Comparison between JB HI-FI Limited and Harvey Norman

This report provides a comparative analysis of the financial performance of JB HI-FI Limited and Harvey Norman. It covers topics such as equity, cash flows, comprehensive income statement and corporate income tax. The report highlights the differences between the two companies and provides insights into their financial position.

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Compare btw JB HI-FI Limited and Harvey Norman

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Executive Summary
The main concept in which the overall report is based is related to corporate accounting. The
corporate accounting helps in measuring recording the financial information so that the actual
results can be achieved and the growth of the organization in the external market can be
achieved. It also deals with the comparative analysis so as to determine the change which has
been occurred from the preceding year to the current year. The organizations have been selected
so that the practical picture of it can be provided such as JB HI-FI Limited and Harvey Norman.
These will enable the accountants to determine the accurate statements.

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Table of Contents
Executive Summary.........................................................................................................................2
Introduction......................................................................................................................................4
Owners Equity.................................................................................................................................5
Cash Flows Statement......................................................................................................................7
Other Comprehensive Income Statement........................................................................................9
Accounting for Corporate Income Tax..........................................................................................12
Conclusion.....................................................................................................................................18
References......................................................................................................................................19

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Introduction
Accounting has the important role in developing the organization by recording the information
related to the finances in proper and systematic manner. The report here has highlighted the
owner’s equity so that the amount of equity within the organization can be determined. With this
the comparison between the debt and equity so as to analyze which source is used by the
organization. The organizations used are JB HI-FI Limited and Harvey Norman. JB HI-FI
Limited is the organization which deals in video games, Blue Rays, DVDs, CDs and electronic
hardware and electric appliances. While Harvey Norman is an Australian based multinational
retailer of furniture, computers, consumer electric products and communication. The last part of
the report has explained about the tax expenses so that the actual taxes for both the organization
can easily be determined.

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Owners Equity
(I) it very well may be noticed that there are various things that can be recorded under the head
of Equity in a financial position sheet. It tends to be noticed that Equity is the estimation of
benefits less the quantity of liabilities (Harvey Norman Holdings Limited, 2017). The measure of
value is recorded under the accounting report and incorporates the specific things. These things
are:
Contributed Equity:
The contributed equity is also known as the paid-up capital. It can be determined as the cash or
any other assets which have been given by the shareholders to the organization in exchange for
stock. It is also the price which the shareholders pay for their stake in the organization (Atanasov
and Black 2016).
Reserves:
The reserves demonstrate the acknowledge balance and perceived as the piece of investor value.
The reserves are the benefits that can be appropriated for the particular reason (Harvey Norman
Holdings Limited, 2017). These are set to buy the advantages and set off the liabilities for repairs
and upkeep.
Retained Earnings:
It very well may be expressed that the retained incomes are benefits and a total profit of the firm
after the representing profits. It very well may be gotten by the including the aggregate sum of
pay and subtracting the misfortunes from the beginning and furthermore subtract the number of
profits that can be paid to investors (Harvey Norman Holdings Limited, 2017).
Patent entity interest:

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These are the interests which are being paid by the organization in the form of interest of any of
the patent right for some of the assets within the organization has been taken.
Non-controlling interest:
It is one of the parts of the subsidiary organization’s stock which is owned by the parent
organization. The minority interest is less than 50% of the outstanding shares (JB HI-FI Limited,
2017).
Yes, change has been observed as in the case of Harvey Norman the amount of the contributed
equity has been increased from $385296 to $386309 (Harvey Norman Holdings Limited, 2017).
(ii) In this question, a short report should be possible on the things of monetary record. It
additionally thinks about the measure of obligation and value with the earlier year of the
organization. By investigating the information of two associations, the analyst can without much
of a stretch decide the proportion of obligation and value.
From the analysis of JB HI-FI Limited, it can be analyzed that the amount of equity has been
increased from the year 2017 to 2016 that is in 2016 the amount was $ 404.7 which increased to
$853.5 in 2017. The debt in the organization also showed the increasing trend that is in 2016 it
was $587.6 which increased to $1598.8 in 2017 (JB HI-FI Limited, 2017). Therefore, the debt of
the organization is more which risky situation for the organization is.
In case of Harvey Norman, the amount of the debt has shown the decreasing trend that is it
decreased from $1743126 in 2016 to $1376837 in 2017 while the amount of equity has increased
from $2688674 to $2812907 (Harvey Norman Holdings Limited, 2017). Therefore, it can be said
that the organization is funding its sources through equity which will enable to pay off all the
debts easily.

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Cash Flows Statement
(iii)The cash flow statement shows the liquidity position of the organization by analyzing
the inflow and outflow of cash and cash equivalents. Cash flow statements items are shown
below:
Operating Activities It alludes to the inflow and outpouring from a
business of enterprises exercises, for example,
purchasing and offering the administrations and
items and so forth. It comprises receipts from
the customers and GST that expansion the
money and it additionally makes the instalments
to representatives and providers that
demonstrate the outpouring of money. The
measure of intrigue got is additionally recorded
in this movement (Harvey Norman Holdings
Limited, 2017).
Investing Activities These reports the aggregate change in the
situation of an organization that can result from
the additions and misfortunes of speculation and
the variety can result from the sum burned
through regularly the ventures, for example,
assets and so forth (JB HI-FI Limited, 2017). It
includes the instalment for property, hardware
and plant, proceeds from the transfer of
speculations.
Financing Activities The financing activities record those exchanges
that can be viewed with the lenders and
partners. It very well may be noticed that the
fund can be utilized to extend and works the
business at a substantial scale (Welford, 2016).
It comprises of profits paid to the partners,
instalments for obtaining of offers and so forth
.
(IV) There are various differences which have been observed in the operating financing and the
investing activities of both the organization. These needs to be looked forward so that the
effectiveness within the organization can be maintained and the growth of organization can be
achieved by analyzing the actual performance in the external market. The variations have been
defined as follows:

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JB HI-FI Limited
Activities 2015 2016 2017 Change in
2017-16
Change in
2016-15
Operating
Activities
179,896 185,140 190.6 -184,949 5,244
Investing activities (44,370) (52,001) (885.5) 51,116 -7,631
Financing
Activities
(129,640) (130,565) 715.9 131,281 -925
Harvey Norman
Activities 2015 2016 2017 Change in
2017-16
Change in
2016-15
Operating
Activities
340448 437691 425140 -12551 97243
Investing activities -81803 -179853 -198765 -18912 -98050
Financing
Activities
-220597 -307427 -287124 20303 -86830
(V) The financing action records those exchanges that can be viewed with the lenders and
partners. It very well may be noticed that the fund can be utilized to extend and works the
business at a substantial scale. It comprises of profits paid to the partners, instalments for
obtaining of offers and so forth. It has also been observed that there has been the change in the
financing activities by comparing both the years have shown the positive results which can be
said that the financial position of the organization is strong and this in turn will enable in
attaining sustainability as well as transparency within organization.
In JB HI-FI Limited, it has been noticed that there is the increase in operating activities from
2015 to that of 2017 which can be said that the organization has much cash so as to fund its

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operations. With this, the investing and the financing activities has also shown the increase in the
cash flow statement (JB HI-FI Limited, 2017).
In case of Harvey Norman, it very well may be noticed that there is converse in the working
exercises which demonstrates that they produce the administrations to acquire more benefit and
that prompts the advantages in future (Harvey Norman Holdings Limited, 2017). Aside from
this, there is a lessening in the contributing action that shows they didn't put their benefits in
associations and due to there is a low piece of the pie.
Other Comprehensive Income Statement
(VI) Almost the items covered in the comprehensive income statement are the same. In fact,
there are most items in the comprehensive income statement of Harvey Norman Limited when
compared to the statement of comprehensive income of JB HI-FI Limited (JB HI-FI Limited,
2017). This will be explained by the following income statement of both the organizations.
The items included in comprehensive income statements also include exchange differences that
arise on the translation of foreign operations which do not arise due to the efficiency of any
particular personal or employee (Harvey Norman Holdings Limited, 2017). Apart from that, it

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includes a change in the fair value of cash flow hedges (Crane and Matten 2016). Thus, all the
items will be categorised according to their nature and will fall either under items that may be
reclassified or may not be reclassified subsequently to profit or loss. After summing up both the
items, comprehensive income attributable to or belonging to the shareholders (only equity
shareholders) are determined and accordingly analysed.
(VII) There is a specific format of the comprehensive income statement and income statement
and both are totally different from each other. Items covered in comprehensive income statement
should not be reported in income statement or statement of profit or loss (JB HI-FI Limited,
2017). This is because the items covered in comprehensive statements have nothing to do with
the operating efficiency or productivity that arises in the normal business operations of any
business enterprise. However, it does not mean that the items covered or mentioned in these
comprehensive income statements are of no use and are useless (Harvey Norman Holdings

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Limited, 2017). These items depict the comprehensive income attributable to or belonging to
equity shareholders or owners of the concerned business organizations or enterprises. They
should form part of the financial statement of the companies since they serve the financial needs
of the owners and should be considered as such by the concerned investors.
(VII) Both organizations have prepared comprehensive income statement in accordance with the
generally accepted accounting principles popularly known as GAAP (Schaltegger and Crutzen,
2016). It has been observed the items covered or listed in such statement is higher in Harvey
Norman when compared with JB HI-FI Limited. While the comprehensive statement of Harvey
Norman comprises income that may be reclassified subsequently to profit or loss as well as items
that will not be reclassified subsequently to profit or loss, comprehensive statement of JB HI-FI
Limited contains only items that will be reclassified subsequently to profit or loss (JB HI-FI
Limited, 2017). It can be said that JB HI-FI Limited does not have any financial item that will
not be reclassified subsequently to profit or loss or income. Thus, these have not been mentioned
in the comprehensive income statement.
The measuring unit of items covered in the comprehensive income statement of both the
organizations are different. While Harvey Norman Holding Limited has reported all the items
therein in $ 000, JB HI-FI Limited has reported their items in $ million (Harvey Norman
Holdings Limited, 2017). However, it does not affect the comparison between these business
enterprises or organizations. For making a better comparison between the items listed in
comprehensive income statements of these two enterprises, it is advisable to convert items
mentioned therein into same measuring unit and variable.
(IX) It is not wise able to include consolidated comprehensive income in determining and
evaluating the performance and progress of top-level managers working in any business

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enterprise since it will not reflect and depict the true position of financial performance and
progress of business operations in which any particular business enterprise is actively or majorly
engaged (Harvey Norman Holdings Limited, 2017). Thus, different statements are prepared in
different formats and are assessed accordingly.
Accounting for Corporate Income Tax
(XI) Both the organizations namely, JB HI-FI Limited and Harvey Norman Limited have a
different amount of tax expenses. However, both the companies have followed the same
accounting expenses in relation to such financial component. While the tax expense of JB
HI-FI Limited is$ 86.8 million, the income tax expense of Harvey Norman Limited amounts
to$ 186.84 million (JB HI-FI Limited, 2017).
Particulars Harvey Norman JB HI-FI Limited
Income tax
expense
186840000 or
186.84 million
86800000 or 86.8
million
Thus, the income tax expenses of Harvey Norman Limited are higher than that of JB HKI-FI
Limited. It can be said that income tax expenses are almost double (Harvey Norman Holdings
Limited, 2017). It is important to note that the above income tax expenses include the deferred
tax expenses. Thus, it covers both current tax expenses as well as deferred tax expenses.

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(XI)
Harvey Norman JB HI-FI Limited
Particulars (Amount in $ million) (Amount in $ million)
Earnings before
tax
639.81 259.2
Income tax
expense
186.84 86.8
Effective tax rate 29.20% 33.49%
The above table explains the detailed comparison of the effective tax rate of both the business
enterprises. It has been observed that JB HI-FI Limited has a higher effective tax rate than that of

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Harvey Norman Limited. This is because the effective tax rate of Harvey Norman is only
29.20% while that of JB HI-FI Limited is 33.49% (Harvey Norman Holdings Limited, 2017).
(XII) The below screenshot has been taken from the extracts of the annual report of Harvey
Norman Holdings Limited. It can be observed that the company has adjusted deferred tax assets
against deferred tax liabilities which are in accordance with the GAAP indicating deferred tax
liabilities of $ 267,219 in the Balance sheet (Harvey Norman Holdings Limited, 2017).

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In the same manner, the following extract has been taken from the annual report of JB HI-FI Ltd.
which has also adjusted deferred tax liabilities against deferred tax assets. Thus, DTL stands for
$ 8.2 million (JB HI-FI Limited, 2017).
(XIII) On comparing deferred tax expenses of both the organizations, it can be observed that
there exist deferred tax liabilities in JB HI-FI Limited as well as Harvey Norman after the
adjustment of deferred tax assets (JB HI-FI Limited, 2017).
JB HI-FI Limited
Particulars (Amount in $ million) (Amount in $ million)
2017 2016
Deferred tax assets 0 7.8
Deferred tax
liabilities
8.2 0

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Harvey Norman
2017 2016
Particulars (Amount in $ million) (Amount in $ million)
Deferred tax
liabilities
267219 226254
(XIV)
Particulars Harvey Norman JB HI-FI Limited
Particulars (Amount in $
million)
(Amount in $
million)
Cash tax amount 147.82 77.8
The above table computes the tax amount that has been paid in cash. This amount has been
computed considering the income tax amount along will deferred tax expenses (Ada, et. al.,
2015).
(XV) Tax calculation of both companies
Particulars Harvey Norman JB HI-FI Limited
Particulars (Amount in $ million) (Amount in $ million)
Earnings before tax 639.81 259.2
Cash tax expense 147.82 78.3
Cash tax rate 23.10% 30.21%

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The above table explains that the cash tax rate of JB HI-FI Limited is higher than that of Harvey
Norman Holdings Limited (Harvey Norman Holdings Limited, 2017).
(XVI) The first and foremost reason for the difference in between cash tax rate and book tax rate
is the difference that arises between accounting income and taxable income computed as per the
taxable provisions (Ada, et. al., 2015).

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Conclusion
It can be summarized from the overall report that it gave the understanding of various items
reported in the distinct statement of the corporate accounting. To achieve the objectives the
director needs to record the exchanges in the right and dependable way. For this, they examine
the accounting report in which every one of the benefits and liabilities are recorded that knows
the situation of the organization. The association additionally delineates the cost which is caused
in the money related year and furthermore confirms the income. On the off chance that there is
more income than costs then it is a benefit and bad habit e-versa. It additionally recognizes the
situation of money than whether it is inflow and outpouring through the income proclamations.
On the off chance that the two associations can appropriately keep up the records the association
can make viable choices.

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References
Ada, S., & Ghaffarzadeh, M., (2015) Decision Making Based On Management Information
System and Decision Support System. International Journal of Economics, Commerce,and
Management.
Atanasov, V. and Black, B., (2016) Shock-based causal inference in corporate finance and
accounting research.
Crane, A. and Matten, D., (2016) Business ethics: Managing corporate citizenship and
sustainability in the age of globalization. UK: Oxford University Press.
Harvey Norman Holdings Limited, (2016) Annual Report. [Online]. Available at:
http://www.annualreports.com/HostedData/AnnualReports/PDF/ASX_HVN_2016.pdf
[Accessed: On 23 September 2018]
Harvey Norman Holdings Limited, (2017) Annual Report. [Online]. Available at:
http://clients.weblink.com.au/news/pdf2/01784649.pdf. [Accessed: On 23 September 2018]
JB HI-FI Limited, (2016) Annual Report. [Online] Available at:
https://www.csr.com.au/-/media/corporate/files/annual-reports/2016_annual_report_-
for_31_march-2017.pdf [Accessed: On 23 September 2018]
JB HI-FI Limited, (2017). Annual Report. [Online]. Available at:
https://www.jbhifi.com.au/Documents/2017%20Annual%20Report.pdf. [Accessed: On 23
September 2018]
Nowduri, S., (2015) Management information systems and business decision making: review,
analysis, and recommendations. Journal of Management and Marketing Research.
Omotayo, F.O., I2015). Knowledge Management as an important tool in Organisational
Management: A Review of Literature. University of Nebraska – Lincoln.

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Schaltegger, S. and Crutzen, N., (2016) Integrating corporate sustainability assessment,
management accounting, control, and reporting. Journal of Cleaner Production, 136, pp.237-
248.
Welford, R., (2016) Corporate environmental management 1: systems and strategies. Germany:
Routledge.