HI5020 Corporate Accounting: Financial Analysis of ASX Listed Firms

This report analyzes the financial statements of three ASX-listed companies: Domino’s Pizza Enterprise Limited, G8 Education Limited, and Navitas Limited, focusing on equity, liabilities, cash flow statements, other comprehensive income, and corporate income tax. The analysis includes a comparati...Read More

Running head: CORPORATE ACCOUNTING
Corporate accounting
Name of the student
Name of the university
Student ID
Author note

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CORPORATE ACCOUNTING
Executive summary
Aim of the report is to analyse the financial report of ASX listed companies Domino’s
Enterprise Limited, G8 Education Limited and Navitas Limited. The report will focus on the
items on equity and liability and changes taken place for those items during the year from
2015 to 2017. The report will further focus on the cash flow statements of the companies and
other comprehensive income statements. Finally the report will highlight the tax treatment of
the companies reported in the financial statements.

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Table of Contents
Introduction................................................................................................................................3
Equity and liabilities..................................................................................................................3
(i) Equity items.................................................................................................................3
(ii) Liability items..............................................................................................................6
(iii) Comparative analysis of debt and equity position.......................................................8
Cash flow statement...................................................................................................................9
(iv) Listed items for cash flow...........................................................................................9
(v) Comparative analysis.................................................................................................11
(vi) Comparative analysis selected for explaining insights..............................................13
Other comprehensive income statement..................................................................................13
(vii) Reported items under other comprehensive income (OCI).......................................13
(viii) Why items of OCI are not reported in the profit and loss statement.....................14
(ix) Comparative analysis of items reported under OCI..................................................15
(x) Including comprehensive income to analyse the manager’s performance................15
Accounting for corporate income tax.......................................................................................15
(xi) Reported tax expenses for 2017................................................................................15
(xii) Effective rate of tax...................................................................................................15
(xiii) Deferred tax assets or deferred tax liabilities.........................................................16
(xiv) Increase or decrease in deferred tax assets or liabilities reported by the entities. .16

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(xv) Cash tax.....................................................................................................................17
(xvi) Rate of cash tax......................................................................................................17
(xvii) Difference of cash tax rate from the book tax rate................................................18
Conclusion................................................................................................................................18
Reference..................................................................................................................................19
Appendix..................................................................................................................................21

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Introduction
Domino’s Pizza Enterprise Limited is involved in operation of the retail foods and
franchise services. Different segments of the company include New Zealand, Australia, Japan
and Europe. The entity is the franchise for Domino’s Pizza brand all over the world. Various
menu served by the company are prawn and chicken pizza, pizza mogul, traditional pizza,
crusts, pizza chefs, chef’s best and gluten free pizza. Further, the customers are availed with
the facility of ordering online. It operates in 7 nations from more than 2000 stores
(Dominos.com.au 2019).
G8 Education Limited is largest child care centre that is listed under ASX and
operates in Australia. The company aims to be the leading provider of the high quality
educational and developmental service centre for child care. The company was established in
the year 2006 and it brought together the team with dedicated professionals that drive high
quality educational and developmental child care services in Australia (G8 Educatio 2019).
Navitas Limited offers the educational services for the professional and students of
Australia, Asia, United Kingdom, Asia, Canada, United States and globally. The company
operates its business through the University partnership, industry segments and careers. The
university partnership segment provides pre-university, university courses and managed
campus. Industry and career segment provides wide range of programs related to higher
education in different fields of the study including film, audio, animation, design and gaming
(Navitas.com 2019).

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Equity and liabilities
(i) Equity items
Domino’s Pizza Enterprise Limited – various components of equity are as follows –
 Issued capital – issued capital is that part of the authorised share capital that is issued
to the shareholders. In other words, shares allotted to the shareholders or the shares
held by the shareholders are known as issued capital
 Reserves – reserves are that part of the profit that is generated by the entity in normal
business course. Reserves are kept aside for using in future for some specific purpose.
However, the reserves can be segregated into the general reserves too.
 Retained earnings – it is the cumulative net earnings that can be in negative or
positive. If the retained earnings figure is positive it creates lot of rooms for the entity
management or business owners for utilizing surplus amount (Dominos.com.au 2019).
Changes in equity are as follows –
Reserves amount changed as the company used it for payment of dividend to the
shareholders. Retained earnings amount changed due to changes in the amount of net
earnings.
G8 Education Limited – various components of equity are as follows –
 Contributed equity – this is the stock value that is purchased by the shareholders
directly from issuing entity. Component of the contributed equity is the direct listing,

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initial public offerings, secondary offerings and direct public offerings and the issues
of the preferred stock (G8 Education 2019).
 Reserves – Explained above for Domino’s Pizza Enterprise Limited
 Retained earnings – Explained above for Domino’s Pizza Enterprise Limited
Changes in equity are as follows –
Retained earnings amount changed due to changes in the amount of net earnings.
Reserves amount changed as the company used it for payment of dividend to the
shareholders.
Navitas Limited - Various components of equity are as follows –
 Issued capital – Explained above for Domino’s Pizza Enterprise Limited
 Foreign currency translation reserve – when the integral foreign operation of the
reporting entity is categorized as the non-integral foreign operation the exchange
difference generated on translation of the non-monetary assets on the reclassification
date is accumulated in foreign currency translation reserve.
 Cash flow hedge reserve – it is utilised while the entity looking for reducing or
eliminating exposure that generates from the changes in cash flows or the financial
asset or the liability owing to the changes in the specific risk like floating rate of the
debt instrument or risk of interest rate (Navitas.com 2019).
 Retained earnings – Explained above for Domino’s Pizza Enterprise Limited
Changes in equity are as follows –

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Retained earnings amount changed due to changes in the amount of net earnings.
Amount in cash flow hedge reserves is changed due to changes in the rate of interest.
(ii) Liability items
Domino’s Pizza Enterprise Limited – various components of equity are as follows –
 Trade and other payable – it is the amount due for payment to the suppliers for
purchased made or for serviced availed. Trade payables includes short-term payables
those are payable within the period of 1 years and long term payables those are
payable after 1 year period.
 Borrowings – borrowing is raising fund for business operation from the banks and
other financial institution in exchange of interest payment.
 Current tax liability – current tax liability is the tax obligation of the company that is
payable on the current period’s earning that is taxable (Dominos.com.au 2019).
 Provisions – provision is the amount kept aside for meeting future estimated liability
for which the obligation is yet to be certain. The amount kept aside as provision to
meet the uncertain obligation if it becomes certain.
Changes in liability are as follows –

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Changes in the amount of trade and other payables were there due to payment of old
payables and arising of new payables. Borrowings amount has been changed due to raising of
new borrowing and repaying the old borrowing.
G8 Education Limited – various components of liability are as follows –
 Trade and other payable – Explained above for Domino’s Pizza Enterprise Limited
 Borrowings – Explained above for Domino’s Pizza Enterprise Limited
 Provision – Explained above for Domino’s Pizza Enterprise Limited
Changes in liability are as follows –

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Borrowings amount has been changed due to raising of new borrowing and repaying
the old borrowing. Changes in the amount of trade and other payables were there due to
payment of old payables and arising of new payables.
Navitas Limited – various components of equity are as follows –
 Trade and other payable – Explained above for Domino’s Pizza Enterprise Limited
 Current tax payable – Explained above for Domino’s Pizza Enterprise Limited
 Deferred revenue – it is the liability as it refers to the revenue that has not yet been
earned and it represents the services and products owed to the customers. As the
service or products yet to be delivered over time, it is reported as deferred revenue
(Weygandt, Kimmel and Kieso 2015).
 Borrowings – Explained above for Domino’s Pizza Enterprise Limited
 Provision – Explained above for Domino’s Pizza Enterprise Limited
Changes in liability are as follows –
Changes in the amount of trade and other payables were there due to payment of old
payables and arising of new payables. Borrowings amount has been changed due to raising of
new borrowing.

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(iii) Comparative analysis of debt and equity position
Debt –equity amount –
From the above it can be identified that Domino’s Pizza and Navitas Limited is
majorly dependent on debt for its fund whereas G8 Education is majorly dependent on debt
for its fund.
Debt-equity percentage –
Debt equity component of the capital structure is analysed by the analyst to measure
the leverage of the company which in turn indicates the entity’s solvency position. If the
entity is highly dependent on debt finance its leverage position will be high which in turn will
question its long term solvency (Maaloul and Zéghal 2015). Looking into the above table it
can be stated that Domino’s Pizza’s capital structure includes 63.36% debt and 36.64%
equity and Navitas Limited’s capital structure includes 82.72% debt and 17.28% equity.
Hence, these companies are highly leveraged as major component of capital structure is debt.
On the other hand, G8 Education Limited’s capital structure includes 33.08% debt and
66.92% equity. Hence, Novatis is lower leveraged as major component of capital structure is
equity. Hence, it can be stated that the in leverage context, G8 Education Limited is in best
position among all 3 entities.

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Cash flow statement
(iv) Listed items for cash flow
Cash flow statement of all the entities selected above are segregated into 3 segments – cash
generated or used for operation, cash generated or used for investing and cash generated or
used for financing. Cash flow statement as a whole represents the cash position of the entity
that is the amount of cash generated and used during the specific period of time (Marshall
2016). Detail explanation of each segment is as follows –
 Cash generated or used for operation – it represents the net cash flows reported in the
1st section of the cash flow statement. This section focuses on the cash generated or
used from the core activities of the entity and includes adjustments for the non-cash
expenses like depreciation, adjustments for changes in working capital, money
received from customers and money paid to suppliers.
 Cash generated or used for investing - it represents the net cash flows reported in the
2nd section of the cash flow statement. This section focuses on the cash generated or
used for purchasing long term and fixed assets like plant, equipment and property and
the proceeds received from selling of the long term and fixed assets (Watson 2015).
 Cash generated or used for financing – it represents the net cash flows reported in the
2nd section of the cash flow statement. This section focuses on the cash generated or
used for repurchasing of company stocks, payment of the dividends, repayment of the
debt, sale of the stocks and issuance of debts like bonds.
Changes for the cash flows statement items –
Domino’s Pizza Enterprise Limited – cash from operation for the entity has been increased
from $ 128,472 thousand. Increase was due to the amount received from the customers.
Amount used for investing activities reduced from $ 263,968 thousand to $ 88,260 thousand.

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The reduction was due to less payment made towards repayment for intangible assets and
payment for plant, equipment and property. Cash used for financing has been reduced from $
150,541 thousands earnings to $ 52,625 thousands usage. Reduction was due to borrowing
receipts and repayment of borrowing (Melloni, Lai and Stacchezzini 2018).
G8 Education Limited – cash from operation for the entity has been reduced from $ 108,583
thousand to $ 92,011 thousands. Reduction was due to the amount paid to the suppliers.
Amount used for investing activities reduced from $ 107,149 thousand to $ 86,212 thousand.
The reduction was due to less payment made towards payment for plant, equipment and
property.
Navitas Limited - Amount used for investing activities reduced from $ 107,149 thousand to $
86,212 thousand. The reduction was due to less payment made towards payment for plant,
equipment and property. Cash used for financing has been reduced from $ 150,541 thousands
earnings to $ 52,625 thousands usage. Reduction was due to borrowing receipts and
repayment of borrowing (Narotzki 2017).
(v) Comparative analysis
Domino’s Pizza Enterprise Limited –

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2017 ($'000) 2016 ($'000) 2015 ($'000)
-300,000.00
-250,000.00
-200,000.00
-150,000.00
-100,000.00
-50,000.00
-
50,000.00
100,000.00
150,000.00
200,000.00
Net cash used in
operating activiti
es
Net cash (used in
) / provided by in
vesting activities
Net cash provide
d by (used in) fin
ancing activities
Cash from operating activities have increasing trend whereas cash from investing
activities and financing activities have no specific trends over the years from 2015 to 2017.
G8 Education Limited –
2017 ($'000) 2016 ($'000) 2015 ($'000)
-200,000.00
-150,000.00
-100,000.00
-50,000.00
-
50,000.00
100,000.00
150,000.00
Net cash used i
n operating act
ivities
Net cash (used
in) / provided b
y investing acti
vities
Net cash provi
ded by (used in
) financing acti
vities

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Cash used for investing activities have reducing trend whereas cash from operating
activities and financing activities have no specific trends over the years from 2015 to 2017
(Pavlović and Bogdanović 2013).
Navitas Limited –
2017 ($'000) 2016 ($'000) 2015 ($'000)
-150,000.00
-100,000.00
-50,000.00
-
50,000.00
100,000.00
150,000.00
200,000.00
Net cash used in opera
ting activities
Net cash (used in) / pr
ovided by investing a
ctivities
Net cash provided by
(used in) financing act
ivities
Cash used for investing activities, operating activities and financing activities have no
specific trends over the years from 2015 to 2017.
(vi) Comparative analysis selected for explaining insights
Insights gained from the comparative analysis of the cash flow trends of the above
entities it can be stated that all the companies’ generated cash from operating activities and
cash used for the purpose of financing as well as investing activities (Chang et al. 2014).

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Other comprehensive income statement
(vii) Reported items under other comprehensive income (OCI)
Domino’s Pizza Enterprise Limited – following items included under the OCI statement –
 Items that may subsequently be classified to the profit or loss account – it includes
loss or gain from net investment hedge, loss or gain from cash flow hedge, income tax
associated with OCI components and exchange difference from foreign operation
translation.
 Items that may not subsequently be classified to the profit or loss account – it includes
re-measurement of the obligation related to defined benefit and income tax associated
with OCI components (Jordan and Clark 2014).
G8 Education Limited – following items included under the OCI statement –
 Items that may subsequently be classified to the profit or loss account
 Items that may not subsequently be classified to the profit or loss account
 Effective part of changes in the fair value of the cash flow hedges
 Reclassification of income statement for the prior period hedges (Warren and Jones
2018)
Navitas Limited -
 Items that may subsequently be classified to the profit or loss account
 Items that may not subsequently be classified to the profit or loss account
 Net difference from currency translation
 Movement in fair value under hedge instruments

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(viii) Why items of OCI are not reported in the profit and loss statement
Items reported under the OCI are of extraordinary nature and hence, if it is reported
under the income statement it will over-report or under-report the income or loss for the
period reported under the income statement. Items included in OCI includes loss or gain from
net investment hedge, loss or gain from cash flow hedge, income tax associated with OCI
components and exchange difference from foreign operation translation. These items cannot
be reported under income statement and for enhancing the transparency and clarity of
financial report these items are reported under OCI (Khan and Bradbury 2016).
(ix) Comparative analysis of items reported under OCI
For Domino’s Pizza Enterprise Ltd total comprehensive income reduced from $
131,215,000 to $ 80,554,000. Reduction was due to unfavourable exchange difference from
foreign exchange operation. For G8 Education Limited total comprehensive income increased
from $ 75,209,000 to $ 82,479,000. Increase took place due to no amount reported as
reclassification of income statement for prior period hedge (Reid and Myddelton 2017). For
Navitas Limited total comprehensive income reduced from $ 97,641,000 to $ 83,342,000.
Reduction was due to unfavourable exchange difference from foreign exchange operation.
(x) Including comprehensive income to analyse the manager’s performance
Different items included under OCI like loss or gain from net investment hedge, loss
or gain from cash flow hedge, income tax associated with OCI components and exchange
difference from foreign operation translation require management’s ability to plan and
estimate the values of assets and liabilities. As these items play important role in analysing
the ability of the entity regarding future obligation it shall be considered while analysing the
performance of the managers (Sarfaty 2015).

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Accounting for corporate income tax
(xi) Reported tax expenses for 2017
 Domino’s Pizza Enterprise Limited - $ 44,876,000
 G8 Education Limited - $ 37,200,000
 Navitas Limited - $ 50,072,000
(xii) Effective rate of tax
Effective tax rate is calculated through dividing the income tax expense by the
amount of earning before tax (Sethi 2016)
 Domino’s Pizza Enterprise Limited - $ 44,876,000 / $ 150,680,000 = 29.78%
 G8 Education Limited - $ 37,200,000 / $ 117,781,000 = 31.58%
 Navitas Limited - $ 50,072,000 / $ 130,941,000 = 38.24%
Hence, the highest effective tax rate is for Navitas Limited at 38.42%
(xiii) Deferred tax assets or deferred tax liabilities
 Domino’s Pizza Enterprise Limited – amount of deferred tax assets reduced from
$ 14,754,000 to Nil and deferred tax liabilities reduced from $ 49,741,000 to $
48,115,000 over the years from 2016 to 2017.
 G8 Education Limited - amount of deferred tax assets increased from $
15,415,000 to $ 16,220,000 and it did not reported any deferred tax liabilities
 Navitas Limited - amount of deferred tax assets reduced from $ 47,549,000 to
32,616,000 and it did not report any deferred tax liabilities.
DTL or DTA are reported by the entity for recognising the timing differences
generated due to accrued tax ad tax paid. DTA or DTL is reported by the entity if there is

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certainty that the entity will have future profit to adjust the temporary differences of the
company (Laux 2013).
(xiv) Increase or decrease in deferred tax assets or liabilities reported by the
entities
Domino’s Pizza Enterprise Limited – deferred tax assets reduced from $ 14,754,000 to Nil
and deferred tax liabilities reduced from $ 49,741,000 to $ 48,115,000 over the years from
2016 to 2017.
G8 Education Limited - amount of deferred tax assets increased from $ 15,415,000 to $
16,220,000 over the years from 2016 to 2017 and it did not reported any deferred tax
liabilities
Navitas Limited - amount of deferred tax assets reduced from $ 47,549,000 to 32,616,000
over the years from 2016 to 2017 and it did not report any deferred tax liabilities.
(xv) Cash tax
Cash tax is computed through adjusting the amount of deferred tax liabilities and
deferred tax assets with the book tax that is reported as tax expenses in the statement of profit
and loss (Titman, Keown and Martin 2017).
Cash tax is highest for Navitas Limited and lowest for G8 Education Limited.

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(xvi) Rate of cash tax
Cash tax rated is calculated through dividing the adjusted cash tax by the earning
before tax, interest and amortisation.
Cash tax rate is highest for Navitas Limited and lowest for G8 Education Limited.
(xvii) Difference of cash tax rate from the book tax rate
Book tax rate is the rate that is reported in the profit and loss statement of the
company. On the contrary, the cash tax rate is the rate at which the companies pay tax to the
federal government. Hence, there is a difference in cash tax rate and book tax rate (Waddock
2017).
Conclusion
Above discussion regarding the 3 entities leads to the conclusion that the companies
presented the items of equities, cash flows, liabilities, taxes and other comprehensive income
items clearly in their financial statements. Liabilities include items like provisions,
borrowings and trade payables. Equities includes items like share capital, reserves and
retained earnings. Cash flow of the companies has 3 segments – cash from operation, cash
from investments and cash from financing

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Reference
Chang, X., Dasgupta, S., Wong, G., and Yao, J. 2014. Cash-flow sensitivities and the
allocation of internal cash flow. The Review of Financial Studies, 27(12), 3628-3657.
Dominos.com.au., 2019. [online] Available at:
https://www.dominos.com.au/media/91141/2017.pdf [Accessed 31 Jan. 2019].
G8 Education., 2019. Home - G8 Education. [online] Available at:
https://g8education.edu.au/ [Accessed 31 Jan. 2019].
Jordan, C. E., and Clark, S. J. 2014. Reporting preferences under the comprehensive income
standard: Examining its use in practice. The CPA Journal, 84(5), 34.
Khan, S., and Bradbury, M. E. 2016. The volatility of comprehensive income and its
association with market risk. Accounting and Finance, 56(3), 727-748.
Laux, R. C. 2013. The association between deferred tax assets and liabilities and future tax
payments. The Accounting Review, 88(4), 1357-1383.
Maaloul, A. and Zéghal, D., 2015. Financial statement informativeness and intellectual
capital disclosure: An empirical analysis. Journal of Financial Reporting and
Accounting, 13(1), pp.66-90.
Marshall, S., 2016. Fair trade, corporate accountability and beyond: Experiments in
globalizing justice. Routledge.
Melloni, G., Lai, A. and Stacchezzini, R., 2018. Integrated reporting and narrative
accountability: The role of preparers. Accounting, Auditing and Accountability Journal, p.1.

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Narotzki, D., 2017. Corporate Social Responsibility and Taxation: A Chance to Develop the
Theory.
Navitas.com., 2019. Navitas - leading global education provider . [online] Available at:
https://www.navitas.com/ [Accessed 31 Jan. 2019].
Newcrest Mining Limited, 2019 . [online] http://www.adenergy.com.au/, Newcrest.com.au.
Available at: http://www.newcrest.com.au/ [Accessed 29 Jan. 2019].
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29 Jan. 2019].
Pavlović, M., and Bogdanović, J. 2013. Cash flow statement. Škola biznisa, (3-4), 129-147.
Reid, W., and Myddelton, D. R. 2017. The meaning of company accounts. Routledge.
Sarfaty, G.A., 2015. Measuring corporate accountability through global indicators. The Quiet
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Sethi, S., 2016. Globalization and self-regulation: The crucial role that corporate codes of
conduct play in global business. Springer.
Titman, S., Keown, A.J. and Martin, J.D., 2017. Financial management: Principles and
applications. Pearson.
Waddock, S., 2017. The difference makers: How social and institutional entrepreneurs
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Watson, L., 2015. Corporate social responsibility research in accounting. Journal of
Accounting Literature, 34, pp.1-16.

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Weygandt, J.J., Kimmel, P.D. and Kieso, D.E., 2015. Financial and managerial accounting.
John Wiley and Sons.
Appendix
Domino’s Pizza Enterprise Limited

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G8 Education Limited

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Navitas Limited

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