Taxation and Accounting Laws in Charter Hall Retail REIT

Explore the impact of taxation laws on financial reporting in Charter Hall Retail REIT. Understand the treatment of equity, income tax, deferred tax assets, and tax payable. Analyze the strategies and policies formulated by the company.

HI5020 Corporate Accounting
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Table of Contents
Introduction......................................................................................................................................3
Question 1....................................................................................................................................4
Question 2....................................................................................................................................5
Question 3....................................................................................................................................6
Question 4....................................................................................................................................7
Question 5....................................................................................................................................8
Question 6....................................................................................................................................9
Question 7..................................................................................................................................10
Conclusion.....................................................................................................................................11
References......................................................................................................................................12
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Introduction
In order to ensure that business gets successful, it is required that proper decisions shall be made.
For this purpose, it is very important that all the accounting shall be made in an appropriate
manner so that it can be used by all and they will be able to use this for various purposes. In the
given report one such aspect in relation to taxation will be discussed. All the factors which are to
be taken into consideration which makes the entries in relation to tax will be explained below. In
this, the reasons for various changes which take place and the manner in which they will be
required to deal are to be taken into account.
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Question 1
Equity is one of the basic components of the statement of financial position. In this, all those
amounts which are owned by the company are entered. The total amount which is recorded in
this is classified in various categories.
Contributed equity: In every company, there is some capital which is to be issued by it to its
investor's indirect manner (Akgün, 2016). This is made in form of shares which are provided and
will be purchased by parties. The entire amount which is received with the help of this is
included in this category. The total amount shown in current books is 2276.3. The change which
is noted in this value is due to the issues which are made for DRP and there are some units which
have been canceled.
Accumulated losses: In a company, there is some profit or loss which is made by it in every
financial year. In this, if profits are made then some of its portions are kept separately which is
used by business afterward and that is known as retained earnings. If there is a loss in place of
profit then that will be accumulated for various years and will be known as accumulated losses.
598.4 is the amount which is shown on the balance sheet.
Reserves: This is the amount which is kept by the company to be taken into use for various
projects which are to be completed by the company. That will be specifically used for that
purpose only. In the given case the amount which is reported in the context of this is 3.4 (Charter
Hall Retail REIT, 2017). The amount is changing because of the change in fair value that is
present for cash flow hedge.
By accumulation of all the amounts which are mentioned above, the amount which is to be
shown as equity will be determined.
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Question 2
In the company, there is an income which is earned by it in any particular year. That amount will
be its profit and on that laws will be applicable according to which it will have to pay the tax.
The amount which is required to be paid, the manner in which it shall be paid and the rate at
which it will be determined is fixed by the authorities made in this respect (Gobetti & Orair,
2017). For this, the taxable income is required to be calculated and then that will be used by the
company. In the given case there is no amount which has been recognized as current tax expense.
This is because of the reason that company is not operating in profitable position or the losses of
past years are very high which are to be recovered at first stage. It has been noted that there are
accumulated losses amounting to 736.1 in the year 2016. So according to the laws company is
required to first consider all the losses which are present in the financial statements. The profit of
current year which has been earned is used by Charter retail for the settlement of this amount and
as that covers the whole of the profit so there is no condition for the company to pay any kind of
taxation to the government.
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Question 3
The amount which is required to be reported by the company in the income statement is the
expense which is related to the current and year and will be calculated on the income of the
present period. For that tax rate is specified and that will be used. This is represented as the
income tax expense (Cascino, et. al., 2014). There are two laws which are required to be
followed by all the organizations and they both have different rules and regulations. The
company calculated its income in accordance with the accounting standards and rules which are
specified in them. This will be known as accounting income on which is a tax is calculated as per
policies of the company. But for the purpose of taxation it is required that taxation laws shall be
followed and in that different aspects are there which are to be taken into consideration. There
are some differences which are to be adjusted and this makes both the amounts of taxes variant.
All of them have some of the timing differences and they are the reason for deviation in amounts
(Charter Hall Retail REIT, 2017). In the Charter retail there is no income tax expense which is
identified in the income statement and so the point that it will be different from that of the
accounting tax does not arise.
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Question 4
As the process involved in accounting and taxation laws are different so there is some deviation
which arises in the amount of tax which is calculated by using both of them. The amount which
is paid as per the accounting rules is sometimes in excess of what is required to be paid as per the
taxation rules (Jaya, 2016). This is because some of the expenses are there, the benefit of which
will be received in next years. So as per tax laws, it is required that they are to be considered in
coming period. So to make the balance between the amounts which are identified by both, there
is the need to recognize the amount as deferred tax asset. These are those values on which tax
has been paid in advance and will not have to be met by the company in future. By the help of
this, all of the temporary difference which is present in accounts will be eliminated (Charter Hall
Retail REIT, 2017). In the given case there is no such asset or liability which has been
recognized by the Charter retail. There is an amount which is recognized by the company in this
regard and so no entry has been made for this.
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Question 5
In business, the tax which is calculated for the current year is to be treated as the current tax but
in addition to this, there is some amount which is to be treated as tax payable. This is that amount
which is required to be paid now and will be met by the company in the coming times. There is
no such amount recognized by the company in the present scenario. The difference which is
identified by the company in the amount tax that is calculated by taxation and accounting rules is
to be identified under this (Charter Hall Retail REIT, 2017). In the current company, this
situation is not relevant as this arises when there is some tax liability which is to be considered.
But here there is no tax expense and so is the case with tax payable. The reason for which it is
happening is the balance of accumulated losses which are present in the Charter retail and due to
that total income which is earned in the current year is adjusted with that amount. This leads to
the situation in which there is no liability on which tax shall be charged by the company. The
reason for the difference which arises in both the amounts is temporary or timing difference
which is there in tax and accounting treatments.
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Question 6
In respect of taxation, there are various recordings which are to be made. It is to be recognized
firstly in the income statement and also if some amount is left then that is considered as tax
payable. Out of the total expenses, some of them are paid by the company in form of cash. All of
those which are met like this will be reported in the cash flow statements (Maag, 2015). This is
required to be done as cash flow statement is one of the financial statements which are required
to be prepared by any business in which only the expenses and incomes which are in cash form
shall be recorded. In business, it is not always necessary that all the tax expenses will be paid in
cash and there will be some other forms also which will be used for this (Wang, et. al., 2016).
Due to this reason only there is some amount of difference which exists in the aggregate of an
expense that is recognized and the sum that is entered as the tax paid in the cash statements.
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Question 7
In every company, there are some aspects which are different from any other organizations. The
treatment which is provided by the company in relation to tax will deviate from one to other and
this is due to the policies and strategies which are formulated by the company which is used in
addition to the rules and laws which are set by the authorities. They are made in accordance with
the set standards and principles and are such which will prove to be beneficial for the company.
The interesting fact which has been noted in the current case of Charter retail is that there is no
tax liability which has been met by the company (Samuel & De Dieu, 2014). No entries are made
in respect of any of the aspect of tax. This is a rare situation that no obligation is present in this
respect. The reason for this is explained in the report above. In addition to this there is another
policy which has been formulated by the company and according to that company will not be
liable to tax payments in a situation that all of the income which is earned by the company has
been distributed to the unitholders. This kind of distribution can be made by it in any form which
means that it may be in cash or can be provided by way of reinvestment (Charter Hall Retail
REIT, 2017). It has been identified that the entire amount has not been allocated and only a
portion of it has been given to all the investors. So this is not the reason due to which taxes have
not been reported by the company. All of these are some of the aspects which have been noted
and are found to be different.
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Conclusion
From the report which is presented above, it can be noted that there are various components
which are to be noted in respect of taxation. In this, all the expenses which are to be recognized
in the income statements are required to be calculated. In this company, it has been identified
that there is no liability which is recognized in relation to tax. This was due to the losses which
have been made by the company in past few years. All of the policies and strategies which are
formulated by the company in this regard have also been described. The manner in which
treatment shall be provided to all of the amounts in this has been discussed. All the other
elements and circumstances of taxation and accounting laws have also been taken into
consideration.
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References
 Akgün, A. İ. (2016). Quality Of The Financial Reporting Within The Ifrs: Research On
Determining The Attitudes And Evaluations Of Financial Information Users. Muhasebe Ve
Finansman Dergisi, (69).
 Cascino, S., Clatworthy, M., García Osma, B., Gassen, J., Imam, S., & Jeanjean, T. (2014). Who
Uses Financial Reports And For What Purpose? Evidence From Capital
Providers. Accounting In Europe, 11(2), 185-209.
 Charter Hall Retail REIT, (2017). Annual Report 2017. [Online] Charter Hall Retail REIT, 35-
55. Available At: Https://Www.Charterhall.Com.Au/News/2017/Cqr-Annual-Report-2017/
[Accessed: 23 January 2017]
 Gobetti, S. W., & Orair, R. O. (2017). Taxation And Distribution Of Income In Brazil: New
Evidence From Personal Income Tax Data. Revista De Economia Política, 37(2), 267-286.
 Jaya, T. E. (2016). Earnings, Leverage, And Deferred Tax On Tax Penalties And Fines (Case
Study In Indonesia).
 Maag, E. (2015). Earned Income Tax Credit In The United States. Journal Of Social Security
Law, 22(1), 20-30.
 Samuel, M., & De Dieu, R. J. (2014). The Impact Of Taxpayers' Financial Statements Audit On
Tax Revenue Growth. International Journal Of Business And Economic Development
(Ijbed), 2(2).
 Wang, Y., Butterfield, S., & Campbell, M. (2016). Deferred Tax Items As Earnings Management
Indicators. International Management Review, 12(2), 37.
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