HI5020 Corporate Accounting: Analyzing Dulux Group Limited's Financial Performance

HI5020 Corporate Accounting
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Contents
Introduction:....................................................................................................................................3
CASH FLOWS STATEMENT...................................................................................................4
OTHER COMPREHENSIVE INCOME STATEMENT............................................................9
ACCOUNTING FOR CORPORATE INCOME TAX.............................................................11
Conclusion:....................................................................................................................................13
References:....................................................................................................................................14
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Introduction:
The report has been prepared in order to analyse the financial position of the company in respect
of the cash flow position and other financial indicators. In order to serve this purpose annual
report of the company has been used to obtain the information about various financial items
concerned with the company during the year. The company chosen here is Dulux Group Limited
which is the manufacturer and marketer of the products that assists in protecting, maintaining
and enhancing the spaces and places where people live and work. Therefore the company is
engaged in home décor operations and other interiors designing works which helps in preserving
the place in a better position. The report will include a cash flow analysis of the company by
recognizing the information about various investing, financial and operational activities. The
report will further include a description about income statement of the company and the current
tax expense associated with the company during the year.
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CASH FLOWS STATEMENT
The various items along with their reasons for changes during the last financial year are
presented below:
Profit before income tax expenses – The profits represents the operational earnings of the
company which have been received after deducting all the expenses form the revenues obtained
by the company (Bhasin, 2015). The same ahs changed by 9% over the last year which
represents that the company has generated enough revenues and have controlled the
expenditures.
Changes in assets and liabilities – The changes in the assets and liabilities are represented by
the changes recognized in the trade receivables and other current assets and liabilities of the
company. The same represents the changes in the operating items of the company. The same has
changes significantly over the last year due to the policy of company to increase its current
assets.
Net cash inflow from operating activities – The net cash flows from operating activities
represents the cash flows incurred during the year due to operating activities conducted in the
company and the same has increased by 15% and the same has resulted in cash inflows for the
company. This has been due to efficiently achieved in maintaining operational efficiency of the
company.
Net cash flow from investing activities – The net cash flows represents the cash inflows and
outflows recognized during the year due to investments made by the company in various assets
and properties purchased. The proceeds also include the cash received from selling these assets
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and properties (Bhasin, 2015). The change represented an increase in the outflow by 32% which
is a major concern for the company as it is focusing ion investing activities more.
Net cash flows form financing activities – The cash flows form financing activities represents
the inflows and outflows concerned with conducting the financing activities in the company. The
financing activities includes dividend paid and proceeds and cash outflows form various
borrowings obtained during the year. The change is concerned with controlling the cash outflows
by 10% in the current year. The financing activities have been reduced in the current year 2017.
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2. 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.
The comparative analysis is provided below:
Comparative cash flow statement
Particulars 2017
$(000)
%
increase/d
ecrease
2016
$(000)
%
increase/d
ecrease
2015
$(000)
Cash flows from operating activities
Profit before income tax expense 196,91
6
9 181,21
1
63 111,30
4
Adjustments for:
Depreciation and amortization 31,282 -3 32,267 -8 34,898
Amortization of prepaid supply
agreements
1,296 20 1,081 2 1,060
Share-based payments expense 3,185 -15 3,727 3 3,628
Defined benefit service cost 5,750 16 4,965 11 4,455
Defined benefit interest cost -100 469
Research and development grant
income
-962 -40 -1,599 -178 2,049
Share of net profit of equity
accounted investment
-1,235 83 -676 -26 -919
Impairment/(reversal) of impairment
of inventories
-100 -447
Impairment of inventories, trade and
other receivables
3,380 53 2,209 -44 3,922
Net loss on sale of property, plant and
equipment
234 -78 1,043 317 250
Net foreign exchange (gains)/losses on
operating items
-1,792 -166 2,732 -1,273 -233
Amortization of prepaid loan
establishment fees
-100 1,399
Net finance cost 17,294 -13 19,898
255,34
8
3 246,85
8
53 161,83
5
Changes in assets and liabilities:
Increase in trade, other receivables
and other assets
-
26,740
609 -3,772 -87 -
28,896
Increase in inventories -
13,338
429 -2,523 -75 -
10,172
Increase/(decrease) in trade and other 13,840 -150 - 6,346 -428
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payables and provisions 27,591
Cash generated from operations 229,11
0
8 212,97
2
-4,250 -5,132
Interest received 189 -16 224 -99 30,862
Interest paid -
13,628
-13 -
15,740
-286 8,443
Income taxes paid -
49,701
-5 -
52,542
Net cash inflow from operating
activities
165,97
0
15 144,91
4
-7 156,51
2
Cash flows from investing activities
Payments for property, plant and
equipment
-
95,546
67 -
57,072
116 -
26,438
Payments for intangible assets -527 -86 -3,732 24 -2,998
Payments for purchase of businesses -571 -96 -
13,276
15 -
11,518
Proceeds from joint venture
distribution
-100 500
Proceeds from disposal of property,
plant and equipment
191 -64 537 69 317
Net cash (outflow) from investing
activities
-
96,453
32 -
73,043
80 -
40,637
Cash flows from financing activities
Proceeds from borrowings 2,890,
779
12 2,584,
489
14,930 17,195
Repayment of borrowings -
2,857,
650
11 -
2,567,
174
12,927 -
19,707
Payments for purchase of treasury
shares
-
18,002
-2 -
18,313
-101 1,333,
000
Proceeds from sale of treasury shares 8 -75 32 -100 -
1,378,
398
Proceeds from employee share plan
repayments
8,551 48 5,773 19 4,856
Dividends paid (net of shares
allocated/issued as part of the DRP)
-
92,114
14 -
81,123
31 -
61,834
Net cash inflow from financing
activities
-
68,428
-10 -
76,316
-27 -
104,88
8
Net increase in cash and cash
equivalents
1,089 -124 -4,445 -140 10,987
Cash and cash equivalents at the 39,068 -16 46,270 32 35,118
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beginning of the financial year
Effects of exchange rate changes on
cash and cash equivalents
-1,183 -57 -2,757 -1,771 165
Cash and cash equivalents at the end of
the financial year
38,974 0 39,068 -16 46,270
Analysis:
Cash flows from operating activities: The cash flows from the operating activities conducted in
the company comprise of the cash movements due to production and selling activities conducted
by the company. By referring to the annual report it can be established that the cash inflow in the
financial year 2017 is $165970000 and the same was $144914000 in the year 2016 (Beekes, et
aussi. al., 2015). This represents that the cash inflows has increased in the year 2017. The sae is
the result of decreases recognized in expending during the year 2017 and the revenues ahs
increased significantly during the year.
Cash flow from investing activities– The cash flows from investing activities are concerned
with funding activities of the company in which the firm takes decision about investing in
various profitable opportunities. This will include the financial income of the company. By
recognizing the above table it can be seen that there has been a cash outflow of -$96,453000 in
the year 2017, -$73043000 in the year 2016 and -$40637000 in the year 2015. This can be seen
as a significant increase in the cash outlays in investing activities of the company.
Cash flows from financing activities– The cash flows from financing activities represent the
inflows and outflows which are concerned with financing the capital for company. These types
of cash flows include dividend payments in respect of funds acquired by the company. The
changes in these financing activities represents that the company should be controlled its cash
outlays during the three years concern.
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OTHER COMPREHENSIVE INCOME STATEMENT
3. What items have been reported in the other comprehensive income statement?
There are two types of items recognized in this type of comprehensive income statement which
are concerned with:
Items that may be reclassified to profit or loss – This represents the exchanges differences
recognized during the translation of foreign operation which results in changes in incomes due to
various fluctuations in foreign exchange rates and the type of differences has not been
recognized in income statement yet.
Items that will not be reclassified to profit or loss – The type of items includes actuarial gains
and losses which are represented by retirement benefit obligations.
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4. Explain your understanding of each item reported in the other comprehensive income
statement
The foreign currency loss represents the actual losses that can be incurred to the company sue to
differences recognized in foreign exchange rates. The income tax obligation represents the
expense associate with income tax and which has not been recognized yet.
Also there have been actuarial gains in case of retirements benefit obligations and the same has
not been recognized in income statements.
5. Why these items have not been reported in Income Statement/Profit and Loss Statement.
The types of incomes and losses represent the portion of income and losses which does not affect
the profit and loss of company directly by affects the shareholders equity (Beekes, et aussi. al.,
2015). These types of items either relates to prior periods or are not recognized in current year
profit and therefore they are considered in comprehensive income of the company.
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ACCOUNTING FOR CORPORATE INCOME TAX
6. What is your firm’s tax expense in its latest financial statements?
The current income tax as recognized in the income statements of the company is $57255000.
7. 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 same is not as per the accounting calculation of the company because as per the
accounting income of the company and applying corporate tax rate of 30% the tax expense
comes out to be $59075000 but this has been different due to existence of Foreign tax rate
differential, Share of net profit of equity accounted investment, Tax losses not recognised, Non-
taxable income and profits, net of non-deductible expenditure, Sundry items and Amounts over
provided in prior years.
8. 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 which have been recorded are $50436000 in the year 2017 whereas the
deferred tax liabilities represents the amount $28096000 (Warren & Jones, 2018). These have
been recorded in order to consider the effect of temporary differences recognized in the treatment
of accounting and taxation laws applicable to company.
9. 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?
Yes the current tax liabilities which have been recorded in current liabilities of the company are
amounting to $18567000 which is different from what is recognized as income tax expense
because it only represents the amount which have been accumulated and remaining unpaid in
cash.
10. 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?
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No this is not the same in both the statement because the cash flow statement contains the
amount actually paid for income tax in which accumulated or less amount of tax have been paid
by the company (Warren & Jones, 2018).
It is interesting to note that the company has recognized current tax assets and liabilities without
considering any tests on the future income earnings of the company and considering the situation
that there can be loss to the company it is doubtful to create deferred tax assets in this situation.
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Conclusion:
It can be concluded that corporate accounting of the company can be conducted by analysing and
evaluating the financial and cash performance of the company in order to investigate the long
term sustainability. The company Dulux Group Limited has carefully prepared its financial
statements and proper accounting records have been maintained by the company in order to
differentiate between different cash flows activities. The analysis of current tax shows that the
liability has been correctly recognized in the financial records of company.
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References:
 Ali, S., 2016. Corporate governance and stock liquidity in Australia: A pitch. Journal of
Accounting and Management Information Systems, 15(3), pp.624-631.
 Beekes, W., Brown, P. and Zhang, Q., 2015. Corporate governance and the
informativeness of disclosures in Australia: a re‐examination. Accounting &
Finance, 55(4), pp.931-963.
 Bhasin, M.L., 2015. Corporate accounting fraud: A case study of Satyam Computers
Limited.
 Duff, A., 2016. Corporate social responsibility reporting in professional accounting
firms. The British Accounting Review, 48(1), pp.74-86.
 Henderson, S., Peirson, G., Herbohn, K. and Howieson, B., 2015. Issues in financial
accounting. Pearson Higher Education AU.
 Lee, T.A., 2014. Evolution of Corporate Financial Reporting (RLE Accounting).
Routledge.
 Ramanna, K., 2014. Political standards: Accounting for legitimacy.
 Sivathaasan, N., 2016. Corporate governance and leverage in Australia: A pitch. Journal
of Accounting and Management Information Systems, 15(4), pp.819-825.
 Dulux Group Limited, 2017 Annual Report.Concise Annual Report 2017, Available at:
DuluxGroup%20Annual%20Report%20November%202017.pdf, [Accessed on:
15/05/2018]
 Warren, C.S. and Jones, J., 2018. Corporate financial accounting. Cengage Learning.
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