Corporate Accounting Solution Assignment

Corporate Accounting

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
CASH FLOW STATEMENT..........................................................................................................1
1. List each items of cash flow statement of organisation and discuss changes in recent years.1
2. Comparative analysis of cash flows...................................................................................4
OTHER COMPREHENSIVE INCOME STATEMENT................................................................4
3. List each items of other comprehensive income statement................................................4
4. Provide understanding of each item in other comprehensive income statement................6
5. Why items of not recorded in income statement................................................................6
ACCOUNTING FOR CORPORATE INCOME TAX....................................................................7
6. List firm's tax expense in financial statement....................................................................7
7. Is figure obtained is same like company tax rate times of organisation's accounting income7
8. Comment on deferred tax assets/liabilities in statement of financial position...................7
9. Provide current tax assets or income tax payable recorded by firm...................................7
10. Is income tax expense same as income tax paid in cash flow statement..........................8
11. Discussing views regarding what confusing, surprising or interesting about treatment of
tax in financials of organisation.............................................................................................8
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................8

INTRODUCTION
Financials are important part of company clarifying overall financial performance of
firm. Present report deals with assessing financial statements of Grain Corp Ltd for the period of
three years. Organisation is engaged in receival and storage of food items and is performing good
in recent periods. Financials such as income statement, balance sheet, cash flow statement and
other comprehensive income statement are evaluated for three years and interpretation is made
regarding its performance in effective manner.
CASH FLOW STATEMENT
1. List each items of cash flow statement of organisation and discuss changes in recent years
There are various financials of company that are helpful in determining whether
organisation is performing well or not in the market. It contains vital piece of information which
is quite useful for external users and management to take effective decisions in the best possible
manner. These financials are cash flow statement, income statement and balance sheet
highlighting performance of organisation quite effectually (Doidge and et.al, 2018). Grain Corp
Ltd is taken as the business entity and financial statements are analysed. It is engaged in business
of agribusiness mainly receival and storage of food commodities and grains. Moreover, company
is listed on Australian Securities Exchange (ASX) and thus, cash flow statement is evaluated for
past three years below-
Particulars 2017 2016 2015
Consumer receipts 4824.1 4350.5 4315.5
Suppliers and employees
payments -4505.3 -4125.7 -4006.9
318.8 224.8 308.6
Proceeds from bank
borrowings (Stock
funding) 42.2 -4 9.1
Received interest 2.4 1.3 2.6
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Interest paid -41.9 -38.4 -42.6
Income taxes paid -21 -32.2 -6.6
Net cash flow from
operating activities 300.5 151.5 271.1
Making payment for
Property, Plant and
Equipment (PPE) -199.7 -268.2 -223.6
Payment for computer
software -26.5 -7.9 -12.8
Proceeds from selling off
PPE 34.8 4.4 6.2
Proceeds from
investment sale or
business 106.6
Investment Payment -35.6 -5.9 -2.3
Received dividend 83.2 0.2
Borrowings repaid by
parties 19.1
Net cash outflow from
investing activities -37.2 -277.6 -213.2
Proceeds from loans 941 801.1 679.8
Loans Repayment -1080.7 -696.6 -561.8
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Paid dividends -42.3 -22.9 -28.6
Non-controlling interest
(NCI) in year 1.5
Treasury shares bought -4.1
Net cash flow from
financing activities -184.6 81.6 89.4
Net decrease / (increase)
of cash and cash
equivalents (CCE) 78.7 -44.5 147.3
Opening balance 307.6 374 206.2
Effect of Exchange rate 2.6 -21.9 20.5
Ending balance of cash
and cash equivalents 388.9 307.6 374
Cash flow statements of organisation is prepared for three financial years such as 2015,
2016 and 2017. It can be interpreted from the above statement that receivables are improved up
to a high extent as it was 4315.6 in the financial year 2015, increased to 4350.5 in next period
and 4824.1 in 2017. It implies that Grain Corp Ltd is able to collect outstanding amount from
credit customers. Suppliers and employees' payments have increased in past three years and as
such, materials are purchased in large quantity from suppliers. The amount of borrowings from
bank is increased as well. It is evident from the fact that it was 9.1 in 2015, -4 in 2016 and hiked
to 42.2 in 2017 year (Grain Corp Ltd. 2016). Furthermore, interest received is maximised as it
was 2.6 in the year 2016, 1.3 in 2016 and 2.4 in next year. It clearly shows that interest income
has been increased in past years. While, PPE payments have maximised as it was 223.6 in 2015,
268.2 in later period and decreased to 199.7 in 2017. On the other hand, payment made for
computer software is increased as it was 12.8, 7.9 and 12.8 in 2015, 2016 and 2017 respectively.
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Sale of PPE has been attained in later year amounting to 34.8. While, there are no sale of any
investments in 2015 and 2016 but it is found in 2017 of 106.6 injecting income for organisation.
Moreover, payments from investment has increased from 2015 to 2017. Borrowings
repaid by parties had been accomplished in 2015 of 19.1. Proceeds from loans is increased as the
figure was 679.8, 801.1 and 941 respectively in past three years. On the other side, loans
repayment has maximised up to a great extent as it was 561.8 in 2015, increased to 696.6 and
1080.7 in 2016 and 2017. The dividends paid to shareholders' are also hiked as figure was 28.6
in 2015, reduced to 22.9 in 2016 and again increased in later period to 42.3 which means that
company's earnings has improved as higher dividends paid to shareholders. NCI is accomplished
amounting to 1.5 in recent year because ownership in equity is attained besides from parent firm.
Treasury shares are bought reducing cash to 4.1. Thus, cash outflow amounting to 184.4 is made
in 2017 while in previous years, inflows were obtained. Hence, opening balance was 307.6 and
closing balance was 388.9 in financial year 2017 clarifying that overall cash position is
enhanced.
2. Comparative analysis of cash flows
The cash flow statement of Grain Corp Ltd can be analysed and it shows that
organisation's overall position of cash has been good. It is properly utilising cash in various
activities with much ease. It is evident from the fact that cash flow from operating activities was
271.1 in 2015 which reduced to 151.5 in later year (Grain Corp Ltd. 2017). While, figure was
maximised in 2017 as it reached to 300.5. It implies that firm's operational position is increased
quite effectually. Besides this, investing activities is increased and cash was realised in three
years. It shows that investments have been maximised quite effectually.
This is evident from the fact that investing activities were 213.5 in the financial year
2015, increased to 277.5 in next year. However, it was reduced to 37.2 in 2017 period as
purchases in fixed assets has decreased. On the other hand, financing activities are good as cash
inflows amounting to 89.4 were accomplished in 2015 which decreased to 81.6 in 2016. While,
apart from cash inflows in these two years, outflow amounting to 184.6 is found in the financial
year 2017 clarifying that borrowings has increased and dividends are paid in more quantum,
thereby decreasing cash. Besides this, by analysing opening and closing cash balance, it can be
said that cash position is overall good of organisation.
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OTHER COMPREHENSIVE INCOME STATEMENT
3. List each items of other comprehensive income statement
Particulars 2017 2016 2015
Income 125.2 30.9 32.1
Other comprehensive
income
Items not to be
reclassified to Profit
and loss account
Remeasurement of
retirement benefits
obligation 12.7 -17.4 -1.1
Income tax on above
item -2.9 2.6 0.6
Items to be reclassified
to Profit and loss
account
Changes found in fair
value of cash flow
hedges 28.6 4.6 -21.6
Shares of income of
joint venture -0.1 0.1
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Income tax on item -6.8 -2.1 5.2
Exchange differences
of foreign business
operations 2.1 -78.4 89.2
Other comprehensive
income obtained (Net
tax) 33.7 -90.8 72.4
Total comprehensive
income available to
owners 158.9 -59.9 104.5
Total comprehensive
income attributable to:
Parent entity equity
stockholders' 158.9
Non-controlling
interest (NCI)
158.9 -59.9 104.5
4. Provide understanding of each item in other comprehensive income statement
Income statement is prepared which shows expenditures incurred and income earned
from various sources. However, some items are not classified in such statement. Thus, separate
statement is formulated known as other comprehensive income statement. In simpler words, it is
prepared when income is not actually earned (Bazdresch, Kahn and Whited, 2017). Moreover,
when gains, losses are not yet realised are listed in this statement. It can be interpreted that
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income was 32.1 in 2015, decreased in 2016 to 30.9, however, profit hiked up to a high extent
amounting to 125.2 in 2017.
Furthermore, remeasurement of employees' retirements benefits were -1.1 in 2015,
increased to -17.4 in 2016. Moreover, it reached to 12.7 in 2017 and thus, retirement benefits
amount is being maximised. Income tax obligation is accounted for on such items. Furthermore,
changes in cash flow hedges were 28.6 in 2017 and is maximised as it were negative in the
financial year 2015. Share income from joint venture has not been attained in 2017. While,
exchange difference is found in foreign operations as figure was 89.2 in 2015 and became
negative in 2016 and reached to 2.1 in recent year. Comprehensive income of net tax were 72.4
in 2015 which was negative in 2016. However, it was increased to 33.7 in 2017. Hence, total
income attained is 158.9 in 2017.
5. Why items of not recorded in income statement
The items such as foreign operations, retirement benefits' remeasurement and other items
are recorded which are not been reported in income statement (Lerner and Seru, 2017). The
reason is that such items are not yet realised by Grain Corp Ltd and as such, they cannot be
treated as income or expense. Moreover, these items are not affecting income statement and only
balance sheet gets affected.
ACCOUNTING FOR CORPORATE INCOME TAX
6. List firm's tax expense in financial statement
Grain Corp Ltd's tax expense is 59.5 in the latest financial year. The effective tax rate
computed by applying formula such as dividing tax expenditures by EBIT is 32.2 %. The income
tax expense is listed in income statement. This expense is classified as current liability because it
has to be paid in current year. The figure is arrived by segregating current tax of 9.6, provision
for previous years of -0.9 and deferred tax amounting to 50.8.
7. Is figure obtained is same like company tax rate times of organisation's accounting income
Accounting income is estimation regarding performances of normal business operations.
Moreover, realised losses and gains are only accounted for and unrealised ones are left out
(García-Meca, López-Iturriaga and Tejerina-Gaite, 2017). Income tax expense is 59.5 and
effective income tax rate is 32.2 which is attained by dividing tax expenditure of 59.5 with 184.9
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of EBIT figure. Thus, it can be interpreted that figure obtained of tax expense is same like tax
rate times of accounting income.
8. Comment on deferred tax assets/liabilities in statement of financial position
Deferred tax assets are those which can be used to minimise overall taxable income for
next year. It is recorded in balance sheet when firm has made an advance payment of tax or has
overpaid the same. The figure were 63.8 in 2015, maximised to 71.2 in next year. However, it
was decreased to 37.6 in 2017. Besides this, deferred tax liabilities is just opposite to that of
deferred tax asset. When differences are found in current and future taxation, obligation arises to
pay tax in the future. It can be analysed from the financials of Grain Corp Ltd that figure was 78
in 2015, reduced to 60.7 in next year which maximised in 2017 to 80.6. Thus, it can be
interpreted that in the future, obligation to pay tax is increased (Dang, Li and Yang, 2018).
9. Provide current tax assets or income tax payable recorded by firm
The balance sheet is taken into account of Grain Corp Ltd and current tax assets have
been found out. The figure amounting to 16 is recorded in financials of 2017. On the other hand,
amount was 1.1 in 2016 and increased to 2.5 in 2016. It can be interpreted that current tax assets
are increased which means that income tax payable to taxation authorities will be increased as
well. The taxable income is different from accounting income. Increased amount of tax assets is
not good income tax burden increases.
10. Is income tax expense same as income tax paid in cash flow statement
It can be interpreted that income tax expense is listed in income statement is not the same
as tax paid listed in cash flow statement. This is evident from the fact that accounting rules in
relation to financial reporting is different from when tax calculation is made. Thus, difference is
found when final tax amount is attained which should be paid on profits would be different from
actual tax statements (Dhaene, Hulle, Wuyts, Schoubben and Schoutens 2017). It is classified
from financials of Grain Corp Ltd that tax paid is 21 reported in cash flow statement, whereas,
income tax expenditure is 59.5 in the latest financials.
11. Discussing views regarding what confusing, surprising or interesting about treatment of tax
in financials of organisation
Treatment of tax is different in organisation and no two follow the same policies. The tax
treatment is interesting as it is found in Grain Corp Ltd. The income tax expenditure is classified
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and reported as current liability because payments has to be made in current year. The income
tax is carried out in different way. For providing depreciation on fixed assets, company has
utilised straight line method. On the other hand, accelerated depreciation means that more
amount of depreciation is made in order to decrease burden of tax in the best possible manner
and as such, taxable income reduces (Häcker and Ernst, 2017). The accounting treatment made
by organisation by applying rate of 30 % on the profits. Deferred tax are not identified on items
like goodwill identification, on assets and liabilities which are not having impact on accounting
income and taxable income. On the other hand, tax consolidation is headed by consolidated
group having share in tax agreement. Hence, treatment of tax is interesting to accounted for.
CONCLUSION
Hereby it can be concluded that financials play crucial role in assessing financial
performance of company in effective manner. These statements are quite helpful in carrying out
analysis whether firm is earning as well or not. Moreover, by analysing financials, external users
of accounting information and management of company are benefited to take decisions in the
best possible manner.
REFERENCES
Books and Journals
Bazdresch, S., Kahn, R. J. and Whited, T. M., 2017. Estimating and testing dynamic corporate
finance models. The Review of Financial Studies, 31(1), pp.322-361.
Dang, C., Li, Z. F. and Yang, C., 2018. Measuring firm size in empirical corporate
finance. Journal of Banking & Finance. 86. pp.159-176.
Dhaene, J., Hulle, C., Wuyts, G., Schoubben, F. and Schoutens, W., 2017. Is the capital structure
logic of corporate finance applicable to insurers? Review and analysis. Journal of
Economic Surveys. 31(1). pp.169-189.
Doidge, C., Kahle, K. M., Karolyi, G. A. and Stulz, R. M., 2018. Eclipse of the public
corporation or eclipse of the public markets?. Journal of Applied Corporate Finance. 30(1).
pp.8-16.
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