Calculating Unlevered Cash Taxes

The assignment content discusses the financial performance of Murray River Foods for the years 2016-2018. It presents the company's income statement, showing a significant increase in profit from $4.95 million to $5.39 million between 2017 and 2018. The cash tax rate is also presented, which is 4.41%. The balance sheet shows an increase in equity from $3.55 million to $6.83 million over the same period. Current and non-current liabilities are also presented, showing a total liability of $39.13 million. The assignment concludes that despite being from the same sector, the company has different financial statuses in each year.

Angel Sea Products
Farm Pride Products
Murray River Foods
Accounting & Finance

Finance and Accounting
1
INTRODUCTION 2
FARM PRIDE PRODUCTS LTD. 3
EQUITY AND LIABILITY 3
REASONS FOR CHANGE IN EQUITY AND LIABILITY POSITION OF FPFL DURING THE LAST 3
YEARS 4
RETAINED EARNINGS 4
CURRENT LIABILITIES 5
2018, 2017, 2016 5
NON-CURRENT LIABILITIES 5
2018 5
2017 5
2016 5
CASH FLOWS STATEMENT 5
REASONS FOR CHANGES IN THE CASH FLOW STATEMENTS OF FFPL DURING THE LAST 3
YEARS 8
MAIN REASONS FOR THE VARIATION IN THE MAJOR 3 ACTIVITIES DURING THE PERIOD OF 3
YEARS 9
OPERATING ACTIVITY 9
Investing activity 9
Financing activity 9
OTHER COMPREHENSIVE INCOME STATEMENT 10
ACCOUNTING FOR CORPORATE INCOME TAX 11
Details of Tax expense shown in the latest financial statement 11
ANGEL SEA FOODS 12
EQUITY AND LIABILITY 12
EQUITY 13
LIABILITIES 13
REASONS FOR CHANGES IN THE CASH FLOW STATEMENTS OF ASHL DURING 2 YEARS 15
Operating activity 16
Investing activity 16
Financing activity 16
OTHER COMPREHENSIVE INCOME STATEMENT 16
ACCOUNTING FOR CORPORATE INCOME TAX 16
COMPARATIVE ANALYSIS OF DEBT AND EQUITY POSITION OF FPFL AND ASHL 18

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COMPARATIVE ANALYSIS OF CASH FLOWS UNDER 3 BROAD CATEGORIES FOR THE YEAR 2018
18
Investing activity 18
Financing activity 19
Calculation of money charge per unit 19
FPFL ASHG Remarks 19
CALCULATION OF CASH TAX RATE 20
MURRAY RIVER FOODS 22
CONCLUSIONS 23
REFERENCE 23
INTRODUCTION
Farm Pride Foods restricted (FPFL), Angel ocean Foods restricted (ASFL) and Murray River
Foods are chosen for this assignment, since each are ASX listed corporations and are within the
same trade, particularly food trade.
FPFL is AN ASX listed company. In 2018 world wide web revenues of the corporate faded by
twelve try to the profit once tax faded by ninety four nada. The Board of administrators ar of the
opinion that the rise in accessibility and provide of eggs in Australia had adversely affected the
volumes and margins of the corporate in F.Y. 2018. but the Board is assured that the adverse
fluctuation won't last for quite twelve months, then the trade can once more enter the expansion
section (Graham, 2009).
ASFL was incorporated on twenty seventh Sept 2016, and was regenerate into a listed company
on twenty first Feb, 2018. In 2018, the Angel cluster has registered a growth in revenue of half
dozen.70 %. but the expansion in Profit once Tax was abundant higher at 31.48 considered
compared with 2017. These figures don't seem to be comparable since the corporate was
incorporated solely within the year 2017 and didn't operate for the entire year. The Board of

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administrators ar of the read, that the monetary position of the corporate is stable and it'll register
growth in revenues and begin earning profits within the close to future. Business of the corporate
is Oyster farming.
FARM PRIDE PRODUCTS LTD.
EQUITY AND LIABILITY
EQUITY 2018 ($
‘000)
2017
($’000)
2016
($’000)
REMARKS
Contributed Capital 29,578 29,578 29,578 Fully paid up ordinary shares.
Retained Earnings 17,565 17,062 8,581 Accumulated net profits after tax.
Total 47,143 46,640 38,159 Represents funds belonging to the
ordinary shareholders.
LIABILITIES
Current Liabilities
Trade and other
Payables
12,626 11,996 11,788 It also includes accruals payable
within 1 year.
Borrowings 1,970 327 895 Bank overdraft, bank loan and
equipment finance repayable within
1 year.
Provisions 1,937 2,057 1,871 Annual Leave and Long Service
Leave likely to be availed by
employees within 1 year.
Current Tax Payable Nil 1,115 2,121 Self explanatory.
Total Current
Liabilities
16,533 15,495 16,675 Summation of all liabilities and
provisions payable within 12

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months.
Non -Current
Liabilities
Borrowings 10,053 5 244 Bank loan and equipment finance
repayable after 1 year.
Provisions 230 143 158 Long service leave benefits likely to
be availed by employees after 1
year.
Total Non-
Current Liabilities
10,283 148 402 Summation of all liabilities and
provisions payable after 12 months.
TOTAL
LIABILITIES
26,816 15,643 17,077 It is the sum of all current and non-
current liabilities.
REASONS FOR CHANGE IN EQUITY AND LIABILITY
POSITION OF FPFL DURING THE LAST 3 YEARS
RETAINED EARNINGS
There can be observed a decrement or decline in retained earnings in FY 2018 and it took place
due to large decrease in profit factor of the company. However in 2017, there was a comparative
growth in retained earnings.
CURRENT LIABILITIES
2018, 2017, 2016
In 2018, there has been an increase in trade creditors and other associated payables and hence, in
spite of a decrement in revenues by more than twelve percent, the situation took place. Due to
constraints, payments needed to be postponed a bit to the due creditors. Decrease took place
owing to repayment of borrowings on a short-term basis and due to the previous year's liability
of taxes. However, repayment of borrowings was not delayed in case of 2016.

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NON-CURRENT LIABILITIES
2018
Thus has seen an increment as the company is likely to form a long bond with Westpac.
2017
There is a decrease due to repayment of the long term bond.
2016
There is a decrease due to repayment of the long term bond.
CASH FLOWS STATEMENT
FPFL
2018
($‘000)
2017
($’000)
2016
($’000)
REMARKS
Cash flow from
operating
activities.
Receipts from
customers
87,276 96,925 94,352 Cash receipts, excluding rebates and
discounts.
Payments to
suppliers and
employees
(84,140) (84,348) (76,898) Cash payments to suppliers (excluding
rebates and discounts) and cash
payments to employees (excluding
unpaid salaries and other unpaid
employee benefits)
Finance costs (331) (150) (413) Does not include finance costs
payable.
Income Tax paid (2,343) (3,365) Income tax paid in cash pertaining to

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(4,839) current and previous financial years.
Interest Received 43 73 11 Does not include interest receivable.
Net Cash
provided by
operating
activities.
505 7,661 13,687 Self explanatory.
Cash flow from
investing
activities
Proceeds from
sale of property,
plant and
equipment.
Nil 21 4 Does not include amounts receivable
on sale of PPE.
Payment for
property, plant
and equipment.
(13,424) (2,288) (6,420) Does not include payable amounts.
Payment for
business
combination.
(6,616) Nil Nil Cash payments made for acquiring
controlling interest in another entity.
(Accounting Tools, 2018)
Net Cash used in
investing
activities.
(20,040) (2,267) (6,416) Self explanatory.
Cash Flow from
financing
activities
Proceeds from
borrowings
10,000 Nil Nil Fresh loans taken in cash.
Repayment of
borrowings
Nil Nil (3,000) Self explanatory.

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Repayment of
finance leases
(322) (794) (1,419) Self explanatory.
Net cash used in
financing
activities.
9,678 (794) (4,419) Self explanatory.
Net (decrease) /
increase in cash
and cash
equivalents.
(9,857) 4,600 2,852 It is the sum of net cash flows from
operating, investing and financing
activities. The difference between the
cash and cash equivalents at the
beginning and end of the year should
be equivalent to this figure.
Cash and cash
equivalents at the
beginning of the
year.
8,038 3,438 586 Self explanatory
Cash and Cash
equivalents at
the end of the
year.
(1,819) 8,038 3,438 Self explanatory
REASONS FOR CHANGES IN THE CASH FLOW
STATEMENTS OF FFPL DURING THE LAST 3 YEARS
In 2018, there could be observed a net decrement and it was around 9,857,000 dollars. This
shows that there has been a net outflow of money; this took place from operating as well as
investing. In 2017 and 2016, an increment could be seen in cash flow. This was 4,600,00 dollars
and 2,8252000 dollars respectively.This shows a much consoling cash flow position.

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We might conclude the explanations for web money outflow in 2018 is favorable owing
to a big reduction within the web money influx from in operation activities and an
awfully substantial increase in web money outflows from investment activities. Internet
inflows from funding activities wasn't enough to catch up on the reduction in in operation
money flows and above all thanks to substantial increase in money outflows from
investment activities (Drury, 2012).
The web money influx of 2017 is quite that of 2016 thanks to lower net money outflows
on investment and funding activities that quite salaried the lower money inflows from in
operation activities as compared with 2016.
MAIN REASONS FOR THE VARIATION IN THE
MAJOR 3 ACTIVITIES DURING THE PERIOD OF 3
YEARS
OPERATING ACTIVITY
● In 2018 there was decrease in receipt from customers.
● In 2017, the decrease in internet money influx was primarily on account of increase in
payments to suppliers and workers..
Investing activity
● In 2018, each payments for PPE and for business mixtures had inflated. the rise in
CAPEX outflows square measure on account of manufacturing plant upgrade and for feat
new farms.
● In 2017 the reduction in internet money outflow was primarily because of reduction in
payments to suppliers of capital product..

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Financing activity
● In 2018 there was a internet money influx because of contemporary loans taken.
● In 2017, the reduction in money outflow was because of aught compensation of
borrowings. money outflow on account of compensation for finance lease additionally
reduced.
OTHER COMPREHENSIVE INCOME STATEMENT
2018
($‘000)
2017
($’000)
2016
($’000)
REMARKS
Cash Flow
hedge
reserve
Nil Nil 90 This represents the hedging costs borne by the
company to hedge the risks of adverse
movements in cash flows on account of
holding a particular asset or liability.
(FiNCAD, n.d.)
Only income hedge reserve in 2016 has been according within the alternative comprehensive
profit-and-loss statement.
alternative comprehensive profit-and-loss statement includes solely those things, that if enclosed
within the profit and loss statement could distort the reliableness of the figures. A couple of
examples results into reckoner gains or losses on outlined profit schemes, unfulfilled gains and
losses on hedging. tho' this idea helps in excluding dubious ways in inflating profits or losses of
a corporation, a comprehensive list of all OCI things acceptable to all or any accounting bodies is
nonetheless to be developed (Dowd, 2002).
There is only one item amounting to $ NINETY THOUSAND shown within the OCI statement
of 2016. Had this quantity been enclosed in profit and loss statement, the profit because of
shareholders would have redoubled by $ 90,000 before tax. (ACCA, n.d.)

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FPFL has properly shown the income hedge reserve in OCI, since there was affordable doubt
whether or not the quantity is realized.
OCI mustn't be enclosed in evaluating the performance of managers of the corporate, since
there's continuously a doubt whether or not the amounts are going to be realized.
ACCOUNTING FOR CORPORATE INCOME TAX
Details of Tax expense shown in the latest financial statement
2018 ($’000)
Current Tax Expense 424
Deferred Tax benefit (68)
Under/Over provision for prior
years
(1)
Income Tax Expense 355
Effective tax rate is 41.38 %.
Deferred Tax Asset.
Deferred Tax asset relate to the following.
2018 ($’000) Remarks
Employee benefits 650
Provisions and accruals 148
Fixed Assets 86
Gross Deferred Tax
Asset.
884.
Increase / Decrease in deferred Tax Asset / Liability.

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2018 ($’000) Remarks
Opening Balance 859
Recognised during the year. 68
Deferred tax liability acquired in business acquisitions. (43)
Closing balance 884
If we go by the accounting policy of the organization, it can be said that DTA is implied upon tax
deductible differences on a temporal basis and tax losses; this is made on the basis of the
guarantee that there will be enough taxable income in recent future.
ANGEL SEA FOODS
The company was only incorporated on 27th September 2016 and therefore did not operate for
the whole of the year ended 30th June 2017.
To avoid repetition only the new items or whose nature is entirely different from that of FPFL
have been explained in the tables shown below.
EQUITY AND LIABILITY
ASFL
EQUITY 2018 ($) 2017 ($) REMARKS
Contributed Capital 14,007,061 6,300,973
Retained Earnings
(2,888,422)
(2,099,519
)
It includes reserves and accumulated
losses.
Total 11,118,639 4,201,454
LIABILITIES
Current Liabilities
Trade and other
Payables
169,030 355,238

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Borrowings 724,127 333,418
Employee benefits 68,314 47,441
Total Current
Liabilities
961,471 1,027,737
Non –Current
Liabilities
Trade and other
payables
3,932 787,226
Borrowings 176,743 333,418
Deferred Tax
Liabilities
Nil 188,225 It is on account of PPE and Fair value
adjustments to biological assets.
Total Non- Current
Liabilities
194,157 1,308,869
TOTAL
LIABILITIES
1,155,628 2,336,606
EQUITY
● There is a considerable amount of capital which has received increment on infusion of
capital in new terms.
● Negative balances also received increment owing to losses in that year.
LIABILITIES
• Current liabilities received increment in short terms loans
• Non-Current Liabilities received increment in longer term loans
CASH FLOWS STATEMENT
ASHL

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2018 ($) 2017 ($) REMARKS

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Cash flow from operating
activities.
Receipts from customers 1,499,798 1,399,336
Payments to suppliers and
employees
(3,504,842) (1,911,351)
Finance costs (56,703) (165,753)
Interest Received 14,122 2,967
Net Cash used in operating
activities.
(2,047,625)
(674,801)
Cash flow from investing
activities
Proceeds from sale of
property, plant and
equipment.
105,688 Nil
Payments for Oyster lease (486,535) (1,025,175)
Payment of deposit for
Cowell Oyster lease.
(300,000) Nil
Payment for property, plant
and equipment.
(1,861,798) (1,285,819)
Payment for other intangible
assets.
(14,542) (13,932) Pertains to expenses incurred on
incorporation of the company.
Net Cash used in investing
activities.
(2,557,187) (2,324,926)
Cash Flow from financing
activities
Proceeds from issue of
shares
8,000,400 5,823,855
Proceeds from related party
loans
Nil 197,038

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Proceeds from convertible
note.
500,000 Nil
Repayment of related party
loans
(8,773) (190,000)
Repayment of borrowings (481,753) (1,097,813)
Repayment of finance leases (98,953) (22,824)
Proceeds from finance leases 23,100
Payments for capital raising
costs.
(727,513) (354,880)
Net cash used in financing
activities.
7,206,508 4,355,376
Net increase in cash and cash
equivalents.
2,601,696 1,355,649
Cash and cash equivalents at
the beginning of the year.
1,355,649
Cash and Cash equivalents
at the end of the year.
3,957,345 1,355,649
REASONS FOR CHANGES IN THE CASH FLOW STATEMENTS OF
ASHL DURING 2 YEARS
● There was a web increase in money inflows amounting to $ 26,01,696.
● The main reasons for increase in money inflows conclude as follows ;
● Net money outflows from operating activities raised by ($ 1,372,824).
● Net money outflow from finance activities raised by ($ 2,32,261)
● However cyber web money flow from finance activities raised by $ 2,851,132.
Main reasons for the rise in web money flow / outflow outline the three activities as below:

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Operating activity
Payments to suppliers and workers raised by eighty three.11 % increase as against growth in
revenue was solely half-dozen.70 %. It seems that in 2017, the corporate didn't pay the suppliers
in time and it's started clearing the owed payments solely in 2018 from infusion of contemporary
capital and issue from convertible notes and finance lease.
Investing activity
Cash outflows raised because of increase in CAPEX payments for PPE, increasing water
holdings, building higher infrastructure and enlargement of operations.
Financing activity
Mainly because of infusion of contemporary capital.
OTHER COMPREHENSIVE INCOME STATEMENT
ASFL
The Group has not reported any amount under the head Other Comprehensive Income.
ACCOUNTING FOR CORPORATE INCOME TAX
ASFL
Details of tax expense shown in the latest financial statement.
2018
($’000)
REMARKS
Deferred Tax
revenue.
161,349 This amount has been set off against income tax expense of 2017.
Please refer note 7 (b) to the consolidated financial statement for
the year ended 30th June 2018.
The details of the calculations are as follows ;

Finance and Accounting
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$ Remarks

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Accumulated losses as per income tax provisions
recognised only to the extent required for setting
off the tax impacts as mentioned below and for
adjusting the income tax expense of 2017.
(1,303.978)
Losses as per tax law to the extent recognised. 358,594 By applying a tax rate of
27.5 % on the aforesaid
accumulated losses.
Less : Tax impact of other non- allowable items. (1,233)
Less : Tax impact of losses which cannot be
carried forward
(196,012)
Income Tax Revenue 161,349 This represents the amount
which was adjusted against
the tax expense for the year
2017.
Effective rate can not be calculated since there was a loss before tax of ($ 1,142,629) as per
profit and loss account and revenue enhancement revenue of 1,61,349.
Note ten to the consolidated money statements for the year concluded thirtieth June 2018, states
that thanks to uncertainty relating to the group’s ability to come up with ample nonexempt
financial gain to line off the previous year tax losses in succeeding years postponed tax plus has
not been recognised. Postponed tax plus was recognized solely to the tune of 1,61,349 that was
set out against the tax expense of 2017 for a similar quantity (Cousins and Piper, 2009).
There was a decrease of postponed tax assets and liabilities amounting to $ t26,876 and $
188,225 severally.

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COMPARATIVE ANALYSIS OF DEBT AND EQUITY
POSITION OF FPFL AND ASHL
There was a lack of improvement in position of equity and position of the above mentioned
companies face the same kind of position in 2018. Bottom line in Farm Pride Products was kind
of dented due to the huge increment in availability of eggs in the country and it affected the
profit percentage of the company, but in negative terms.
Angel Sea Products has started its tasks in 2018, and yet has not attained a break-even point and
this let them attain substantial losses. Thus the balance sheet portrays a negative balance in
equity.
COMPARATIVE ANALYSIS OF CASH FLOWS UNDER
3 BROAD CATEGORIES FOR THE YEAR 2018
In the year 2018 in FPFL there was a pointy decrease in internet money influx thanks to decrease
in receipts from customers. This resulted during a substantial reduction in internet money influx.
within the case of ASHL the negative money outflow was on account a 83.11 % increase in
payment to suppliers. This resulted in a rise within the negative money inflows.
Investing activity
In respect of each the businesses, information superhighway money outflows accumulated thanks
to massive capex payments. created by each the businesses.
Financing activity
For each the businesses, there was a rise in internet money influx. within the case of FPFL it
absolutely was in the main thanks to recent borrowing and ASHL it absolutely was in the main
thanks to infusion of recent capital.
We could conclude that money flows beneath the three major activity heads have followed the
same pattern.

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Calculation of money charge per unit
(Simplified method)
FPFL ASHG Remarks
Cash charge per unit. 273.08. The company had incurred a loss in 2018. thus this rate can not be
calculated. it's the half of of tax paid in money of the profit before tax
But provision for taxation was forty 1.38 you will only of Profit before tax in respect of FFPSL.
273.08 %.The reasons for this distinction is as follows ;
Expenses not deductible beneath the taxation laws amounting to $ ninety eight,000.
Deferred taxes non heritable in business mixtures was $ forty three,000 leading to reduction of
delayed tax assets.
Tax payments for 2017 created in 2018 was $ 1,115,000. (Note 7 e).
The profit before tax was conjointly terribly low at $ 858,000. In previous twelve months, it
absolutely was 12,232,000 (Adams, 2017)
However a more robust approach for conniving the money rate would be by adopting the
advance approach. beneath this methodology the impact of increase / decrease in delayed tax
plus or liability and tax collectable on alternative financial gain is adjusted from the tax provision
to calculate the unlevered money tax quantity. Then the money rate is got hold of by the
subsequent formula ;
money tax / EBITA * a hundred.
CALCULATION OF CASH TAX RATE
(Simplified method)
FPFL ASHG Remarks
Cash tax
rate.
273.08
%
The company had incurred a loss in
2018. Hence this rate cannot be
It is the % of tax paid in
cash of the profit before tax

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calculated.
But provision for taxation was 41.38 you will only of Profit before tax in respect of FFPSL.
273.08 %.The reasons for this distinction is as follows ;
Expenses not deductible below the taxation laws amounting to $ 98,000.
Deferred taxes non heritable in business combos was $ 43,000 leading to reduction of
delayed tax assets.
Tax payments for 2017 created in 2018 was $ 1,115,000. (Note 7 e).
The profit before tax was conjointly terribly low at $ 858,000. In previous twelvemonth it
had been 12,232,000 (Adams, 2017)
However an improved approach for shrewd the money rate would be by adopting the
advance approach. This technique the impact of increase / decrease in delayed tax plus or
liability and tax owed on different financial gain is adjusted from the tax provision to
calculate the unlevered money tax quantity.
cash tax / EBITA * 100.
Advance method
FPFL ($) ASHG
($)
Remarks
Income tax expense / (income) 355,000 (161,349)
Add : Increase in deferred tax asset 25,000 161,349
Current income tax 380,000 Nil
Other income 539,000
Tax payable on other income. (To be reduced from
current income tax)
161,700 Tax rate
is 30 %
Unlevered cash taxes 218,300 Current
income
tax less
tax