HI5020 Corporate Accounting: Analysis of Energy Australia Limited's Financial Statements

HI5020 Corporate Accounting
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Contents
Introduction:........................................................................................................................4
Assessment item 2 — Assignment.........................................................................................5
1. CASH FLOWS STATEMENT........................................................................................5
(i) From your firm’s financial statement, lists each item 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.............................................................................................................................5
(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...................................................................................................6
OTHER COMPREHENSIVE INCOME STATEMENT...........................................................7
(iii) What items have been reported in the other comprehensive income statement.................7
(iv). Explain your understanding of each item reported in the other comprehensive income
statement..........................................................................................................................7
(v) Why these items have not been reported in Income Statement/Profit and Loss Statement. .8
ACCOUNTING FOR CORPORATE INCOME TAX..............................................................9
(vi) What is your firm’s tax expense in its latest financial statements?...................................9
(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.............................................................9
(viii) Comment on deferred tax assets/liabilities that are reported on the balance sheet
articulating the possible reasons why they have been recorded..............................................9
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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?.............................................10
The current tax assets are those assets are those assets which are actually payable and recorded
when the deferred taxes are to be legally enforceable and rightly set off with the current tax
assets against current tax liabilities of the company. As per lack of provision related to income
tax under income tax assessment act 1997, so the company has not recorded current tax assets
and liabilities in their financial statement as income tax payable (NCERT, 2014).................10
(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?..........................................10
(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?..................................................................................................10
Conclusion:........................................................................................................................11
References:......................................................................................................................12
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Introduction:
This report will explain about corporate accounting and its management in the context of Energy
India Limited. This report will describe management returns with the changes into cash flow
behaviour and it's operating and financial activities. It will elaborate and analyse the accuracy of
the comprehensive income statement and different between other comprehensive and original
income statement. In the further explanation, this report will describe Energy Australia Limited
and significance of corporate income tax and its accounting procedure.
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Assessment item 2 — Assignment
Assessment task
1. CASH FLOWS STATEMENT
(i) From your firm’s financial statement, lists each item 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.
Financial statement of the company Energy Australia limited shows relevant changes in cash
flow statement related to operating, financial and investment activities. The financial year of the
company ends in the Month of March. Proper understandings of each item related to each
activity have been given below:
1. Cash flow from operating activities:
This activity contains those items which are related to business operational management. It
includes receipts from members, associates etc. which was 1,008.200 in 2017. It was lower than
figures of 2016 which was 1,101,203. It also contains those items which are related to interest
receivables and payment made to ATO. Total et operation generating cash flow was 5879 M in
2017 n and (140,867) in 2016 (GAS Energy Australia, 2016).
2. Cash flow from investing activities:
This activity includes those items which are related to investment-related procedure. Such as
purchase of property and plants, payment to held maturity investment which has increased the
net ash flow from investment activity around (745,805) in 2016 which was similar in 2017.
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3. Net increased cash held at the beginning of the financial year was 244,142 and 1,132, 864 in
the 2017 and 2016 respectively. At the end of the financial cash, flow activity was 250,071 in
2017 and 244192 in 2016 (GAS Energy Australia, 2016).
(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.
Cash flow from operating, financial and investment activities have been changed in last three
years which can be concluded through financial year statements of 2015, 2016 and 2017. This
can be adjusted through comparative analysis of three years’ financial statement occurred in cash
flow behaviour. These are:
1. Operating activity: operational activity has been increased in the last three years which can
be seen easily through cash flow statement of the Energy Australia limited. Proper payment has
been increased in last three years of the company paid for members, customers and associates by
45%. Cash flow generating from operation was 96,285 in 2015, 140,865 in 2016 and 5879 in
2017 which was profit in comparison to last two years of cash flow from operations.
2. Financial activity: cash flow from financing activities has fluctuated effectively in last three
years. The increment in cash flow from financial activity was 99713 in 2015 and 88792 in 2016.
Total cash in hand was increased in last three years by 37% in the financial year. Cash in hand
was 250,072 in 2017 at the end of the financial year (GAS Energy Australia, 2017).
3. Investment activity:
Cash flow from investment has been increased in last years. It has been included the purchase of
property, plant and equipment of buildings which was decreased in last three years. Net cash
flow from investment was 745,805 in 2016 which was nil in 2017.
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OTHER COMPREHENSIVE INCOME STATEMENT
(iii) What items have been reported in the other comprehensive income statement
Energy limited produces another comprehensive income statement at the end of the March
ending of the financial year. This statement includes revenue, direct expenses and gross profit,
advocacy expense and industry development expense etc. it includes all those expenses which
are basically not included and not realised in the original profit and loss account. All items which
are classified in the comprehensive income would be related to revenue and expense of Energy
Australia Limited. In the rapidly continuing operations of the business, it includes office
expenses, factory expenses, communication expenses and general administrative expense within
the management. Current year surpluses before income tax of the company were 28844 M. and
total comprehensive income of the year 2017 was 28444with current year of surplus in 2017
(GAS Energy Australia, 2017).
(iv). Explain your understanding of each item reported in the other comprehensive income
statement
Other items and their understanding included in the comprehensive statement of the Energy
Australia Company can be evaluated through comparative analysis. Understanding of each item
has been given below:
1. The company has included that income (revenue) and expense items which cannot be realised
easily in the original income statement or in profit and loss statement. These items are basically
factory expense, office expense, information technology and general administrative expense
from which the total generated expense and comprehensive income or surpluses in the statement
was 28844 (Taxadda, 2017).
2. Income Tax: Income tax expense and revenue can be considered as current and deferred tax
expense which would be derived from long-term profit and losses. The total generated income
tax expense was nil in 2017 and 2016.
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3. Through overall analysis, it can be observed and analysed that Energy Limited has adopted
GAAP and international accounting policies to make a proper analysis and effective evaluation
of comprehensive statement to understand reporting and recording of each item (Tweedie, 2011).
(v) Why these items have not been reported in Income Statement/Profit and Loss Statement
These items are generally not recorded in the original income statement or in any profit loss
account due to a proper realization of changes in equity and incomes of the company. Such as in
the comprehensive statement of Energy limited Company, the total surplus for the year
attributable as the member of the equity as 81531 in negative. Balance has been shown at the end
of the year was 945,605 at the beginning of the April financial year. Total balance o the
comprehensive income at the end of the March 2017 was 974,449. Such items recorded in the
other comprehensive statements are not included in the original profit and loss statement due to it
allows the company to measure shareholders’ equity and net worth comparison. It is a good
option for the company to measure assets and liabilities which cannot be usually realized easily
(Rafay and Ajmal, 2014).
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ACCOUNTING FOR CORPORATE INCOME TAX
(vi) What is your firm’s tax expense in its latest financial statements?
The current annual reports contain such items which are classified into two parts revenue and
expense of the Energy Limited Company. The income tax expense is related to income tax
payable and those receivables which allow the company to manage a higher profit. In the FY17
of Energy Australia Limited, the income tax expense is nil (Merritt, 2015).
(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 above statement concludes that there is not any similarity in income tax income and
income tax rates times in the company’s financial accounts. It has been concluded those value of
tax income which is not realised in the financial statement as per given in the accounting
statement. As per accounting principle and standards s per given statutory rates. It could be
enacted when the reporting date and expected dates are applied equally. So income tax provision
has been adopted by the company and raised as entity exempted from income tax assessment act
1997 (Illustrative IFRS consolidated financial statements, 2015).
(viii) Comment on deferred tax assets/liabilities that are reported on the balance sheet
articulating the possible reasons why they have been recorded.
Due to no provision has been made related to income tax in the company as per income tax
assessment act 1997, there is no any provision and transactions related to deferred tax assets and
liabilities in the company financial statements.
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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 those assets are those assets which are actually payable and recorded
when the deferred taxes are to be legally enforceable and rightly set off with the current tax
assets against current tax liabilities of the company. As per lack of provision related to income
tax under income tax assessment act 1997, so the company has not recorded current tax assets
and liabilities in their financial statement as income tax payable (NCERT, 2014).
(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 company has not recorded any income tax expense equal to the income tax paid recorded
in the cash flow statement of Energy limited. In the other words, it is observed that total
computation of income tax payable could be realised and depreciated after calculating PBIT.
(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?
Through overall analysis, it has been observed that above evaluation was quite interesting but
difficult also in understanding management and provision of income tax as per given in the
financial statement of Energy Australia. It was also difficult to identify the proper method and
treatment of taxation under AAC 1997. The major point was to understand the changes in
operational and investing activity of the company as per changes in cash flow statement. As per
requirement of the company related to the realisation of deferred tax rates and current tax assets
which company has not included or mentioned in its financial statement. Due to all these
reasons, all standards and values are legally enforceable deferred tax assets and income tax
payable and their settlement would be written off (Kamran, 2014).
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Conclusion:
This report has been made to make proper understanding of corporate accounting and
significance of corporate income tax and other items related to the comprehensive income
statement. This report has been explained and discussed cash flow behaviour and proportionate
changes occurred in the income statement and changes made in equity as per observed in the
financial statement of the Energy Australia Limited. It has been described all corporate income
tax, and significance of comprehensive income of Energy Australia Limited.
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References:
1. Illustrative IFRS consolidated financial statements, 2015. Introduction. PricewaterhouseCoopers
LL.
2. Kamran, A., (2014). Explain the reason for the creation of deferred tax asset and liability?
[Online] Bayt.com. Available at: https://www.bayt.com/en/specialties/q/80018/explain-the-
reason-of-creation-of-deferred-tax-asset-and-liability/ [Accessed on: 14 May 2018].
3. Merritt, C., (2015). Tax Payable vs. Deferred Income Tax Liability. [Online] Chron.com.
Available at: http://smallbusiness.chron.com/tax-payable-vs-deferred-income-tax-liability-
48704.html [Accessed on: 14 May 2018].
4. NCERT, (2014). Cash Flow Statement. NCERT Publication.
5. Rafay, A. and Ajmal, M., (2014). Earnings Management Through Deferred Taxes Recognized
Under IAS 12: Evidence From Pakistan. The Lahore Journal of Business. pp. 1–19.
6. Taxadda, (2017). What is deferred tax asset and deferred tax liability (DTA & DTL). [Online]
Taxadda.com. Available at: http://taxadda.com/deferred-tax-asset-deferred-tax-liability-dta-dtl/
[Accessed on: 14 May 2018].
7. Tweedie, D., (2011). Measuring Assets and Liabilities Investment Professionals’ Views.
PricewaterhouseCoopers LL.
8. GAS Energy Australia, 2017. Annual Report, 2017. GAS Energy Australia.
9. GAS Energy Australia, 2016. Annual Report, 2016. GAS Energy Australia.
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