Corporate Accounting : Sample Assignment

RUNNING HEAD: Corporate Accounting
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Name of the student-
Topic- Corporate Accounting
University name

Corporate Accounting
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Table of Contents
Answer to question-1.............................................................................................................................3
Answer to question-2.............................................................................................................................5
Answer to question no-3........................................................................................................................5
Answer to question no-4........................................................................................................................7
Answer to question no-5........................................................................................................................8
Answer to question no-6........................................................................................................................9
Answer to question no-7........................................................................................................................9
References...........................................................................................................................................12
.

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Introduction
With the changes in International accounting disclosure, each and every company needs to
change their reporting frameworks with a view to establish the nexus between the domestic
reporting framework and international reporting framework. In this report, JB Hi-Fi
Company has been taken into consideration.
Answer to question-1
Analysis of the Cash flow statement
The cash flow statement of the company reflects the flow of cash in the particular year,
irrespective of the fact whether it belongs to present year or not. There are several changes in
the cash flow statement activities (Brigham, and Ehrhardt, 2013).
The non- cash items shown in the operating activities have increased to AUD $ 191 million in
2017 which is AUD $ 34 million more as compared to last five year data. It shows that
Company has increased the depreciation amount and increased the operating expenses and
income throughout the time.
The cash outflow in the investing activities has increased to AUD $ 886 million which had
happened due to the purchase of machineries and plants in 2017.
The financial activities have also shown inflow of cash AUD $ 396 in 2017 which arise due
to the issues of common stocks to shareholders (Brigham, and Ehrhardt, 2013).
The cash dividend paid has increased the cash outflow in 2017 by AUD $ 119 million which
shows that company has paid good amount of dividend in the present year.

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In the end, it could be inferred that that the free cash flow has changed by AUD $ 21 million
since last five years. It shows that company has increased its overall cash inflow and outflow
from all of its activities with the drastic rate since last five years.
Answer to question-2
Comparative analysis of the all three main flow of activities
JB HI FI LTD (JBH) Statement of CASH FLOW
Fiscal year ends in June. AUD in millions
except per share data.
2017-
06
2016-
06
2015-
06
2014-
06
2013-
06
Net cash provided by operating activities 191 185 180 41 156
Net cash used for investing activities -886 -52 -44 -38 -38
Net cash provided by (used for) financing
activities 716 -131 -130 -28 -91
Free cash flow 142 133 137 5 121
This analysis shows that company has changed its free cash flow by AUD $ 21
million since last five year. However, the main changes in cash outflow arise in the investing
activities and inflow of cash arises in the financial activities due to the issue of shares.
Answer to question no-3
There are several items have been recorded in the other comprehensive income statement
such as total revenue, Gross profit, operating expenses, interest expenses and provision for
the income tax.
JB HI FI LTD (JBH) Cash Flow Flag INCOME STATEMENT
Fiscal year ends in June. AUD in millions except per
share data.
2017
-06
2016
-06
2015
-06
2014
-06
2013
-06
Revenue 5628 3954 3652 3484 3308
Cost of revenue 4398 3089 2854 2745 2610
Gross profit 1230 865 798 739 699
Operating expenses
Sales, General and administrative 1434 1006 931 884 839
Other operating expenses -472 -361 -334 -336 -318
Total operating expenses 963 644 597 548 521

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Operating income 268 221 201 191 178
Interest Expense 11 4 6 9 10
Other income (expense) 2 1 1 0 1
Income before income taxes 259 218 196 183 168
Provision for income taxes 87 66 59 54 51
However, provision for the income tax and depreciation charged and other non-cash flow
charges are not recorded in the cash flow statement.
Answer to question no-4
As per my understanding, only those items which are related to the revenue expenditure and
income have been recorded in the income statement of JB Hi Fi Company. The total revenue
recorded shows the total income; provision for the income tax reflects the accounting for the
tax and interest expenses charged over the profit so deducted from the income statement. The
Earning per share is also the amount of payment made to shareholders (Bekaert, and Hodrick,
2017).
Answer to question no-5
There are several items recorded in the Income statement such as Total revenue, Gross profit,
operating expenses, interest expenses and provision for the income tax. However, Advance
payment to clients and accrued expenses payment have not been recorded in the profit and
loss accounts of the company but shown in the cash flow statement. These items have not
been recorded as these payment does not belong to the prevision year of the company so will
not be charged from the previous year’s profit. This accounting practice helps in finding the
true and fair value of this profit earned by company (Bekaert, and Hodrick, 2017).
Answer to question no-6

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Tax is the amount of money which is charged over the profit earned by company and paid to
government as legal liability. In 2016, JB Hi-FI company had income tax payment of AUD $
86.8 million which went down to AUD $ 65.6 million in 2017.
Particular(AUD $ in million) 2016 2017
Income tax expenses 86.8 65.6
Company has increased its interest expenses by increasing the debt funding which is used by
the management to reduce its overall tax payment.
Answer to question no-7
After analysing the annual report, it could be inferred that the company’s tax rate times
expenses shown is not the same with the tax payment made by company in its income
statement (Bekaert, and Hodrick, 2017).
Explain, why this is with reason
JB Hi-FI Company has paid the income tax AUD $ 65.6 million in 2017 which covers the
current year tax and deferred tax payment for last years as well. The company’s tax rate times
expenses shown should be computed by using the Accounting income * 30% tax rate, i.e.
AUD $ 259*30%. The amount of tax should be 77.7 million. (Garrett, Hoitash, and Prawitt,
2014).

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 The treatment of the recording of the tax in the income statement is different as per
the accounting rules and standards and taxation rules and regulation. .
 The tax expenses shown in the income statement is based on the income tax rules and
regulation. On the other hand, manual calculation of company’s tax rate time’s
expenses is based on the accounting rules.
 Two reason for the changes in this tax payment
1. Revenue and expenses charged in the profit and loss account may be deductible as per
the accounting rules and standards but may not be allowed by the taxation rules.
2. There are changes in the recording of the expenses such as deprecation accounting,
recording of the bed debts and other charges as per the accounting and income tax
rules AASB-112 (Brigham, and Ehrhardt, 2013).
Answer to question no-8
The deferred tax liabilities shown in the balance sheet of JB Hi-FI Company is AUD $ 8.2
million. The deferred tax liabilities is recognized and carried forward to the extent to which it
is reasonably sufficient future taxable income against deferred tax assets is realised. JB Hi-FI
Company has deferred tax liabilities in 2017 which is shown in the liabilities side of the
balance sheet. The treatment of the recording of the tax in the income statement is different as
per the accounting rules and standards and taxation rules and regulation which resulted to the
recording of the deferred tax assets and liabilities. If company has charged higher tax revenue
due the difference between the accounting and taxation rules then excess payment to
government would be recorded as deferred tax assets and if the payment charged is less due

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to the same reason then the same would be recorded as deferred tax liabilities (JB HI-FI,
2017).
JB Hi- FI has shown deferred tax liabilities in its books of accounts. It means it had paid
more tax to the government.
Particular (AUD $ million) 2017 2016
Deferred tax liabilities 8.2 0

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Answer to question no-9
Current tax assets and income tax payable recorded by company
The current tax payable by JB HI Fi Company is AUD $ 4.9 million in which have gone up to
AUD $ 9 million in 2017 (JB HI-FI, 2017).
The income tax payable is the amount recorded by the company and need to be paid as per
the income tax rules and AASB 112 (Garrett, Hoitash, and Prawitt, 2014).
The deferred tax payment by JB HI FI Company is AUD $ 8.5 million
Particular(AUD $ in million) 2016 2017
Income tax payable 4.9 9
Why the income tax payment is not same with the income tax payable
The main reason of differences between the both is related to income tax is charged on the
profit of the company and income tax payable is the accumulated amount of the outstanding
tax which company will pay in future and recorded in the liabilities side of the balance sheet
(Pomeranz, 2015).
Answer to question no-10
Cash flow statement shows the inflow and outflow of cash in the present year irrespective of
the years it belongs (Robinson, Stomberg, and Towery, 2015).

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The cash flow in the income tax shown in the cash flow statement is $98.5 million which
covers all the tax payment (Towery, 2017).
The income tax expenses recorded in the income statement is not same as with the income tax
payment shown in the cash flow statement (Pomeranz, 2015).
Reason
Cash flow statement covers all the tax payment in the current year irrespective of the years it
belongs. Tax charged on the profit is done as per the income taxation rules of AASB112
(Hanlon, Maydew, and Saavedra, 2017).
Answer to question no-11
Treatment of the Tax
Interesting thing
The tax payment as per the AASB 112 increases the tax payment and blocks good amount of
cash of company (Kubick, et al. ., 2016).
With the changes in the income tax rules, it might be hard for the company to determine the
accurate tax payment (Dyreng, Hanlon, and Maydew, 2017).
Surprising thing
The main surprising thing about the recording of the tax is that company can never record
deferred tax assets and deferred tax liability at the same time in the balance sheet (JB HI-FI,
2017).
Difficulty in recorded the entire tax amount

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The main difficulty is related to recording deferred tax assets and deferred tax liability in the
books of accounts. It blocks high amount of cash if company had deferred tax asset (Watson,
2017).
Conclusion
The deferred tax liabilities and assets recorded in the books of accounts of the
company is the reason of difference between the domestic reporting framework and
international reporting framework. Now in the end, it could be inferred that proper rules
should be followed by company to mitigate the taxation issues.

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References
Bekaert, G. and Hodrick, R., 2017. International financial management. Cambridge
University Press.
Brigham, E.F. and Ehrhardt, M.C., 2013. Financial management: Theory & practice.
Cengage Learning.
Dyreng, S., Hanlon, M. and Maydew, E., 2017. When does tax avoidance r
Garrett, J., Hoitash, R. and Prawitt, D.F., 2014. Trust and financial reporting quality. Journal
of Accounting Research, 52(5), pp.1087-1125.
Hanlon, M., Maydew, E.L. and Saavedra, D., 2017. The taxman cometh: Does tax
uncertainty affect corporate cash holdings?. Review of Accounting Studies, 22(3), pp.1198-
1228.
JB HI-FI, 2017., Annual report., [Online]., Available from
http://www.annualreports.com/HostedData/AnnualReports/PDF/ASX_JBH_2016.pdf
[Accessed 14th May, 2018].
Kubick, T.R., Lynch, D.P., Mayberry, M.A. and Omer, T.C., 2016. The effects of regulatory
scrutiny on tax avoidance: An examination of SEC comment letters. The Accounting
Review, 91(6), pp.1751-1780.
Pomeranz, D., 2015. No taxation without information: Deterrence and self-enforcement in the
value added tax. American Economic Review, 105(8), pp.2539-69.
Pomeranz, D., 2015. No taxation without information: Deterrence and self-enforcement in the
value added tax. American Economic Review, 105(8), pp.2539-69.
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.

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Towery, E.M., 2017. Unintended consequences of linking tax return disclosures to financial
reporting for income taxes: Evidence from Schedule UTP. The Accounting Review, 92(5),
pp.201-226.
Watson, L. (2017). Discussion of'Does the Deferred Tax Asset Valuation Allowance Signal
Firm Creditworthiness?'.