Corporate Financial Accounting (doc)

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

Corporate Financial Accounting
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Table of Contents
Introduction...........................................................................................................................................3
Answer to question-1.............................................................................................................................3
Answer to question-2.............................................................................................................................4
Comparative analysis of the all three main flow of activities............................................................4
Answer to question no-3.......................................................................................................................4
Answer to question no-4.......................................................................................................................5
Answer to question no-5.......................................................................................................................5
Answer to question no-6.......................................................................................................................5
Answer to question no-7........................................................................................................................6
Explain, why this is with reason.............................................................................................................6
Answer to question no-8........................................................................................................................7
Answer to question no-9........................................................................................................................9
Why the income tax payment is not same with the income tax payable..........................................9
Answer to question no-10......................................................................................................................9
Answer to question no-11....................................................................................................................10
Conclusion...........................................................................................................................................11
References...........................................................................................................................................12
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Introduction
With the increasing complexity of the taxation rules and regulation, each and every
organization needs to implement proper strategic program and effective taxation compliance.
In this report, JB Hi-Fi Company has been taken to evaluate the cash flow statement; deferred
tax implication and implemented strategic program have been taken into consideration. The
JB HI-FI Company is listed Company which has been running its business on international
level.
Answer to question-1
Analysis of the Cash flow Statement
Cash flow statement is the statement which records all the inflow and outflow of cash in the
particular year. There are several changes in the cash flow statement which have been
evaluated on the basis of changes in flow of cash in the particular year.
The non-cash items which is shown in the operating activities of company is AUD $ 191
million in 2017. It is AUD $ 34 million more as compared to last five year data. Company
has increased is depreciation amount and also increased the operating expenses and income.
The Cash outflow of company in the investing activities has increased to AUD $ 886 million
which occurred due to the investment in buying machineries and plan in 2017.
In addition to this, financial activities of company have shown the inflow of cash around
AUD $ 396 in 2017.
The cash outflow form the dividend has also increased to AUD $ 119 million which
increased the outflow of cash in the business.

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The free cash flow of the company has changed by AUD $ 21 million since last five years
which is 12% higher as compared to last five year data. JB HI-FI Company needs to control
its flow of cash if it wants to manage the flow of cash in its business (Robinson, Stomberg,
and Towery, 2015).
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
Interpretation
The free Cash flow statement of JB Hi-Fi Limited has gone down to AUD $ 121 million. It
has observed that Company has increased the inflow of cash in its financial activities and at
the same time it has increased its outflow from the investing activities by 18% since last five
years. The cash flow changes in the JB Hi- Fi has shown good amount of flow which might
shows that company will grow effectively in long run.
Answer to question no-3
There are several items which have been recorded in the financial statement of t JB Hi-Fi
Limited such as Total sales, Operating and non-operating expenses, gross revenue, interest
expenses and provision for doubtful debts and taxes (Towery, 2017).
JB HI FI LTD (JBH) Cash Flow Flag INCOME STATEMENT
Fiscal year ends in June. AUD in millions except per 2017 2016 2015 2014 2013

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share data. -06 -06 -06 -06 -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
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
It is observed that the cash flow statement does not include the non-cash transaction which
negatively impacts the financial activities of the business (Watson, 2017).
Answer to question no-4
As per my perception only those items which have impact on the net profit of company will
be recorded in the financial statement. It covers all the revenue and expenses related to the
current year only. The flow of tax and interest expenses recording in the books of accounts of
the company will be recorded in the income statement of the company (Haswell, and
Langfield‐Smith, 2008).
Answer to question no-5
Income statement of the company records all the operating and revenue expenses of the
Company. There are several items which have been recorded in the financial statement of t
JB Hi-Fi Limited such as Total sales, Operating and non-operating expenses, gross revenue,
interest expenses and provision for doubtful debts and taxes. The main differences between
the flows of the profit in the cash flow statement are different from the profit and loss account
of the company. The main reason behind the difference between the items recorded in the

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financial statement of company is based on the nature of transactions. Only that transaction
which is having monetary impact on the company will be recorded in the cash flow
statement. On the other hand, income statements record all the transactions which relates to
current year, irrespective of their nature (Li, and Tran, 2016).
Answer to question no-6
Each and every organization needs to pay tax to government as their legal obligation. Tax is
the amount charged on the profit earned by company and paid to government. JB HI-FI
Company has paid tax of AUD $ 86.8 million in 2016 which have gone down to AUD $ 65.6
million in 2017 due to its decreased net profit (Bond, Govendir, and Wells, 2016).
Particular(AUD $ in million) 2016 2017
Income tax expenses 86.8 65.6
The interest expenses have also increased by JB HI-FI which eventually reduces the tax
payment of company due to the available deduction on the profit (Dahmash, . 2007)
Answer to question no-7
The annual report of company has shown that company has increased its tax payment since
last year. This is found that the tax amount shown in the income statement of company is not
sae with the company’s tax rate time’s expenses shown (JB HI-FI, 2017).

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Explain, why this is with reason
The company’s tax rate time’s expenses are the amount of tax computed on the basis of the
tax rate charged on the profit earned by the company (Heijker, 2012). It reflects the
computation of the 30%* AUD $ 259. On the other hand, the tax amount paid by JB HI-FI
company is also AUD $ 65.6 million which is too low as. As per the company’s tax rate
time’s expenses, the amount of tax should be AUD $ 77.7 million which is way higher than
the tax paid by JB HI-FI Company (Dagwell, Wines, and Lambert, 2015).
The main reason of changes in both the tax payment is given as below
 The treatment of the tax payment in the books of accounts is done on the basis of
income tax rules and regulation. On the other hand, company’s tax rate time’s
expenses computation is done on the basis of the manual computation.
 There are main two other reason of the differences between the tax computations is as
below (Murray, 2007).
1. The revenue and expenses charged in the books of accounts of company is done on
the basis of income tax rules while the manual calculation tax rate is based on the %
of tax and profit computed as per the accounting rules and regulation.
2. There is difference for the recording of the bad debts, provision for the doubtful debts,
depreciation and other provision as per the income tax rules AASB-112 and
accounting rules (Mear, 2017).
3. Differences between the accounting rules and regulation and income tax rules as per
the AASB 112 need to be assessed by the company. If in case, there is differences
income tax rules will override the accounting rules.

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Answer to question no-8
It is considered that the deferred tax liabilities shown in the balance sheet 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 the deferred tax assets. The treatment of
the recording of the tax in the income statement is different as per the accounting rules
taxation standard as per the AASB 112. If company paid higher tax as per the income tax
rules as compared to the tax computation on the basis of accounting rules then the same
would be recorded as deferred tax assets. If the payment is less in this case then the remaining
amount would be recorded as deferred tax liabilities (JB HI-FI, 2017).
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 recorded in the books of accounts
The current tax paid by JB Hi-Fi Company is AUD $ 4.9 million in which increased to AUD
$ 9 million in 2017 (JB HI-FI, 2017).
The income tax payable is the amount to be paid by company as per the taxation rules and
AASB 112 ( Felski, 2017).
The deferred tax payment of the 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 tax payment shown in the profit and loss account
and income tax payable is related to its nature of recording.
 The income tax payment relates to the present year and charged as revenue expenses
in the profit and loss account.
 The income tax payable is recorded in the balance sheet of company as liabilities
which show the collective liabilities of the tax payment which company needs to pay
(Nuryanah, and Islam, 2015).

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Answer to question no-10
The cash flow statement is accompanied with the flow of cash either for inflow and outflow.
The income tax payment shows the cash outflow of capital i.e. $98.5 million.
The income tax expenses shown in the books of accounts of company covers payment of tax
in the present year which company needs to make (Goodwin, et al., 2017).
Reason
Cash flow statement shows the outflow of cash tax payment in the present year irrespective
of the fact whether it relates to previous year or next year. The non-cash items of the
operating activities of company is AUD $ 191 million in 2017.. The Cash outflow of
company in the investing activities has increased to AUD $ 886 million which occurred due
to the investment in buying machineries and plan in 2017. It shows that company has
increased its cash inflow and outflow since last year which shows that company needs to
increase its liquidity position.
On the other hand, tax recording in the profit and loss account of company is done as per the
AASB112 (Kusuma, 2009).
Answer to question no-11
Treatment of the Tax
Interesting thing
 The interesting thing about the tax payment is that tax recording as per the AASB-112
increase the tax blockage and tax implication on the Company.

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 It is hard for the company to determine the exact tax implication due to the sudden
changes in the taxation rules.
Surprising thing
It is surprising thing to know that JB HI-FI Company cannot record all the deferred tax assets
and deferred tax liabilities in its books of accounts at the same time (JB HI-FI, 2017).
Difficulty in recorded the entire tax amount
The difficulty to record the tax payment arises when there are changes or amendment in the
taxation rules and regulation given under AASB 112 (Stoianoff, and Kaidonis, 2015). The
main difficulty arises due to the wrong recording of the deferred tax in the books of account.
If in case there is contradiction between the income tax rules and accounting rules then
company will comply with the income tax rules to make its financial statement.
Conclusion
The main reason for the differences in the tax amount in the cash flow statement and
income statement is based on its recording concept and different accounting standards. Each
and every statement of the company is prepared for the particular purpose. Now in the end, it
could be inferred that JB Hi-Fi Company has effective business and had shown the deferred
tax payment in its books of accounts. It has been observed that company has complied with
the all the rules, regulations and applicable standards of the AASB 112. It has also increased
the transparency of its financial reporting to its stakeholders.

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References
Bond, D., Govendir, B. and Wells, P., 2016. An evaluation of asset impairments by
Australian firms and whether they were impacted by AASB 136. Accounting &
Finance, 56(1), pp.259-288
Dagwell, R., Wines, G. and Lambert, C., 2015. Corporate accounting in Australia. Pearson
Higher Education AU.
Dahmash, F.N., 2007. An Examination of the Value Relevance and Bias in the Accounting
Treatment of Intangible Assets in Australia and the US Over the Period 1994-2003 Using the
Feltham and Ohlson (1995) Framework. University of Western Australia.
Felski, E.A., 2017. How Does Local Adoption of IFRS for those Countries Who Modify
IFRS by Design, Impair Comparability over Countries Who have not Adapted
IFRS?. Journal of International Accounting Research., 18(1), 46-62
Goodwin, J., Atilgan, Y., Simsir, S.A. and Ahmed, K., 2017. Investor reaction to accounting
misstatements under IFRS: Australian evidence. Research., 28(1), 56-62
Haswell, S., and Langfield‐Smith, I. 2008. Fifty‐Seven Serious Defects in
‘Australian’IFRS. Australian Accounting Review, 18(1), 46-62.
Heijker, R., The influence of the mandatory adoption of IFRS on the value relevance of
earnings for Dutch listed companies., Accounting Research., 18(1), 46-62
JB HI-FI, 2017., Annual report., [Online]., Available from
http://www.annualreports.com/HostedData/AnnualReports/PDF/ASX_JBH_2016.pdf
[Accessed 14th May, 2018].
Kusuma, H., 2009. The information content of the cash flow statement: An empirical
investigation (Doctoral dissertation, Victoria University of Technology). 12(1), 44-64.
Li, E.X. and Tran, A.V., 2016. An Empirical Analysis of the Tax Burden of Mining Firms
versus Non-Mining Firms in Australia. Austl. Tax F., 31, p.167.

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Mear, K.M., 2017. Information relevance of deferred tax: a thesis submitted in fulfilment of
the requirements for the degree of Doctor of Philosophy in Accounting at Massey University,
Albany, New Zealand (Doctoral dissertation, Massey University)., 27(1), 35-64.
Murray, J.H., 2007. TaxaTion of financial arrangeMenTs—furTHer DevelopMenTs. The
APPEA Journal, 47(1), pp.443-468.
Nuryanah, S. and Islam, S., 2015. Corporate governance and financial management:
computational optimisation modelling and accounting perspectives. Springer.
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.
Stoianoff, N. and Kaidonis, M., 2005. TAX TEACHERS ASSOCIATION. JOURNAL OF
THE AUSTRALASIAN TAX TEACHERS ASSOCIATION, 1(1).
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?'., The Accounting Tax Review, 92(5), pp.205-209