Corporate Accounting Analysis of Harvey Norman Limited
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This report analyzes the income statement, cash flow statement, and taxation recording process of Harvey Norman Limited. It examines the fair accounting valuation method, disclosure policy, materiality policy, notes to accounts and a detailed description about all the accounting figures in the annual report of the company.
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HARVEY NORMAN LIMITED Corporate Accounting Studentâs Name [25/5/2018]
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Corporate Accounting 2 Contents Introduction:.....................................................................................................................3 Harvey Norman limited:...................................................................................................3 Que 1:................................................................................................................................3 Que 2:................................................................................................................................5 Que 3:................................................................................................................................5 Que 4:................................................................................................................................6 Que 5:................................................................................................................................6 Que 6:................................................................................................................................7 Que 7:................................................................................................................................7 Que 8:................................................................................................................................8 Que 9:................................................................................................................................9 Que 10:..............................................................................................................................9 Que 11:............................................................................................................................10 Conclusion:.....................................................................................................................10 References:.....................................................................................................................11
Corporate Accounting 3 Introduction: Evaluating the income statement recording process, cash flows recording process and taxation recording process are one of the major elements of the accounting process. It examines the standards and the accounting process which has been used by the company to measure the accounting figures and their recording process in the annual report. It examines the fair accounting valuation method, disclosure policy, materiality policy, notes to accounts and a detailed description about all the accounting figures in the annual report of the company. The report explains about the various financial statement of the company such income statement, cash flow statement, comprehensive income statement and the balance sheet of the company. It measures the different figures and the recording style of the company to identify that whether the company has used proper rules, regulations and the policies to record the financial and accounting figures of the company in the final financial statement of the company. Harvey Norman limited: Harvey Norman limited is one of largest Australian company in the retailing and electrical industry. Mainly, the comapny operates it business in retailing of furniture, computers beddings, consumer electrical products and combination products. The company operates it business through various franchise, it has been founded in 1982. Home (2018) explains that around 2820 franchise stores are owned by the company to run the business and manage the performance of the company. The brand names of the company are Harvey Norman, Domayne and Joyce, Mayne etc. the company is also operating its business at overseas. Annual report of the company briefs that the company has followed the AASB, FASB and IFRS rules to determines and record all the accounting activities and figures in the annual report of the company. Que 1: Cash flow statement is crucial statement of an organization which is prepared by the companies to evaluate the changes in the cash in a particular period; this statement measures
Corporate Accounting 4 the entire cash outflow and inflow of an organization of a particular period and measure about the liquidity and solvency position of the company. Cash flows statement does not affect by the outstanding expense and revenue of the company. It only records those activities which have been impacted on the cash position of the company. Every listed company is required to prepare this statement according to IFRS rules (Walsh, McGregorâLowndes and Newton, 2008). The Harvey Norman limited explains that the cash flow statement of Harvey Norman limited explains about huge changes into the cash position of the company from 2016 in 2017. The main changes into the cash flow position of the company has been occurred due to investments, purchase of PPE, acquisitions, investment purchase, debt issuance, repayment of debt amount, dividend amount etc. The below table explains that the investments and purchase of PPE has enhanced the cash outflow of the company which has directly impacted on the total cash flow position of the company. In addition, it has been recognized that the long term debt issuance has enhanced the cash inflow position of the company from last year (Horngren et al, 2012). Though the higher dividend amount has been paid to shareholders of the company and it has impacted the cash inflow position. The changes could be seen on the net changes in the cash. It explains about the improved position of cash items of the company from 2016. CASH FLOW STATEMENT Amt in AUD201520162017 Investments in property, plant, and equipment-55012000-68155000-89366000 Property, plant, and equipment reductions7152000905100028592000 Acquisitions, net-4000-25349000 Purchases of investments-19876000-64484000 - 130397000 Long-term debt issued4434900034900072075000 Long-term debt repayment-52000000-45862000-15250000 Cash dividends paid - 333664000 - 266882000 - 344962000 Net change in cash - 302400000 - 487280000 - 485889000 (Yahoo finance, 2018)
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Corporate Accounting 5 Que 2: The cash flow statement further explains about the comparison of cash position of last 3 years. It briefs that the cash flow position of the company has been changed due to various factor which has taken place into the current year of the company. Firstly the cash flow from the investing activities of the company explains that the cash outflow of the company has been higher than the cash inflow of the company because of higher investments into the property and equipment of the company. It explains that the cash position of the company has been lowered in context with the investment activities of the company. In addition, the cash flow from the financing activities of the company explains that the cash outflow of the company has been lower than the cash inflow of the company from last year because of higher investments into the cash dividend and the debt issuance factors of the company. It explains that the cash position of the company has been lowered in context with the investment, operating and financial activities of the company from last 2 years. CASH FLOW STATEMENT Amt in AUD201520162017 Net cash used for investing activities-81803000 - 179853000 - 198765000 Net cash provided by (used for) financing activities - 220597000 - 307427000 - 287124000 Net change in cash - 302400000 - 487280000 - 485889000 Free cash flow285041000368900000335774000 (Morningstar, 2018) It explains that the performance of the cash flows of the Harvey Norman limited has been lower from last 2 years and the recording process of the company and the notes to accounts explains that the free cash flow of the company is quite competitive. Que 3: Comprehensive income statement of Harvey Norman limited explains that the total profit of the year of the company is $ 462966000 which has been impacted due to the translation in foreign currency, cash flow hedges, available for sales investment, income tax effect etc.
Corporate Accounting 6 The changes into the total profit of the company explain that the total comprehensive income of the company is $ 17,226,000 which has enhanced the total profitability level of the company. Randolph and Tice, (2014)explains that the comprehensive income statement is prepared separately in the annual report of the company to measure the total profit of the company. However, the items in the comprehensive income statement are not related with the daily activities of the company. Que 4: The main items in the comprehensive income statement of the company is foreign currency, cash flow hedges, available for sales investment, income tax effect etc. It indicates about the noncurrent and non operating activities of the company. these items explain about those figures and items which have incurred due to the industry and economical fluctuations these items explains about the current changes in the assets of the company and thus it is not recorded in the income statement of the company (Nobes, Parker and Parker, 2008). Que 5: The comprehensive income statement explains about those items which are not related with the daily operations of Harvey Norman and neither has it indicated about the exact value of the company. It only explains about fair value of foreign investment and other investment of the company (Nielsen, Raimondos-Møller and Schjelderup, 2010). Thus it is not recorded
Corporate Accounting 7 in the income statement of the company. As the income statement prepares on the basis of the daily activities of the company and the comprehensive income statement of Harvey Norman limited explains about the fair value of the assets and the liabilities of the company. Que 6: The tax expenses of the company in the income statement of Harvey Norman limited is $ 186,840,000 in the year of June 2017. It explains that the total tax liability of the company on the basis of the total EBT of the company is $ 186,840,000. The tax amount of Harvey Norman limited has been improved from 2016 in 2017 (Morningstar, 2018). The reasons behind increasing in the income tax expenses of the company are higher sales revenue of the company and improved gross profit of the company. Que 7: The income tax expenses of Harvey Norman limited is $ 186,840,000 in 2017 according to the annual report (2017). However, it has been recognized that the accounting profit of the company is $ 639806 and on the basis of the Australian taxation office, the corporate income tax rate of the company is 30%. It explains that the actual at amount of the company should be $ 191,942,000 instead of $ 186,840,000. It explains that the actual tax amount of the company is lower than the taxation amount on the basis of the accounting profit of Harvey Norman limited. The report explains that the various non deductable expenses and income have affected the accounting taxation
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Corporate Accounting 8 amount of the company and due to it; the taxation amount of the company has been lowered by $ 5,102,000. The main reasons behind the difference among the actual tax amount and accounting tax amount is various expenses and income which are not deductable on the basis of the Australian taxation officer and the Australian accounting standards board (Floropoulos et al. 2010). Que 8: The balance sheet of Harvey Norman limited explains that the deferred tax liabilities and deferred tax assets of the company. These figures explain about the differences among the changes into the value of the assets and liabilities of the company and their impact on the total taxation of the company. In the year of 2017, it has been recognized that the deferred tax liabilities of the company has been improved from last year to $ 267,219,000. These changes have occurred into the changes into the PPE and other intangible assets of the company. The amount explains that it must be set off form the provisions of the company and through paying the tax amount to the Australian government (Morris, 2017).
Corporate Accounting 9 Que 9: The balance sheet of Harvey Norman limited explains that the current tax assets and current tax liabilities of the company. These figures explain about the differences among the tax amount paid and the actual tax amount of the company. In the year of 2017, it has been recognized that the current tax liabilities of the company has been improved from last year to $ 39,680,000. These changes have occurred into the changes into the total tax amount paid of the company. The amount explains that it must be paid to the Australian government in short run by the company. Que 10: The cash flow statement of Harvey Norman limited explains that the total tax amount which has been paid in the year of 2016-17 by the company is $ 152,454,000. Further, the income statement of Harvey Norman limited explains that the total tax amount which has been occurred in the year of 2016-17 by the company is $ 186,840,000. These figures explain about the differences among the tax amount paid and the actual tax amount of the company (Robinson, Stomberg and Towery, 2015). It explains that the lesser amount has been paid by the company to the government than expected. The balance amount of this figures have been presented in the balance sheet of the company under the current tax liabilities head. The difference has occurred due to the less payment of the taxation amount in the year of 2016-17 than the expected amount.
Corporate Accounting 10 Que 11: The study on the Harvey Norman limited, its annual report and its tax amount in the balance sheet, income statement and the cash flow statement explains that the study was quite interesting as it is interested to read the annual report of a real company and measure that how the items are recorded in the annual report of the company. Though, few minor difficulties have also been faced while evaluating the accounting process and the recording process of Harvey Norman limited. It has been found that the tax amounts are required to be studied in depth to understand all the factors of the company. Conclusion: To conclude, Harvey Norman limited has recorded the entire accounting figures on the basis of IFRS, AASB and IASB rules. The taxation figures have been added by the company on the basis of AASB 112 rules. The performance of the company explains about the better performance of the company.
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Corporate Accounting 11 References: Annual report. 2017.Harvey Norman limited. [online]. Available at: https://static1.squarespace.com/static/54803162e4b08e1b8a472201/t/ 59cded6780bd5e4dbeef7f83/1506667916831/2017-Annual-Report.pdf(accessed 24/5/18). Floropoulos, J., Spathis, C., Halvatzis, D. and Tsipouridou, M., 2010. Measuring the success of the Greek taxation information system.International Journal of Information Management,30(1), pp.47-56. Home. 2018.Harvey Norman limited. [online]. Available at: http://www.harveynorman.com.au/(accessed 24/5/18). Horngren, C., Harrison, W., Oliver, S., Best, P., Fraser, D., Tan, R. and Willett, R., 2012.Accounting. Pearson Higher Education AU. Morningstar. 2018.Harvey Norman limited. [online]. Available at: http://financials.morningstar.com/cash-flow/cf.html?t=HVN®ion=aus&culture=en-US (accessed 24/5/18). Morris, J.L., 2017. Classification of Deferred Tax Assets and Deferred Tax Liabilities: An EvaluationofFASB'sAttemptatStandardsSimplication.JournalofAccountingand Finance,17(8), pp.198-208. Nielsen, S.B., Raimondos-Møller, P. and Schjelderup, G., 2010. Company taxation and tax spillovers: Separate accounting versus formula apportionment.European Economic Review,54(1), pp.121-132. Nobes, C., Parker, R.B. and Parker, R.H., 2008.Comparative international accounting. Pearson Education. Randolph, B. and Tice, A., 2014. Suburbanizing disadvantage in Australian cities: sociospatial change in an era of neoliberalism.Journal of urban affairs,36(s1), pp.384-399. Robinson, L.A., Stomberg, B. and Towery, E.M., 2015. One size does not fit all: How the uniform rules of FIN 48 affect the relevance of income tax accounting.The Accounting Review,91(4), pp.1195-1217.
Corporate Accounting 12 Walsh, P., McGregorâLowndes, M. and Newton, C.J., 2008. Shared services: Lessons from the public and private sectors for the nonprofit sector.Australian Journal of Public Administration,67(2), pp.200-212. Yahoo Finance. 2018.Harvey Norman limited. [online]. Available at: https://au.finance.yahoo.com/quote/HVN.AX/(accessed 24/5/18).