Critical Analysis of MYOB's Annual Report: Cash Flow, OCI, and Corporate Income Tax
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Table of Contents Introduction.................................................................................................................................................2 Critical analysis of Cash flow statement......................................................................................................2 Critical analysis of OCI...............................................................................................................................5 Computation of Corporate Income tax........................................................................................................6 References...................................................................................................................................................9
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Introduction The main purpose of the assignment is to analyse in detail the annual report of a company and provide comparative analysis on the cash flow statement for the 3 year period from 2015 to 2017. The student then analyse the other comprehensive income aspect of the company, the various particulars included in the OCI of the annual report and last part is to perform a detailed analysis on the corporate income tax paid by the company. The organisation which is considered for the analysis is MYOB, a primary software solutions company which is involved in offering software solutions to the small and medium sized enterprises on the various area which includes taxation, accounting system, payroll maintenance etc. The company main clients are the small and medium sized enterprises which are located in Australia, New Zealand and other Asian countries. The company offers solutions to its clients through cloud computing and other software soutions like MYOB Advanaced module, Payroll MYOB, Direct Pay, the company also offers various other services like taxation filing, payroll management of the employees, GST computation, record management system of key financial and non-financial information. Critical analysis of Cash flow statement . The cash flow statement shall be considered as a complete account of changes in the accounts and balance sheet. Attention is primarily focused on money in these sectors. The cash flow statement can be classified into categories such as cash flow from operations, cash flow from investing activities, cash flow from financial operations and cash flow operations. train. The main purpose of the cash flow statement is to provide more information and information on total revenues and payments over a certain period of time, usually one year. This statement helps the company understand the company's total liquidity, assesses the solvency from time to time, predicts future cash flows and seeks resources. The most important components of the cash flow statement are mainly based on the accounting capabilities that the company has to determine when comparing revenues and costs. It should be noted that the cash flow statement contains only the funds and funds that were released. These statements generally exclude a transaction that does not include money From the critical analysis of cash flow statement of MYOB it is noted that the cash flow from the beginning of the period were 61,434,000 in 2017 but in the year 2016 it stood at 36,384,000 and 5,044,000 in 2015. This shows that the cash flow of the business is consistently increasing over the period of time. Analysis of cash flow based on the operating activities:
From the annual report of the company it is noted that the net cash flow based on the operating process was 97,860,000 in 2015 whereas it was 145,833,000 in 2016 and it has grown to 163,919,000 in 2017. This shows that the business has grown to a larger extent in the past three years. The cash receipts of the company were at 362,211,000 in 2015, but this has significantly increased to 406,711,000 in 2016 and 414,224,000 in 2017. Similarly the payments to the suppliers and others has been made to a level of 213,879,000 in 2015, and this has increased to 246,153,000 in 2016 but due to continuous effort of the management the expenses has been reduced to 233,781,000 in 2017. The net cash flow from the operating activities were at 97,860,000 in 2015, increased significantly in 2016 and stood at 145,833,000 in 2016 and increased even further to 163,919,000 in 2017. 201520162017 Netcashfromoperating activities 97,86 0 145,83 3 163,91 9 201520162017 0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 180,000 Net cash from operating activities Netcashfromoperating activities Analysis of investment activities of MYOB: This section is mainly involved in understanding the various investment activities which has been carried out by the company during the period 2015 to 2017, The company made a major investment in creating new product development in 2015 for this purpose 13,822,000 has been invested in 2015, whereas in 2016 the new product development was capitalised to a level of 26,879,000 in 2016 nd this has increased to 35,288,000
in 2017. Furthermore the company paid 13,160,000 in 2015 for the purchase of new company, whereas in 2016 the purchase of new companies was 22,820,000 and in 2017 the value of investment was at 47,545,000 in 2017. The overall investment made by the company in the year 2015 was 54,605,000, whereas in the year 2016 it was around 59,031,000 but in 2017 the investment has increased significantly and was around 101,680,000. 201520162017 Netcashininvestmentactivities 54,60 5 59,03 1 101,68 0 201520162017 0 20,000 40,000 60,000 80,000 100,000 120,000 Net cash in investment activities Netcashininvestment activities Analysis of financing sources of the company: Based on the annual reports of the company, it is identified that the company raised the capital through the issue of shares at 828,062,000 in 2015, whereas the proceeds generated through the treasury shares were at 3,456,000 in 2017. The company made a repayment of borrowing 1,048,176,000 in 2015, however the repayment of financial liabilities were 410,000 in 2017. The overall financing aspects of the company were at - 11,878,000 in 2015, whereas it reduced to -62,453,000 in 2016 and -69,525,000 in 2017. 201520162017 Netcashinfinancingactivities 11,87 8 62,54 3 69,52 5
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201520162017 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 Net cash in financing activities Netcashinfinancing activities A comparative analysis was made for a period of 2015 to 2017, the following table shows the various aspects pertaining to the cash flow of the business. 201520162017 Netcashfromoperating activities 97,86 0 145,83 3 163,91 9 Netcashininvestment activities 54,60 559,031 101,68 0 Netcashinfinancingactivities 11,87 862,54369,525 Netcashflow 36,38 461,43454,779 Netcashfrom operating activities Netcashin investment activities Netcashin financing activities Netcashflow 0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 180,000 2015 2016 2017
Critical analysis of OCI The table shows the other comprehensive income as stated in the annual reports of the company, the only item to be reported is the OCI table is the foreign currency translation reserve, the value was around 2,327,000 in 2017. Other comprehensive income is comprehensive income, IFRS gains, which are mainly included in the income statement and in the balance sheet. It should be noted that the management of a company intends to include different revenues and expenses, including the total result, as it is not fully implemented. The company that arose when the underlying transactions were completed is the time when these investments are sold and realized. The other world attaches greater importance to strengthening the unconditional side of net profit, rather on changes in corporate profits that were part of equity rather than the underlying transaction. (Ray, 2011). OCI wants to report details that are not necessary and that the company does not. Presenting a detailed and holistic presentation of the company's operations and other aspects of the business. Other comprehensive income is comprehensive income, which are mainly included in the income statement and in the balance sheet. It should be noted that the management intends to engage in different revenues and expenses, including full results, as it is not fully realized. Once the underlying transactions are completed, the company is created when these investments are soldandrealized.Thesecondworldattachesgreaterimportancetostrengtheningthe unconditional side of net profit, but also to changes in corporate income, which form part of the capital rather than the underlying transactions. (Ray, 2011). OCI wants to report details that are not needed and the company does not.
Computation of Corporate Income tax Based on the annual report of the company, the net incoe of the business as of 2017 is 85,482,000 and the income tax paid by the company for the year is 24,802,000. Based on the net income generated by the business and the corporate tax rate of nearly 30%, the corporate tax of the business can be computed as = 85,482,000 x 30% = 25,645,000 However based on the annual statement the income tax paid by MYOB for the year 2017 is 24,802,000. We see that there is a difference between the above two values, the reconciliation between these two values are stated as under: 20172016 Netprofitgeneratedbythebusinessforthegivenyear 85,482.0 0 71,132.0 0 Corporatetaxasperthetaxrate 25,645.0 0 21,340.0 0
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Overalltaxeffectontheamountswhichareexcludedin computingthetaxaspectfromtheincome Entertainmentaspects269.00353.00 Taxexcluedduetoreseachanddevelopment-1,391.00-2,786.00 RecopofdepreciationwhichwastransferredfromOther company0.001,141.00 Otheraspects654.00-343.00 -468.00-1,635.00 Variationsintheoverseastax-132.00-93.00 Adjustmentsmadeforthepresentyear-243.00-642.00 Totalcorporateincometaxpayablefortheyear 24,802.0 0 18,970.0 0 The taxable income differs from income recognized in the income statement as certain items or income may be taxed or deducted in different years or can never be taxed or deducted. The Group's liability The sales tax is calculated on the basis of the tax laws and regulations adopted or applied during the reporting period. Deferred tax is a future or recyclable tax that is caused by temporary differences in the reported amount. Appropriate tax rates used to calculate assets and liabilities in the financial statements and taxable income. This is important if used for financial reports. All deferred taxes and time differences generally require a deferred tax liability. Taxable instruments indicate the extent to which temporary differences or taxable profits can be applied. whose assets and liabilities are not recognized in the settlement of temporary differences arising from transactions and liabilities that are not affected by the taxable profit or the carrying amount arising from the original contract (excluding acquisitions). Deferred tax is not recognized as the first reported result of non-deductible value added. (Brigham, 2010). Deferred tax liabilities are reported as temporary differences attributable to investments in subsidiaries, investments and investments. unless the team can control the reversal of the temporary difference and it is unlikely to occur in the near future. The carrying amount of deferred tax assets is reviewed at each reporting date and reflects changes in the Group's valuation. taxable profit sufficient to recycle all or part of the assets. Deferred tax is calculated on the basis of the interest rates applicable during the debt settlement period or if the asset is taxable. Expiration date acceptable or almost approved. Assets and liabilities are repaid when the tax is present irrespective of whether the same tax authority is linked to income tax when settling debts on liquid funds and debtors of the same taxpayer or different taxpayers. The tax is credited or credited to the income statement,exceptforitemsthatarecreditedtoothercomprehensiveincomedirectlyor indirectly, in which case the tax is reported in other comprehensive income or on its own account. (Titman, 2010) Goodwill is not amortized but the write-down amount is tested annually or there is evidence that the asset can be recycled. For the impairment test, assets shall be collected at the lowest level when identifiable cash flows are known. unit. For a cash-generating unit, the unit's resale value
reduces the write-down, mainly decreases the book value of goodwill associated with the company, and then gives the entity access to other assets. The impairment loss recognized in goodwill can not be changed in subsequent periods. The recoverable amount is the actual value, the sale cost and the value in use. Estimated future cash flows reflecting current money market and risk assessments at discounted discount rates before tax in current valuations are special tools for which future cash flow analyzes have not been modified. References Bragg, Steven. (2007). Throughput Accounting: A Guide to Constraint Management. 1st edition. Wiley & Sons Brigham, E. F. (2010). Financial Management:Theory & Practice. 5th edition. Cengage Learning. Brooks, R. M. (2012). Financial Management. 4th edition. Prentice Hall. Kaplan, R. S., & Young, M. S. (2011). Management Accounting. 3rd edition. Prentice Hall. MYOB. (2017). Annual report of MYOB Ray, G., & Eric, N. (2011). Managerial Accounting. McGraw-Hill/Irwin. Titman, S. J. (2010). Financial Management. Prentice Hall. Weygandt. (2011). Managerial Accounting: Tools for Business Decision Making (6th ed.). Wiley.