H15020 Corporate Accounting: Analyzing Woodside Petroleum's Financial Statements

This report analyzes the financial statements of Woodside Petroleum Limited, a leading Australian oil and gas company. It examines the cash flow statement, other comprehensive income statement, and accounting for corporate income tax. The report provides a comparative analysis of cash flows over three years, explains the components of other comprehensive income, and explores the relationship between tax expense, tax payable, and deferred tax assets/liabilities. The analysis aims to provide insights into the company's financial performance and its tax accounting practices.

H15020 Corporate Accounting
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Contents
CASH FLOWS STATEMENT....................................................................Error! Bookmark not defined.
(i) From your firm’s financial statement, list each item of reported in the cash flows statement
and write your understanding of each item. Discuss any changes in each item of cash flows
statement for your firm over the past year articulating the reasons for the change.................Error!
Bookmark not defined.
(ii) Provide a comparative analysis of your company’s three broad categories of cash flows
(operating activities, investing activities, financing activities) and make a comparative evaluation
for three years...........................................................................................Error! Bookmark not defined.
Other Comprehensive Income Statement...................................................Error! Bookmark not defined.
(iii) What items have been reported in the other comprehensive income statement?...............Error!
Bookmark not defined.
(iv) Explain your understanding of each item reported in the other comprehensive income
statement...................................................................................................Error! Bookmark not defined.
(v) Why these items have not been reported in Income Statement/Profit and Loss StatementError!
Bookmark not defined.
Accounting For Corporate Income Tax......................................................Error! Bookmark not defined.
(vii) Is this figure the same as the company tax rate times your firm’s accounting income?
Explain why this is, or is not, the case for your firm..............................Error! Bookmark not defined.
(viii) Comment on deferred tax assets/liabilities that are reported in the balance sheet
articulating the possible reasons why they have been recorded............Error! Bookmark not defined.
(ix) Is there any current tax assets or income tax payable recorded by your company? Why is the
income tax payable not the same as income tax expense?.....................Error! Bookmark not defined.
(x) Is the income tax expense shown in the income statement same as the income tax paid shown
in the cash flow statement? If not why is the difference?......................Error! Bookmark not defined.
(xi)What do you find interesting, confusing, surprising or difficult to understand about the
treatment of tax in your firm’s financial statements? What new insights, if any, have you gained
about how companies account for income tax as a result of examining your firm’s tax expense in
its accounts?..............................................................................................Error! Bookmark not defined.
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Cash Flows Statement
i)From your firm’s financial statement, list each item of reported in the cash flows statement
and write your understanding of each item. Discuss any changes in each item of cash
flows statement for your firm over the past year articulating the reasons for the change.
Woodside petroleum Limited is a one of the largest company in Australia which deals in
production and exploration of oil and natural gas. It has its headquarters in west Australia,
Perth.
Cash Flow Statements:
Net cash flow from operating activities
1. Depreciation and amortization: cash outflow for depreciation from assets and other
amortization from expenses.
2. Disposal of oil and gas properties: sale proceeds from oil and gaseous properties.
3. Net finance cost: adjustments from or cash outflow from net finance cost from activities.
4. Tax expenses: cash outflow from tax paid in operations and other activities.
5. Change in fair value of financial instruments: cash flow from the adjustments of the
true value of financial markets and other financial instruments.
6. Changes in assets and liabilities: Increase or decrease in inventories, receivables and
other provisions.
7. Payments to employees: for share plans, purchase of shares and other benefits in form of
cash are given.
8. Interest received: from the operations that are performed from the oil or natural gas
production.
9. Dividend Received: from the money invested in various financial market.
10. Borrowing cost: payment as cash and interest of loan taken.
Cash flow from investing activities:
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1. Payment for exploration: cash outflow for exploration and production of oil and
natural gas.
2. Borrowing cost: this cost bears the expenses related to the financing activities.
3. Proceeds from oil and gas properties: sale of units of business as oil and natural gas
properties.
4. Payments for acquisition: cash outflow for acquisition and takeover of some units
foe production (Annual report, 2017).
Cash flow from financing activities:
1. Proceeds from borrowings: cash inflow from borrowings given to investors.
2. Repayment from borrowings: cash outflow of loan amount given with interest
3. Borrowing cost: cash outflow for the borrowing cost.
4. Proceeds from DRP: proceeds available from dividend reinvestment plans.
(Fabozzi, 2018).
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ii) Provide a comparative analysis of your company’s three broad categories of cash
flows (operating activities, investing activities, financing activities) and make a
comparative evaluation for three years.
Net cash flow from
activities
2015 2016 2017 Difference
in 2015-16
Difference
in 2016-17
Cash flow from
operating activities
2475 2587 2400 112 (187)
Cash flow from
investing activities
(5555) (2473) (1568) (3082) (905)
Cash flow from
financing activities
(58) 51 (805) (8) ( 754)
Cash flow from operating activities: it includes activities like expenses for operations, cash
generated from operations, dividend received, and interest received. From the above table the
difference in 2015-16 is 112 which mean the company has received the interest, dividend and
customer receipts. In 2016-17 it is (187) which mean the company shows the negative balance
and cash outflow from activity like payments for restoration depreciation and amortization.
Cash flow from investing activities: this includes payments for purchase of building,
equipment for production of petrol as well as payments for acquisition and borrowing cost. As
seen from the above table in 2015-16 it is (3082) which means the payments are made for
exploration and evaluation of petrol. In 2016-17 it is (905) which means the company paid for
the acquisition and disposal of oil and gas properties (Annual report, 2017).
Cash flow from financing activities: it includes receiving and giving loans, dividend
paid to the investors, borrowing cost related to finance. In the year 2015-16 the balance is
(8) which shows the company has made payments to interest and dividend to the
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investors. In 2016-17 the balance shows the (754) which shows the company has received
from the underwriters in the dividend reinvestment plan and received from the
borrowings (Defusco, et. al., 2015).
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Other Comprehensive Income Statement
iii) What items have been reported in the other comprehensive income statement?
The comprehensive income statement includes those items which are not realized yet in includes
all the revenues, expenses, gains and losses, finance cost and excludes the profit and loss. It
always shows in table form below the income statement.
It comes as total of net income from the income statement plus the items of the comprehensive
item= comprehensive income. The items that are included in the comprehensive income
statements are gains and loss from the foreign currency adjustments, pension and retirement
plans, speculation and hedging activities, winnings and lottery, investments and holdings
(Annual report, 2017).
The reason behind including these statements in the annual report is that they are items of
shareholders equity and if not recorded the value of shareholder decreases so to enhance their
goodwill they are recorded as a comprehensive item. The word comprehensive means including
something, so here the items which are related to shareholders equity (Damodaran, 2018).
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iv) Explain your understanding of each item reported in the other comprehensive
income statement
It includes all the items that are not realized yet and does not include the items of profit
and loss. So, here are some of the items of these statements
Gains and losses from winnings and lottery: Any amount which a shareholder incurred
from the lottery and winnings outside the business but which is associated with
shareholder examples like horse racing, cricket matches games tends to come as items of
comprehensive statement (Annual report, 2017).
Gains and losses from pension plans: any income or loss from the pension or retirement
benefit plans or after retirement plans. For an example change in govt. policy could result
in increase or decrease in pension plan or gratuity should result in comprehensive income.
Gains and losses from foreign currency: any adjustments which result in gains and
losses from foreign currency could be treated as comprehensive item. For an example
currency swap rates, increase or decrease in exchange of currency (Damodaran, 2018).
Gains and losses from debt securities: any adjustments in the stock market increase or
decrease in prices of stocks inflation/deflation in market risk and speculation activities.
Gains and losses from unrealized holdings: gains and losses from the sale of return of
investment and any adjustments made in unrealized holdings that are available for sale.
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(v) Why these items have not been reported in Income Statement/Profit and Loss
Statement
These items include only the unrealized items and it does not include direct items of incomes and
losses. These are the items that are associated with the stakeholder value and they are necessary
to be recorded in any way. They are shown apart because the reason to get more highlights the
values, rights and goodwill of stakeholders. As they are not the direct items that are realized by
the company so they show just below the income statements.
Moreover, it becomes convenient not to show in P&L. If any stakeholder wants to know its value
they can just look on comprehensive income statement (Fraser, et. al., 2010).
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Accounting For Corporate Income Tax
(vi) What is your firm’s tax expense in its latest financial statements?
The tax expense for the current financial year in 2016 and 2017 respectively are (544) and (582).
The tax expense of any firm is depicted in the income statements.
The tax expense of the company is the actual expenses that derived with the mathematical
formula. These are the expenses for the year. They are deductable from profit before tax. It is
quite different from tax payable (Slemrod & Bakija, 2017).
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(vii) Is this figure the same as the company tax rate times your firm’s accounting income?
Explain why this is, or is not, the case for your firm.
No, the figure of tax expense is not same as that of firms accounting income The tax expense for
the current financial year in 2016 and 2017 respectively are (544) and (582) and the income tax
rate as per the Australian standards is 30% Other things that income tax expense does not
include the entire amount which is not taxable are as depreciation and amortization, capital
income or losses realized, tax benefits on acquisitions and mergers etc. (Warren & Jones, 2018).
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(viii) Comment on deferred tax assets/liabilities that are reported in the balance sheet
articulating the possible reasons why they have been recorded.
The deferred tax assets/liabilities are the overpaid and advance tax paid by the company. The
deferred tax of our company Woodside petroleum limited is 965 and 1125 in the year 2016 and
2017 respectively. They are always shown on the assets side of the balance sheet.
They are always treated and shown on the balance sheet:
The deferred assets are always treated as assets though they are paid as advance tax. The reason
is the nature that they poses by giving lump sum or advance tax and then using that advance tax
amount by taking the tax reliefs, tax rebates in tax concessions in the near future. So, the reason
that they reduce the future tax liability that’s why they are treated as an asset and all the assets of
the company are shown in the balance sheet. (Wang, et. al., 2016).
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(ix) Is there any current tax assets or income tax payable recorded by your company? Why
is the income tax payable not the same as income tax expense?
The current tax assets are $ 965 and 1125 in the year 2016 and 2017 respectively. The company
current tax liability is $ 91 and 61 in the year 2016 and 2017 respectively.
The income tax payable and income tax expense are both the different terms. The tax expenses
of firm are 2016 and 2017 respectively (544) and (582). The tax payable is $ 91 and 61 in the
year 2016 and 2017 respectively. So, we can see the difference in the figure the tax is not paid in
full. This will stand as a liability in balance sheet until it is written off in full. There can be many
reasons by which we stand the liability of tax payable to get reduce by means of deferred tax and
other tax concessions from the govt. but the tax expense cannot be reduce, paid off latter or can
set-off because they are the actual expenses one has to bear it because if the company has not
done expenses it could not have earned the profits (Annual report, 2017). The profits of the
company are result of the expenses incurred by the company and they are not payable to govt.
either they are deducted in the income statement.
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(x) Is the income tax expense shown in the income statement same as the income tax paid
shown in the cash flow statement? If not why is the difference?
No, the figures are not at all the same as tax expense for the current financial year in 2016 and
2017 respectively are (544) and (582) and the income tax paid is (411) and (172) in 2016 and
2017 respectively.
The reason of difference: From the figures we can note that the tax expense is more than the tax
paid, the tax expense should be the full expense they are derived with a mathematical formula for
a particular year, whereas the tax payment stand as a liability for a company they can pay a
particular amount in the particular year or in the future year. They can also rebate their taxes by
the deferred taxes. So, it is not required by the company to pay all the taxes in a particular year
so, that’s why the figures of the company are different (Annual report, 2017).
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(xi) What do you find interesting, confusing, surprising or difficult to understand about the
treatment of tax in your firm’s financial statements? What new insights, if any, have you
gained about how companies account for income tax as a result of examining your firm’s
tax expense in its accounts?
It is interesting that financial statements include the comprehensive income statement for
increasing the value of the stakeholders but at a time it is also difficult because for making the
financial statements we need to gather the data from the various historical records which
sometimes proves to be the time consuming and inappropriate (Annual report, 2017).
Our company Woodside petroleum Limited consist of the tax expenses 2016 and 2017
respectively are (544) and (582) after examining this it gives us information that company should
keep its account updated. Use of simple and quick answer base methods so that company can
maintain its expenses properly and wisely.
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References:
 Annual report, 2017. Woodside Petroleum Limited. [Online] Annual report. Available at:
https://woodsideannouncements.app.woodside/14.02.2018 AnnualReport2017.pdf
[Accessed on: 29 may 2018].
 Damodaran, A., 2018. The dark side of valuation: Valuing young, distressed, and
complex businesses. Ft Press.
 DeFusco, R.A., McLeavey, D.W., Pinto, J.E., Anson, M.J. and Runkle, D.E.,
(2015. Quantitative investment analysis. John Wiley & Sons.
 Fabozzi, F.J. ed., 2018. The handbook of financial instruments. John Wiley & Sons.
 Fraser, L.M., Ormiston, A. and Fraser, L.M., 2010. Understanding financial statements.
Pearson.
 Slemrod, J. and Bakija, J., 2017. Taxing ourselves: a citizen's guide to the debate over
taxes. MIt Press.
 Wang, Y., Butterfield, S., & Campbell, M. (2016). Deferred Tax Items As Earnings
 Warren, C.S. and Jones, J., 2018. Corporate financial accounting. Cengage Learning.
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Appendix
Cash flow statement
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Profit and loss account
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Balance sheet
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