Corporate Financial Accounting - PDF

RUNNING HEAD: Corporate Financial Accounting
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JB HI FI COMPANY
Corporate Accounting
JB Hi-FI Company
Name of the Author- Sagar Pokhrel
Student id- EMV 22235

Corporate Financial Accounting
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Table of Contents
Introduction...........................................................................................................................................2
Answer to question-1.............................................................................................................................2
Answer to question-2.............................................................................................................................3
Comparative analysis of the all three main flow of activities............................................................3
Answer to question no-3.......................................................................................................................3
Answer to question no-4.......................................................................................................................4
Answer to question no-5.......................................................................................................................4
Answer to question no-6.......................................................................................................................5
Answer to question no-7........................................................................................................................5
Explain, why this is with reason.............................................................................................................5
Answer to question no-8........................................................................................................................6
Answer to question no-9........................................................................................................................8
Income tax payment differ from the income tax payable..................................................................8
Answer to question no-10......................................................................................................................9
Answer to question no-11......................................................................................................................9
Conclusion...........................................................................................................................................10
References...........................................................................................................................................11
.

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Introduction
This report emphasises upon the financial statement analysis, deferred tax payment
and the recording of the tax provisions of the JB Hi- Fi Company. With the ramified
economic changes, government has been changing the taxation rules and regulation
throughout the time to make the tax implication better and effective on the corporations. In
this report, JB Hi- Fi Company has been taken to prepare this report. This company has been
running its business on international level for selling electronic goods and services (JB HI-FI,
2017).
Answer to question-1
Analysis of the Cash flow statement
Cash flow statement is accompanied with the flow of cash in the business irrespective of the
fact whether it belongs to present year or not. The cash flow statement represents the flow of
cash in its three main activities named investing, financial, operating activities.
The non-cash items are being added in the operating activities which have increased to AUD
$ 191 million in 2017 which is AUD $ 34 million as compared to last five year data. It is
reflected that company has increased the depreciation amount and increased operating
expenses (JB HI-FI, 2017).
The cash outflow shown by company in its investing activities is AUD $ 886 million which
arise due to its cash payment to buy new machineries and assets (JB HI-FI, 2017).

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The financial activities of the JB Hi-Fi Company has shown the positive cash inflow of AUD
$ 396 in 2017 which is increased due to the investment made by the investors in buying the
capital of company.
The cash dividend paid by JB Hi-Fi company is AUD $ 119 million which is 10% higher as
compare to last year data.
After analysing all the details, it could be inferred that free cash flow of company has
increased to AUD $ 21 million since last five years. JB Hi-Fi Company has positive cash
inflow in its business which reflects the positive business outcomes in near future (Ho, 2017).
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
The free cash flow is accompanied with the all the addition and subtraction of the
cash in the business due to the changes in the flow of operating activities. The free cash flow
of JB Hi-Fi Company is AUD 142 million which is too high and shows that company has
positive flow of capital in its business (Watson, 2017).
Answer to question no-3
There are several items have been recorded in the income statement of the JB Hi-Fi Company
such as revenue, cost of capital, gross profit, operating expenses and all the expense and
income which are recorded as revenue nature (Watson, 2017).

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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
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
The provision for the doubtful debts, provision for the tax and all the other items which
cannot be recorded in the cash are not shown the cash flow statement but adjusted in the
income statement of company (JB HI-FI, 2017).
Answer to question no-4
As per the perception of me, I have understood that only those items which are related to the
present year are recorded in the income statement of company. It is observed that cash flow
statement covers all the items recording irrespective of the fact whether it belongs to present
year or not. On the other hand, income statement shows the income and expenses related to
the present year with a view to identity the true and fair net profit of company (JB HI-FI,
2017).
Answer to question no-5
Income statement is prepared with a view to identify the actual profit of the company in the
particuarl year. It is acomapenid with the details such as as revenue, cost of capital, gross
profit, operating expenses and all the expense and income which are recorded as revenue

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nature. All the advance payment and outstanding payment made in the current year will be
subtracted from its heading shown in the income statement of company.
Answer to question no-6
Each and every company needs to pay tax to government. It is the amount of liabilities or tax
payment which company needs to pay as their moral responsibilities to government on their
earning. The amount of tax payment by JB Hi-Fi Company is AUD $ 86.8 million in 2016
which decreased to AUD $ 65.65 million in 2017 (JB HI-FI, 2017).
Particular(AUD $ in million) 2016 2017
Income tax expenses 86.8 65.6
However, with the increasing tax expenses, company has increased its interest expenses
which will eventually reduce the tax implication on company (JB HI-FI, 2017).
Answer to question no-7
After analysing all the details shown in the annual report of company and AASB 112 taxation
rules and regulation for the tax implication on companies, it could be inferred that the tax
payment made by company is not equal to the computed tax rate times on the accounting
profit of company.

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Explain, why this is with reason
It is analysed that JB Hi-Fi Company has paid the income tax AUD $ 65.6 million in 2017
which includes all the tax payment such as deferred tax and current tax (Obinson, Stomberg,
and Towery, 2015).
The company’s tax rate times expenses would be Accounting income * 30% tax rates.
It would be around 259*30%.
The amount of tax should be 77.7 million.
 The treatment of tax recording in the income statement varies as per the accounting
rules and regulation and AASB 112 income tax standards (Towery, 2017).
 The tax payment shown in the profit and loss account is computed by using the proper
taxation rules and manual calculation is done on the basis of company’s tax rate
times’ expense and accounting rules.
 There are main two reasons of the differences between the tax amount shown in the
profit and loss and manual calculation
1. Revenue and expense recorded by the accounting rules and regulations may not be
allowed as per the income tax rules and standard AASB 112.
2. The recording of the bad debts, interest charged, and deduction charged for the charity
may not be allowed by the income tax rules and standards (Brigham, and Ehrhardt,
2013).

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Answer to question no-8
The deferred tax liabilities shown in the balance sheet is AUD $ 8.2 million. It is evaluated
that deferred tax liabilities is recognized and carried forward to the extent to which it could be
resonbly charged to the books of accounts of company (Watson, 2017).
The JB Hi-Fi Company has recorded the deferred tax liabilities in its balance sheet.
The treatment of the deferred tax assets and libiliteis recorded in the balance sheet of the
company (Bradley, 2017).
If company paid higher tax as per the AASB 112 in comparison with the tax computed as per
the accounting rules and standards then the same additional amount would be recorded as
deferred tax assets.
If company charges less tax as per the AASB 112 in comparison with the tax computed as per
the accounting rules and standards then the less amount would be recorded as deferred tax
liabilities (JB HI-FI, 2017).
JB Hi-Fi Company has recorded deferred tax liabilities. It shows that company has paid
higher tax to government (Ho, 2017).
Particular (AUD $ million) 2017 2016
Deferred tax liabilities 8.2 0

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Answer to question no-9
Current tax payment and current tax payable by the JB Hi-Fi Company
The current tax payable recorded in the books of accounts of company is AUD $ 4.9 million
in 2016 which have reduced and resulted to AUD $ 9 million in 2017 (JB HI-FI, 2017).
The income tax payment shown in the income statement is the amount of tax implication
which was paid by JB Hi-Fi Company on its profit as per the income tax rules and AASB 112
(Gorry, et al., 2017).
Particular(AUD $ in
million)
2016 2017
Income tax payable 4.9 9
Income tax payment differ from the income tax payable
There are several reasons for the difference between the income tax payment amount show in
the income statement of company and income tax payable shown in the liabilities side of the
balance sheet (Ladas, Negkakis, and Samara, 2017).
Nature- Income tax payment amount show in the income statement of company is of revenue
in nature. On the other hand, income tax payable shown in the liabilities side of the balance
sheet.

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Payment- income tax payment covers the tax payment of Company related for the present
year. On the other hand, income tax payable is recorded as cumulative taxable libiliteis of
company (Landoni, and Zeldes, 2017).
Answer to question no-10
The cash flow statement covers all the inflow and outflow of cash in the present year
irrespective of the fact that whether it belongs to the current year or not.
The cash flow statement shown the income tax payment of $98.5 million which covers entire
tax payment in present year irrespective of the fact that whether it belongs to the current year
or not (Kim, 2017).
The recorded income tax in the income statement is related to the current year tax implication
which is charged against profit to identify the true and fair of the profit earned by JB Hi-Fi
Company (Ladas, Negkakis, and Samara2017).
Reason
The main reason of the difference between the amount shown in the cash flow statement for
the tax and the amount charged in the income statement is related to the current year tax
implication is based on the recording of the nature of transaction in the separate books of
accounts for which they are prepared.
Answer to question no-11
Treatment of the tax amount recorded in the books of account of JB HI Fi Company

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Interesting thing
The tax payment shown in the income statement may be changed with the changes in the
taxation rules and standards (Morris, 2017).
It may be hard for the organization to determine the right amount of cash flow for the income
tax which company need to make in the assessment year.
Surprising thing
The surprising thing about the recording of the tax in the books of accounts is related to its
booking entries. JB Hi-Fi Company cannot have deferred tax assets and deferred tax
liabilities in the books of accounts at the same time. It may result to conflict as per the
accounting rules if recorded (Larson, Lewis, and Spilker, 2017).
Difficulty in recorded the entire tax amount
The main difficulty in the recording of the entire tax arise when company has high amount of
tax payment and at the same time company needs to set off its deferred tax liabilities in its
books of accounts (Eberhartinger, Genest, and Lee, 2017).
Conclusion
After analysing all the details and deferred tax recording of the JB Hi-Fi Company, it
could be inferred that company has complied with the all the domestic and international rules
for the tax payment. It is inferred that if in case accounting rules and standards conflict with
the rules and regulation of the AASB 112 then in that case the computation of the tax
implication will be made as per the income tax rules and regulation.

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References
Bradley, S., 2017. Inattention to Deferred Increases in Tax Bases: How Michigan Home
Buyers Are Paying for Assessment Limits. Review of Economics and Statistics, 99(1),
pp.53-66.
Brigham, E.F. and Ehrhardt, M.C., 2013. Financial management: Theory & practice.
Cengage Learning.
Eberhartinger, E., Genest, N. and Lee, S., 2017. Practitioners’ Judgment and Deferred
Tax Disclosure: A Case for Materiality.
Gorry, A., Hassett, K.A., Hubbard, R.G. and Mathur, A., 2017. The response of deferred
executive compensation to changes in tax rates. Journal of Public Economics, 151, pp.28-
40.
Ho, A.T., 2017. Tax-deferred saving accounts: Heterogeneity and policy
reforms. European Economic Review, 97, pp.26-41.
JB HI-FI, 2017., Annual report., [Online]., Available from
http://www.annualreports.com/HostedData/AnnualReports/PDF/ASX_JBH_2016.pdf
[Accessed 14th May, 2018].
Kim, J.H., 2017. What Really Determines the Information Content of Tax Expense and
Deferred Tax?. 회회회회회, 42(2), pp.1-44.
Ladas, A.C., Negkakis, C.I. and Samara, A.D., 2017. Accounting quality deferred tax and
risk in the banking industry. International Journal of Banking, Accounting and
Finance, 8(1), pp.1-19.
Ladas, A.C., Negkakis, C.I. and Samara, A.D., 2017. Accounting quality deferred tax and
risk in the banking industry. International Journal of Banking, Accounting and
Finance, 8(1), pp.1-19.
Landoni, M. and Zeldes, S.P., 2017. Should the government be paying investment fees on
$3 trillion of tax-deferred retirement assets?

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Larson, M.P., Lewis, T.K. and Spilker, B.C., 2017. A Case Integrating Financial and Tax
Accounting Using the Balance Sheet Approach to Account for Income Taxes. Issues in
Accounting Education, 32(4), pp.41-49.
Morris, J.L., 2017. Classification of Deferred Tax Assets and Deferred Tax Liabilities:
An Evaluation of FASB's Attempt at Standards Simplication. Journal of Accounting and
Finance, 17(8), pp.198-208.
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.
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?'.