Financial Statement Analysis of Abundant Produce Limited: A Comprehensive Overview

This report provides a comprehensive analysis of the financial statements of Abundant Produce Limited, an Australian ASX listed hybrid plant breeder organization. It examines the cash flow statement, other comprehensive income statement, and accounting for corporate income tax. The report analyzes the financial position of the company in the competitive market and highlights key insights into its financial performance and tax strategies.

HI5020 Corporate Accounting
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Contents
Introduction.................................................................................................................................................3
Cash Flow Statement...................................................................................................................................4
Other Comprehensive Income Statement....................................................................................................7
Accounting for Corporate Income Tax........................................................................................................7
Conclusion.................................................................................................................................................10
References.................................................................................................................................................11
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Introduction
Abundant Produce Limited is the Australian ASX listed hybrid plant breeder organization. It
basically focuses on development of the new varieties which are of the food crops specially the
green house vegetables with the aim of producing the better variety with the superior flavors so
as to gain the competitive advantage. This report basically deals with the analysis of the financial
statements of Abundant Produce Limited so that their financial position in the competitive
market can easily be analyzed. With that the analyses of the cash flow statement is done so as to
determine all those items which are listed in this statement and what does they mean. It also
examines the corporate taxes of the Abundant Produce Limited so that knowledge about the
treatment of taxes can be gained. Beside this the report also explains the various items which are
listed in the other comprehensive income statement.
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Cash Flow Statement
I. In the cash flow statement of the Abundant Produce limited various items are listed
such as:
Cash Flows from Operating Activities: It is the accounting term which determines the
amount that company brings from its regular business activities. For example: sale and the
manufacturing of goods and services (Mgammal and Ismail, 2015). The items included in the
operating activities are:
o Receipt from customers: It is the receipt that is received from the customers for the
cash sale of goods and services.
o Payment to suppliers and employees: These include the amount or the money that
is paid to the suppliers by the organization (Safonova, et. al., 2016).
o Interest Received: It is amount which is received in the form of income by the
organization on the operating activities.
o Interest Paid: This means that the tax expense is already included in the net income
amount and will be adjusted to the amount of the interest paid in cash.
Cash Flows from Investing Activities: It shows all the changes in the company’s cash position
by doing the investment in the financial markets and operating subsidiaries (Miletić, 2014). The
items in this activity are:
o Payments for property, plant and equipments: These include all the payments which
have been done so as to acquire long lived physical assets such as plant, property and
equipments (Miletić, 2014).
o Payments for research and development: The payments which are made by the
Abundant Produce Limited for doing the research of the agricultural products used for
production so that the market share can be attained (Gazzola and Amelio, 2014).
Cash Flows from Financing Activities: It is the category in the cash flow statement of the
company that accounts for the external activities through which the firm can raise capital
(Gazzola and Amelio, 2014). The items in the financing activities of the Abundant Produce
Limited are:
o Proceeds from issue of shares: These are the proceedings of the new shares which are
issued by the organization up to the full amount of share capital.
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o Transactions Cost: It is the expense which is incurred by the organization during the
purchase or the sale of the goods and services (Gazzola and Amelio, 2014).
Yes, there is the change in the item of the statement from 2016 to 2017 as it 2016 the interest
was paid by the organization but in 2017 it was not it is due to the fact that the tax expense is
already included in the net income so it is not shown separately (Petro and Gean, 2014). There
were no financing activities during the year 2017 as the company neither issued any shares nor
did any transactions.
II. For 2015-2016
For 2016-2017
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The above is the cash flow statement for the year 2015- 2016 and 2016-2017 of the Abundant
Produce Limited (Abundant Produce Limited, 2018). It can be seen that the net cash outflow or
the inflow from the operating activities during the year 2015 was $107538 but it has been
increased in the year 2016 to $401442 and in 2017 it has again increased to $1158880 (Abundant
Produce Limited, 2018). This shows that the company has brought the more amounts in the year
2016 from its daily operations. According to the investing activities the amount in 2015 was
$326336 while in the year 2016 it also showed increase to $441461 but in 2017 it decreased to
$229561 which showed the positive returns on the investments were received in 2015 and 2016
but in 2017 the returns were less received (Abundant Produce Limited, 2018). There were no
financing activities of the firm in 2017 but in 2015 it was $22995 and in 2016 $3339980 which
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means that the company has raised the capital in 2015 and in 2016 but not in 2017 from external
sources (Safonova, et. al., 2016).
Other Comprehensive Income Statement
III. The items which are listed in the other comprehensive income statement of the
Abundant Produce Limited are:
There are no as such items which are listed in the other comprehensive Income Statement of
the Abundant Produce Limited but the statement of the other comprehensive income is
prepared with that of the statement of the profit and loss which is showing the amount of the
comprehensive statement as losses $1248721 (Hodgson and Russell, 2014). Only one of the
item is listed which is the movement in the fair value of the cash flow hedges.
IV. As it can be seen that in the other comprehensive income statement of the Abundant
Produce Limited there are no as such items except only one item which is the
movement of the fair value of cash flow hedges (Hodgson and Russell, 2014).
 Movement of the fair value of Cash Flow Hedges: It is the hedge in change of the
fair values that has been recognized as the value of assets and liabilities or the
unrecognized firm commitment which is attributed to the particular risk that could
affect the profit and loss of the business (Gazzola and Amelio, 2014).
V. These items has not been listed in the income statements as these are the items which
has not been realized till then only those items are listed in the income statement or
the profit and loss statement which are realized when the financial accounts are
prepared. As in the Abundant Produce Limited there is only one item that is not
realized till the date of the final preparation of the financial statements (Hodgson and
Russell, 2014).
Accounting for Corporate Income Tax
VI. The current tax expense of the Abundant Produce Limited is $274486. The tax
expense is the liability which is owned to the federal, state or the municipal
government by the organization. It is charged to the profit and loss and is the taxable
amount which has to be paid on the taxable income (Hodgson and Russell, 2014).
VII. The statement is true that the figure of the tax expenses is same as that of the
company tax rate times for the Abundant Produce Limited accounting income. It is
same as the effective tax rates as it is the rate from which the income is taxed but the
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corporations take it as the rate which is charged at the pre-tax profits. For the
individual the tax is charged from the income but it is different than the corporation
taxes. So, the tax is same for both in the tax rates and the expenses of the firm (Kari
and Ropponen, 2014).
VIII. The deferred tax liability and the assets both are there in the balance sheet of the
Abundant Produce Limited but the amount is blank in the current year. It is recorded
in the balance sheet as non-current liabilities and assets because of the accrual
accounting rules which states that the company should defer its taxes on some of the
income. The unrealized tax debt in the called the deferred tax liability (Kari and
Ropponen, 2014). The deferred tax assets are the temporary differences that are
recognized so that the future profits will be available that will be utilized from the
deferred tax assets.
IX. Yes, the income tax payables are recorded by the organization in their income
statements which is the liability of the Abundant Procedure Limited organization
(Kari and Ropponen, 2014). The amount of the tax payable is not same as tax expense
as the tax expense is treated as the income for the organization while the tax payable
is obligation for the organization that has to be paid by the organization. The tax
expense is according to the accounting standards while the tax payable is the payable
amount according to the income tax rules.
X. This statement is treated as the false statement as the income tax payables shown in
the cash flow statement is not same as that of the income tax expense in the income
statements (Kari and Ropponen, 2014). There is difference in the treatment of both
the taxes is that the income tax expense is treated as the income for the organization
while the income tax payable is the obligation for the organization which has to be
paid annually in the taxable income. All the payables are shown in the cash flow
statement as it is the statement which shows the inflow and the outflow of the cash
and the cash equivalent. While in that of the income statements all the incomes which
are earned during the year is treated here (D'Arcy, 2012). So, there occurs the
difference in the treatment of both the accounts as both the accounts reflect the
different areas.
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XI. The most interesting thing after analyzing the financial statements and evaluating
various taxes was that the taxes of the Abundant Produce Limited is not so complex
as that of the other industries as this is the agricultural based food products industry
so the financial accounts are made so easy that any individual can easily evaluate
their financial position. With that the recording of the transactions in their accounts is
done in the true and fair manner. The taxes are not paid by the organization but the
expenses or the income on the taxes is earned by the organization (D'Arcy, 2012).
The surprising part was that the company has earned the expenses on the taxes but has not paid
the taxes which show less transparency in their financial accounts (D'Arcy, 2012). The
ignorance of the taxes by the organization will not give the fair view of their financial statements
as while evaluation the amount of the taxes is ignored which will not show the actual position of
the organization. With that there was one more surprising fact that in the year 2017 there were no
financing activities which means that the company have the enough capital to meet its operations
there was no need to take the funds externally by raising the capital (D'Arcy, 2012).
The difficulty was faced in the transaction was while evaluating the taxes amount as the amount
of the taxes is ignored by the organization so without the taxes it was difficult to make the
analysis of their financial performance in the competitive market (D'Arcy, 2012). With this it
also gave the new insight about the understanding of the taxes and the treatment of those taxes.
With this the cash flow statement amount of the organization is also the new concept and their
evaluation is done so easily without any difficulty (Petro and Gean, 2014).
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Conclusion
From the above discussion it can be concluded that the understanding of the taxes is very
important while analyzing the financial statements of any organization. In case of the Abundant
Produce Limited it was seen that there was less transparency in their financial statements as
various taxes were ignored by the organization. The comparative analysis is also considered
while evaluating the financial accounts by analyzing the difference between the three cash flow
activities. For the analysis the financial data of the consecutive three years has been considered.
It gave the understanding that how the treatment of the taxes is done in the organization and with
that it also revealed about the treatment of the different accounts on various heads so that the
classification can easily be done. So, this report explains the overall financial health of the
organization by evaluating it through various aspects such as cash flows and the taxes.
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References
 D'Arcy, M., 2012. Taxation, Democracy and State-Building: how does sequencing
matter?.
 Kari, S. and Ropponen, O., 2014. Literature review of the dynamic effects of corporate
income taxation.
 Hodgson, A. and Russell, M., 2014. Comprehending comprehensive income. Australian
Accounting Review, 24(2), pp.100-110.
 Gazzola, P. and Amelio, S., 2014. The impact of comprehensive income on the financial
ratios in a period of crises. Procedia Economics and Finance, 12, pp.174-183.
 Miletić, D., 2014. Cash flow statement: Assessment of situation and application problems
in Serbia. Industrija, 42(4), pp.99-114.
 Petro, F. and Gean, F., 2014. A logical approach to the statement of cash flows. American
Journal of Business Education (Online), 7(4), p.315.
 Safonova, M.F., Kalinina, I.N., Vasilieva, N.K., Bershitskiy, Y.I. and Kiselevich, T.I.,
2016. Methodology of Planning Tax Expenses. International Journal of Economics and
Financial Issues, 6(4).
 Mgammal, M.H. and Ismail, K.N.I.K., 2015. Corporate tax planning activities: overview
of concepts, theories, restrictions, motivations and approaches. Mediterranean Journal of
Social Sciences, 6(6 S4), p.350.
 Abundant Produce Limited, 2018. Annual Report. [Online]. Abundant Produce Limited.
Available at: https://abundantproduce.com/annual-report/. [Accessed On 13 May 2018]
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