HI5020 Corporate Accounting: Comprehensive Financial Analysis

This report provides a detailed analysis of corporate accounting practices, focusing on cash flow statements, other comprehensive income statements, and accounting for corporate income tax. It examines Green Cross Limited's financial activities across three years, analyzing operating, investing, and financing activities. The report also discusses the classification of cash transactions, the components of comprehensive income, and the accounting treatment of corporate income tax, including deferred tax assets and liabilities. Furthermore, it addresses the company's compliance with Australian tax laws and regulations, highlighting the use of tax consolidation groups and funding agreements. Desklib offers a platform to access this and other solved assignments to aid students in their studies.

HI5020 Corporate Accounting
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Table of Contents
CASH FLOWS STATEMENT.......................................................................................................3
(i)..................................................................................................................................................3
(ii)................................................................................................................................................4
OTHER COMPREHENSIVE INCOME STATEMENT................................................................5
(iii)...............................................................................................................................................5
(iv)................................................................................................................................................5
(v).................................................................................................................................................5
ACCOUNTING FOR CORPORATE INCOME TAX...................................................................6
(vi)................................................................................................................................................6
(vii)..............................................................................................................................................6
(viii).............................................................................................................................................6
(ix)................................................................................................................................................7
(x).................................................................................................................................................7
(xi)................................................................................................................................................7
References........................................................................................................................................9
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CASH FLOWS STATEMENT
(i)
Green cross limited is the company which is operating and it is making the cash flow statement
in which there are various activities which are covered and they all will be required to be
determined. In the below-provided discussion, all the items of the cash flow are mentioned.
 The main item which is included in the cash flow is related to the operating activities and
in that, all the payments which are made to the suppliers and the receipts which are made
from the customers are considered. The overall amount which is received by the company
is 704620 in 2015 and then increased to 809595 for the year 2016 and in 2017 it amounts
to 899917. The payments which are made by the company are amounting to 658300,
713874 and 802303 for all the three consecutive years which are 2015, 2016 and 2017
(Greencross Limited, 2017).
 Then the various other transactions which took place in the company and are considered
as the operating activities includes interest received and paid by the company and also the
payments are made for the income tax and other acquisition costs. By considering all of
them the net cash flow which is involved in the operations will be determined. In 2017
there was very less amount of the income tax which was paid and that amounted to 1126
(Greencross Limited, 2017).
 In the investing sector the purchases are made of the other businesses and also the
company is making the payment in relation to the property and intangibles which are
acquired. The total payment which is made by the company for all of these are 234495
for 2015 and then 60279 for 2016 and in 2017 the payment of 76666 has been made by
Greencross (Greencross Limited, 2017).
 The last is the financing items in which the share related transactions are involved. The
borrowings and other repayments which are made will also be included. The dividend
which is paid by the company is also taken into account as that is also related to the
equity of the company. There was a positive balance of this in last two years but in the
current year there is a decline in this and the negative amount is received.
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(ii)
All of the cash transactions which take place in the company are classified in three categories in
the cash flow and so it is required that appropriate comparison shall be made so that the
evaluation of the cash position of the business can be made in an effective manner. All of the
description in relation to this is provided below:
Operating activities: In this section, the company will be covering all of those items which are
related to the operations that are performed by the company. In this, the day to day activities of
the business is considered so that the requirement and the manner of the utilisation of the funds
in the business can be ascertained.
Investing activities: This will be the part in which the investments which are made by the
company in any manner will be included (Bhandari & Adams, 2017). There are various such
purchases and sales in the business which are made under it and they will be identified in the
given section. In this, the investments which are made in the tangible and intangibles both will be
considered.
Financing activities: all of those transactions and events which are related to the financial
sources of the company will be covered in this. Here the equity and debt related accounts will be
handled. All the payments and receipts which are made in relation to them are to be incorporated.
For the proper comparison, the table is provided below in which all of the three activities are
incorporated.
Particulars 2015 2016 2017 Change
2015-
2016
change
2016-
2017
Change
2015-
2017
Cash flow from operating activity 14691 78636 74987 63945 -3649 60296
Cash flow from investing activity -234495 60279 76666 294774 16387 311161
Cash flow from financing activity 128752 14627 -3221 -114125 -17848 -131973
All the changes which are taking place in the company are represented in the above table. In this,
the increase and decrease of three years have been taken into consideration. By this, the
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conclusion can be drawn and it can be said that in case of investing activities positive balance is
there.
OTHER COMPREHENSIVE INCOME STATEMENT
(iii)
In the company, there are several such items which are to be incorporated in the income
statements but there are some of the situations in which they cannot be considered in them.
Those which cannot be incorporated in that will be included in the comprehensive income
statements. They are ones which are not realised by the company in the given period and so will
not be considered in the current period.
(iv)
While making the accounts there are various items which can be incorporated in the
comprehensive income statements and mostly they are related to the hedges and foreign
exchange difference. In the given case also there are two amounts which are related to them only.
The change which is there is in the change in the value of cash flow hedges which are related to
the equity. The amount of 904 is included in this respect in the accounts. Next is related to
foreign currency translations and they amounted to -128 (Greencross Limited, 2017). They are
included and the net amount is taken into consideration for the distribution purpose.
(v)
The comprehensive income statement is made so that company can enter all the amounts whether
they are realised or not. So in this, the ones which are not realised by the company will be taken
into consideration as they cannot be included in the main statement. By this, the difference which
may exist will be eliminated. By this, all the aspects will be represented in an appropriate manner
and the company will be depicting the true position of the business and that will be disclosed to
the shareholders so that they can consider that in their decision making.
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ACCOUNTING FOR CORPORATE INCOME TAX
(vi)
In every year the company will be required to ascertain the income or the loss which has been
made by it. They will be then ascertain the laws and the regulations which are applicable on them
in relation to tax so that they can be used and by that it will be possible for the company to
ascertain the amount which is to be paid by them (Gobetti & Orair, 2017). In the given case also
there is the tax expense which has been determined and the company has incorporated in the
income statement of the company so that the net amount of the profits which are made can be
calculated. In the present year the expense of 15419 has been recognised which in the last year
was 15007 (Greencross Limited, 2016). The increase is because of the rise in the earnings of the
company.
(vii)
The amount of the tax which has been determined in the company as the expense is in
accordance with the accounting laws but if the tax rate of 30% is applicable when the amount of
the tax in accordance with that is different (Greencross Limited, 2017). There is various such
items which is not deductible in the tax laws and due to them the variation in the tax arises. In
the given case also the non-deductible expenses such as entertainment expense, acquisition cost
and various sundry items are there which have been considered and due to them, the difference
in the amount has been identified.
(viii)
The timing difference which exists in the business due to the difference in the laws will be
eliminated with the help of the deferred tax assets and liabilities (Jaya, 2016). In this the amount
on which the tax will be paid by the company in the different period will be recognised in this
manner. In the given case the company is recognising the deferred tax assets for the same. There
is the amount of the asset and liability which was recognised earlier but now the company is
representing them in the net manner. There is the net asset of 11501 in 2016 and 7296 in 2017
(Greencross Limited, 2017). They are to be taken into consideration so that the tax in relation to
them can be adjusted at the required time.
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(ix)
The liability in relation to the income tax has been incorporated by the company in its balance
sheet and the same will be considered. The amount which is determined in this is not similar to
the amount of the tax expense which has been identified. 1478, 5601 and 6963 are the amount of
the tax payable which are ascertained and presented for the year 2015, 2016 and 2017
respectively. This is the amount which the company will be required to pay in the forthcoming
one year as this is the current liability for the company (Greencross Limited, 2017). Due to this
the variation is there as the expense is the amount of the tax on the earning but it is not necessary
that whole of the payment will be made by the company in the current year only.
(x)
The payment which is made by the company in case of the tax and that is represented in the cash
flow is not similar to that of the expense. This is because the amount which is recognised as the
tax will be paid in the various aspects (Burkhauser, et. al., 2015). Cash paid is only the portion
and the remaining will be paid in the coming year. Also the adjustments are made in this which
is related to various other components or if there is some due in the past then that will also have
to be adjusted from the same which leads to the difference. The company always not pay the
total amount in cash and so the other modes of payments are also used which leads to the
following situation.
(xi)
All of the laws and regulations which are specified in the Australian Act have been determined
by the company and they have also been complied with by the company. The tax amounts which
are identified are in accordance with the law and the entire amount is classified in the tax amount
and the deferred tax. There are various policies which are formulated by the company in this
respect and they are followed by the whole group (Greencross Limited, 2017). Tax consolidation
group has been formed which is required as per the act. All of the entities which are involved
will be making the separate recordings in relation to all the tax-related amounts. The separate
taxpayer approach is followed by which the calculation of the accurate amount of the tax has
been made and also that is allocated by the company in proper manner among all the members of
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the group. Tax funding agreement is also followed and by the help of that the entire amount
which is receivable and payable for the tax is recognised and that is mentioned which ensures
that proper balance among all the amounts is made.
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References
 Bhandari, S. B., & Adams, M. T. (2017). On the Definition, Measurement, and Use of the
Free Cash Flow Concept in Financial Reporting and Analysis: A Review and
Recommendations. Journal of Accounting and Finance, 17(1), 11-19.
 Burkhauser, R.V., Hahn, M.H. and Wilkins, R. (2015). Measuring top incomes using tax
record data: A cautionary tale from Australia. The Journal of Economic Inequality, 13(2),
pp.181-205.
 Gobetti, S. W., & Orair, R. O. (2017). Taxation and distribution of income in Brazil: new
evidence from personal income tax data. Revista de Economia Política, 37(2), 267-286.
 Greencross Limited. (2016). Annual report. [Online]. Greencross Limited. Available at:
http://www.greencrosslimited.com.au/Docs/2045-GXL0002-_Greencross-Annual-
Report-2016.pdf. [Accessed: 25 May 2018]
 Greencross Limited. (2017). Annual report. [Online]. Greencross Limited. Available at:
http://greencrosslimited.com.au/Docs/3049-Greencross_Annual_Report_2017.pdf.
[Accessed: 25 May 2018]
 Jaya, T. E. (2016). Earnings, Leverage, and Deferred Tax on Tax Penalties and Fines
(Case study in Indonesia).
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