
- -113446 -110041
Issuance of long term
debt
- - -
Reduction in long term
debt
- -1193 -13068
Net financing cash in
flow
-126997 -111234 -118804
Net change in cash -1381 1582 -18416
Free cash flow 112776 111843 106376
Interpretation – In net operating activities related item decreasing reason of increasing
in current assets and decreasing current liabilities and net investing activities in mostly
7

decreasing item and many items will be in negative reason of investment in securities and not
invested in right security (Gallhofer, 2011). Net financial activities cash dividend, common
dividend are decreasing and paid to firstly investors and loans from the year 2016-2018.
4 Abacus property group
2018 2017 2016
Net operating cash
flow ($M)
194.3 116.2 91.5
Net investing cash
flow
-232 171 -192
Net financing cash
flow
85 -275 106
Interpretation – Net operating cash flow increasing from past three years (2016-2018)
because changes in current assets and current liabilities. Net investing cash flow increase 2016-
17 and decrease 2017-18 reason of purchase and sale of investment. Net financial cash flow
decreasing in 2016-17 and increasing 2017-18 cause of raising capital and pay to investors, pay
loan.
BWP trust
2018 2017 2016
Net operating cash
flow ($M)
112.8 111.8 106.4
Net investing cash
flow
13 1 -6
Net financing cash
flow
-127 -111 -119
2018 2017 2016
Net operating cash
flow ($M)
112.8 111.8 106.4
8

Net investing cash
flow
13 1 -6
Net financing cash
flow
-127 -111 -119
Interpretation – Net operating activities continue increasing from 2016 to 2018 and
reason of current assets and current liabilities. In investment cash flow purchase and sale
securities, net financial activities continue decreasing paying to investors and pays loans
(Grinblatt, Hillier and Titman, 2011).
5. Insights from comparative analysis of cash flow statements of both the companies namely
Abacus Property Group and BWP Trust:
 Total net cash flow from operating activities in current year is $112,776,000,
from investing activities is $12,840,000 and from financing activities is
$126,997,000 of BWP Trust.
 Total net cash flow from operating activities is about $194,266,000 for 2018,
from investing activities is about (-$232 millions), cash flow from financing
activities is around $85 millions of Abacus Property Group.
 Difference of cash flow from operating activities between these two
companies is about $81490000.
 Difference of cash flow from investing activities between these two
companies is about (-$244840000) which is negative cash flow.
 Difference of cash flow from financing activities between these two
companies is around $41997000.
 So, as we can see cash flow from operating activities of Abacus Property
Group is more than from BWP Trust. Net cash flow from investing activities
of BWP Trust is more than from Abacus Property Group (Jones, 2011). And
cash flow from financing activities of BWP Trust is more than from Abacus
Property Group.
 Cash flow shows the movement of cash inflow and cash outflow. Negative
cash flow of Abacus Property Group is not a good sign because it can lead to
bankruptcy. From analysis of overall cash flow statement, BWP Trust stands
at strong position as compared to Abacus Property Trust.
9

Other Comprehensive Income Statement:
 For analysis and comparison of other comprehensive income statement of two public
limited companies, Abacus Property Group and BWP Trust are being taken operating in
real estate industry. Items that have been reported in other comprehensive income
statement of Abacus Group are:
 Net gain/(loss) in fair value of investment properties and property, plant and equipment
held at balance date
 Net change in property, plant and equipment remeasured at fair value
 Net change in fair values of investments and financial instruments held at balanced date
 Net change in fair value of derivatives
 Net change in fair value of investment properties, inventory and property, plant and
equipment included in equity accounted investments (Leventis, 2013).
 Impairment of land development at Muswellbrook
Items that have been reported in other comprehensive income statements of BWP Trust are:
 Realised losses transferred to profit or loss (this portion of gain or loss is from derivative
financial instruments in the form of interest rate swap agreements)
 Unrealised gains/(losses) on cash flow hedges
VII) Above items of other comprehensive income statement have not been recorded in
Income Statements/Profit and Loss Statements because income statements records only
regular line items or one can say profit and loss items according to IASB but in case if
these items will disclosed under profit and loss statement that it could mislead users of
financial statements. Other comprehensive income statement includes those changes of
profit and loss which have not been realised yet. It starts with the profit or loss
recognized through profit and loss statements. Gains/losses included in other
comprehensive income statement are changes in company's net assets from non-owner
sources. Elements of other comprehensive income that cannot be included in income
statements are:
 Gains/losses in revaluation of property, plant and equipment and intangible assets
(Schaltegger, 2017)
 Gains/losses originate from equity instruments and derivative hedging instruments in a
cash flow hedge
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 Gains/losses from benefit plans like retirement plan, pension plan
 Changes in foreign currency transactions
VIII) Comparative analysis of other comprehensive statements of Abacus Property Group and
BWP Trust is as follows:
Abacus Property Group
Particulars 2017 ($'000) 2016 ($'000) 2015 ($'000)
Other comprehensive incomes :
Net gain/(loss) in fair value of
investment properties and property,
plant and equipment held at balance
date -74733 -74029 -29430
Net change in property, plant and
equipment remeasured at fair value Nil Nil -435
Net change in fair values of
investments and financial instruments
held at balanced date 10677 -14 -1323
Net change in fair value of derivatives -4317 8258 10949
Net change in fair value of investment
properties, inventory and property,
plant and equipment included in
equity accounted investments -718 -11575 940
Impairment of land development at
Muswellbrook Nil 40622 Nil
Total -69091 -77360 -19299
BWP Trust
Particulars 2017 ($'000) 2016 ($'000) 2015 ($'000)
Other comprehensive incomes :
11

Realized losses from interest rate swap
agreement transferred to profit or loss 3933 4981 5290
Unrealized gains/(losses) on cash flow
hedges 1488 -4016 -4186
Total 5421 965 1104
Interpretation: Losses from investment and properties of Abacus Property Group are
continuously increasing in above three consecutive years but losses from interest swap
agreements are decreasing for BWP Trust. In year 2017, total other comprehensive income of
Abacus Property Group is ($-69091000) for BWP trust it is $1488000, so in this way if we
include this amount in profit and loss statement of 2017 then it will affect profit attributable to
shareholders. Other comprehensive income is expanded form of net income. Earlier, gain or loss
from operations other than core activities of business were allowed to flow through shareholder's
equity but now these details are provided in the section of other comprehensive income. So,
these items if included in profit and loss account can misstate shareholder's profitability because
these are not regular line items and profit could overstate or understate due to gains or losses
from non-owner's sources (Watson, 2015).
IX) Yes, other comprehensive income should be included in evaluation of manager's
performance because these incomes also consists of losses that can decrease a company's
value and owner's equity. Manager should devote more time if value of company
decreases due to wealth effect of gains and losses from other comprehensive income
statements. Manager's spending capacity also affected by company's value, as they will
spend more if company's wealth increases and spend less if company's wealth decreases.
These overseas operations and currency hedging instruments of other comprehensive
income statement affect corporate performance as well as manager's performance because
assists in bringing complex financial reports into a clearer view. Other comprehensive
incomes occurs often in larger companies rather than small companies.
Accounting for corporate income tax
X) According to current Australian income tax law, BWP Trust is not liable for income
tax, its taxable income including any realised capital gain distributed each year among unit
12

holders. Abacus Property Group paid income taxes of about 29 millions. BWP Trust's deferred
payables are worth $18,587,000 till June 2018.
XI) Effective tax rate includes only income tax but not sales, excise or other types of
taxes. Formula for calculating is:
=Income tax expenses / earnings before tax
Effective tax rate of BWP Trust can not be calculated. But effective tax rate of Abacus Property
Group is 10.45%. Income before income taxes are 276 millions for the year 2018.
Xii) Deferred tax is the amount of tax due but yet not paid. It is difference between tax
accrued and paid and represents future tax payment liability of a company. Opposite to deferred
tax liability, deferred tax asset is the amount of taxes paid in advance as they are paid but not yet
recognized in income statements. Deferred payable liabilities of BWP Trust for the year 2018 is
about $18,587,000. Deferred incomes like rent received in advance of about $10,787,000. Due to
short-term nature of loans and receivables, and payables and deferred income, their carry
forward amount is calculated on the basis of their fair values (Zadek, Evans and Pruzan, 2013).
Xiii) Yes, there was an increase in deferred tax liability of Abacus Property Group from
$17,923,000 to $18,587,000 and decrease in deferred income from $10,869,000 to $10,787,000.
XIV) Cash tax amount is the amount of tax paid to income tax department mentioned in
tax return each year according to income tax laws book tax amount is the total of tax expenses
recorded in financial statements of a company prepared according to IAS's to interpret financial
performance and health of a company. Differences of amount between these two occurred due to
difference in time period of recording tax expenses in tax return and in books of accounts. Cash
tax amount for Abacus Property Group is about $8 million and book tax amount is around 29
million.
XV) As BWP Trust is not liable to pay income tax so cash tax rate can not be calculated.
Cash tax rate for a company is calculated as:
= Total cash tax paid / Net taxable income available to common shareholders * 100
Cash tax rate of Abacus Property Group is as follows:
= $8 million / $244 million * 100
= 3.278%
XVI) There are two ways to measure income tax payable by a company and these are cash tax
and book tax payable. Cash tax amount is calculated according to tax laws to satisfy tax
13

obligations to government. Book tax amount is calculated according to financial accounting rules
to mention in company's financial statements. Difference between these two are due to time
duration taken for calculation, as in cash tax system tax is determined taken into consideration
current year but in book tax system both future and current tax liabilities. Then the difference
between items of cash tax and book tax are classified as temporary and permanent. At last, both
these taxes will be equal because it just a difference because of method (Kim, 2012).
CONCLUSION
This report summarises comparison analysis of overall financial statements of Abacus
Property Group and BWP Trust which includes owner's equity, cash flow statements, other
comprehensive income statements and corporate income tax accounting for last three
consecutive years. Owner's equity statement shows movement in shareholder's reserves, cash
flow statements measure cash flow from operating activities, investing and financing activities,
other comprehensive income statements helps to show true picture of financial position of a
company and also tax expenses are accounted from corporate tax accounting.
14