Detailed Tax Analysis Report: Aveo Group Stapled Financial Performance

This report provides a detailed tax analysis of Aveo Group Stapled's financial performance, examining various aspects such as equity capital, tax expenses, and deferred tax liabilities. The analysis delves into the differences between accounting and taxation income, exploring the reasons behind tax discrepancies and the treatment of deferred tax payments. The report also investigates the company's current tax assets, income tax payable, and the relationship between income tax expenses and payments shown in the cash flow statement. Furthermore, it highlights interesting, surprising, and confusing aspects of the tax recording process, offering insights into the application of tax provisions and amendments. The analysis concludes with a discussion of the challenges in recording tax amounts and insights gained from examining the firm's tax expense in its accounts, referencing relevant sources for supporting evidence.

RUNNING HEAD: Tax analysis of Aveo Group Stapled
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Topic- Tax analysis of Aveo Group Stapled
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Tax analysis of Aveo Group Stapled
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Table of Contents
Answer to question-1.............................................................................................................................3
Answer to question-2.............................................................................................................................3
Answer to question no-3........................................................................................................................4
Answer to question no-4........................................................................................................................5
Answer to question no-5........................................................................................................................6
Answer to question no-6........................................................................................................................6
Answer to question no-7........................................................................................................................7
References.............................................................................................................................................9
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Tax analysis of Aveo Group Stapled
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Answer to question-1
The annual report of Aveo Group Stapled has been analysed and it is found that company has
increased its equity capital proportion. Equity capital of company is accompanied by the
contributed equity, retained earnings and distributable profit.
Discussion of its equity capital
Company has reduced its reserve to AUD $ -33.4 which is not good indicators for the
business. However, company has plugged back its reserve in its business (Aveo Group
Stapled, 2017).
Equity (Amount in million) 2017 2016
Contributed equity 1262.6 1178
Reserve (33.4) 122.3
Retained earning 121.5 (144.4)
Total equity 1350 1156
Answer to question-2
The total tax expenses of Aveo Group Stapled is AUD $ 54.6 million which is 23% higher as
compared to last year tax payment. This tax payment has increased due to increase in the
overall profit of company.

Tax analysis of Aveo Group Stapled
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Particular(AUD $ in million) 2017 2016
Income tax expenses 54.6 44.9
However, Aveo Group Stapled has increased its tax deductible expenses by increasing the
debt funding and interest payment on it.
Answer to question no-3
The annual report of Aveo Group Stapled has reflected that tax expenses shown in the
income statement is not same as the amount computed based on the tax rate times on its
income. Aveo Group Stapled has paid 54.6 AUD $ million tax in 2017 which consists of
entire tax payment including provision for tax implication. The tax rate times on income of
Aveo Group Stapled is computed by using accounting income *30% tax rate i.e. 163.1 AUD $
*30%= 48.9
Reason for tax differences between tax rate times on income of Aveo Group Stapled and tax
shown in the income statement
 The tax amount shown in the profit and loss account is computed based on the
taxation rules and regulation as per the AASB-122. On the other hand, taxation rate is
computed by using accounting income *30% tax rate i.e. AUD $
 The main reason for the differences between tax rate times on income of Aveo Group
Stapled and tax shown in the income statement is related to deductible expenses and
other payment which could be minus from the profit and loss account as per the
taxation rules and regulation as per the AASB-122. Recording of depreciation

Tax analysis of Aveo Group Stapled
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amount, interest payment and other expenses are recorded differently as per the
accounting and income tax rules and regulations (Abdallah, 2016).
Answer to question no-4
The annual report of Aveo Group Stapled has shown that deferred tax payment of company is
AUD $ 54.5 which is 100% higher in comparison with the last year. This deferred tax
amount should be carried forward and deducted to the limit that is reasonably sufficient for
its future taxable income against which this deferred tax assets would be realised (Aveo
Group Stapled, 2017).
It is considered that accounting and taxation income are not same which resulted to deferred
tax assets and liabilities. If company finds that due to difference between accounting4 and
taxation rules, it needs to pay higher tax then the excess tax payment would be recorded in
the deferred tax assets. On the other hand, if it the tax payment is lower then the remaining
amount would be shown in the deferred tax liabilities of the company.
Aveo Group Stapled has deferred tax liabilities which reflect that company might pay more
tax to government.
Particular (AUD $ million) 2017 2016
Deferred tax liabilities 54.5 27

Tax analysis of Aveo Group Stapled
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Answer to question no-5
Current tax assets and other income tax payable by company
The current tax payable of Aveo Group Stapled is AUD $ 5.8 in 2017. The income tax
payable would be shown on the current liabilities side of company as this amount would be
paid in the near future (Gray, Owen and Adams, 2016).
Particular(AUD $ in million) 2017 2016
Income tax payable 5.8 -
Why income tax expenses is not same as the income tax payable
The income tax expenses shown in the profit and loss account is the amount charged on the
profit of the current year. Income tax payable is the accumulation of the outstanding tax
which company will pay in future.
Answer to question no-6
Is the income tax expense shown in the income statement same as the income tax paid shown
in the cash flow statement? If not
The income tax payment in its cash flow statement is zero i.e. company has not paid tax in
this current year. On the other hand, tax expenses shown in its income statement is AUD $
54.6. Cash flow statement shows the amount of cash inflow and outflow in the current year.
The cash flow of income tax shown in the CFS of the company includes all the tax payment

Tax analysis of Aveo Group Stapled
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irrespective of the fact, whether it is related to present, past or future period. On the other
hand, income tax shown in the income statement is related to tax charged on the current year.
Therefore, it could be inferred that due to difference in tax recording in both statement, there
is difference in tax payment (Hoyle, Schaefer and Doupnik, 2015).
Answer to question no-7
Treatment of tax
Interesting thing about the recorded its entire tax amount
Tax recording differ in the financial statement due to the differences between accounting and
income tax provision.
Surprising thing about the recorded its entire tax amount
Company cannot have deferred tax assets and deferred tax liabilities in its books of account at
the same time.
Confusing thing in recording of income tax amount
The main confusing thing is related to implication of the tax provision and amendment which
make taxation rules and regulations cumbersome for the stakeholders.
Difficulty to record the entire tax amount
Due to change in taxation rules and uncertainty of the tax provisions, company have to block
high amount in its deferred tax assets and liabilities.
Insight companies account for income tax as a result of examining your firm’s tax
expense in its accounts

Tax analysis of Aveo Group Stapled
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The main insight which I have gained is related to recording of the tax deductible
expenses which differ as per the accounting rules and regulation with the comparison of
income tax rules and AASB-122 (Lubbe, Modack and Watson, 2014).

Tax analysis of Aveo Group Stapled
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References
Abdallah, W. (2016). Accounting, Finance, and Taxation in the Gulf Countries. Springer.
Aveo Group Stapled, 2017, annual report, Retrieved on 29th November, 2017 from<
https://www.aveo.com.au/wp-content/uploads/2017/09/AVEO-2017-Annual-Report.pdf>
Gray, R., Owen, D. and Adams, C., 2016. Accounting & accountability: changes and
challenges in corporate social and environmental reporting. Prentice Hall.
Hoyle, J.B., Schaefer, T. and Doupnik, T., 2015. Advanced accounting. McGraw Hill.
Lubbe, I., Modack, G. and Watson, A., 2014. Financial Accounting GAAP Principles. OUP
Catalogue.