HI5020 - Corporate Accounting: Comparative Analysis of BCI & Boral

This report provides a comprehensive analysis of BCI Limited and Boral Limited, two public limited companies listed on the Australian Securities Exchange (ASX) within the same industry. The analysis is based on their latest financial statements, focusing on owners' equity, cash flow statements, other comprehensive income, and corporate income tax. Key items reported in the financial statements are examined, including contributed equity, reserves, accumulated losses, issued capital, retained earnings, and various cash flow activities. The report compares the debt and equity positions of both companies, analyzes their cash flow generation from operations, investments, and financing activities, and evaluates their tax obligations. The study concludes that BCI Limited demonstrates better cash flow generation, while Boral Limited exhibits greater effectiveness in settling tax obligations.

Running head: CORPORATE ACCOUNTING 1
Corporate Accounting
Author’s Name
Institutional Affiliation
Date

CORPORATE ACCOUNTING 2
Executive Summary
The paper presented analysis of BCI Limited and Boral Limited. This is based on their latest
financial statements. From the analysis, BCI Limited is found to be in a better position in
terms of cash flow generations. In addition, based on the analysis, it can be stated that Boral
Limited was more effective in settling its tax obligations in comparison to BCI Limited.
Additionally, it can be concluded that BCI Limited was in a better position to generate high
cash flow both from its operations, investment as well as from its financing operations in
comparison to Boral Limited. This is based on the fact that despite the decreasing trend in
BCI Limited cash from operations, the company had relatively high cash inflow from these
activities unlike its counterpart.

CORPORATE ACCOUNTING 3
Table of Contents
Executive Summary...............................................................................................................................2
Introduction...........................................................................................................................................3
OWNERS EQUITY..............................................................................................................................4
Item Reported on BCI and Boral Limited Latest Financial Statements.............................................4
Debt and Equity Position of Both BCI Limited and Boral Limited...................................................5
CASH FLOWS STATEMENT.............................................................................................................6
Item Reported in the Cash Flows Statement of BCI Limited and Boral Limited...............................6
Analysis of BCI Limited and Boral Limited Based on the Three Categories of the Cash Flows.....10
Comparative Analysis of BCI Limited and Boral Limited...............................................................10
OTHER COMPREHENSIVE INCOME STATEMENT.....................................................................10
Items Reported in BCI Limited and Boral Limited Statements of the Other Comprehensive Income
.........................................................................................................................................................10
Why the items are not reported in the Profit/Loss Statements.........................................................11
How inclusion of the items could affect profit attributable to shareholders.....................................12
Whether the other comprehensive income ought to be included in evaluation of managers’
performance.....................................................................................................................................12
ACCOUNTING FOR CROPORATE INCOME TAX........................................................................12
The Tax Expenses in BCI and Boral Limited Financial Statements................................................12
Effective Tax Rate for the Two Companies.....................................................................................12
Comments on the Deferred Tax Assets/Liabilities...........................................................................13
Whether There Was an Increase or Decrease in Deferred Tax Assets or Liabilities........................13
Cash Tax Amount for Both Companies...........................................................................................13
Cash Tax Rate for Both Companies.................................................................................................14
The reason behind cash tax rate being different from book tax rate.................................................14
Conclusion...........................................................................................................................................14
References...........................................................................................................................................15
Introduction

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BCI formerly the BC Iron Ltd is the iron ore development and mining firm listed in
ASX. Its principal development activities comprise of exploration and development of the
mineral projects, mostly on the iron ore deposits within Pilbara, west of Australia (BCI
Limited 2017). It key strategies are maximizing value from the iron ore, creating presence in
the base and gold metals as well as becoming a key influential player in the country both in
industrial minerals and agricultural sector. Iron is the firm’s chief focus, with chief assets of
Buckland and Iron Valley offering complementary mix of the current growth and earnings
potential. On the other hand, Boral Limited is the international construction and building
material firm whose headquarter is in Sydney (Investsmart 2018). Its core operations are
construction materials and cement within Australia, bricks and roof tiles within US and
Australia as well as plasterboard within Asia and Australia.
OWNERS EQUITY
Item Reported on BCI and Boral Limited Latest Financial Statements
Based on BCI Ltd statement of the owner’s equity there were a number of items
reported. These items include contributed equity, reserves, and accumulated losses. The
accumulated losses for the company comprised of the balance at the 30th June 2016, which
was 165,005 million which was an increase from 79,955 in 2015. Another items included in
this section was the profit generated within the year of around 5,669 million which yielded to
comprehensive income of around 5,669 million (BCI Limited 2017). On overall, accumulated
losses for the company in 2017 was 165,005 million a decrease from 170,674 million
reported in 2017. Further, contributed equity items comprised of share issued of around
21,188 million and performance rights converted of around 80 million. On overall, the
contributed equity for the company was 266,735 million in 2017 which was an increase from
the amount reported in the previous year of around 242,467 million. It reserves comprised of
performance rights converted of around -80 million, and share based payments of around 623

CORPORATE ACCOUNTING 5
million. Generally, BCI total reserves was 5,426 in 2017 an increase from 4,883 million
reported in 2016. The combination of the three items that is; reserves, accumulated losses and
contributed equity yield to a total equity of 107,156 million in 2017 a significant increase
from 76,676 million reported by 2016 (BCI Limited 2017).
The increase in reserve in 2017 would have been attributable to significant increase in
the company share based payments from 53 million in 2016 to around 623 million reported
by 2017. Decrease in the company accumulated losses on the other hand was attributable to
introduction of profits for year ended 2017 which was not reported previously. Further,
contributed equity increased over the past year due to introduction of share issued of around
24,188 million as well as performance right converted of around 80 million.
On the other hand, based on Boral Limited owner’s equity statement, it is evident that
several items were reported. These items were grouped into issued capital, retained earnings
and reserves. Issued capital for Boral Limited comprised of share issuance under the capital
raising of 2,018.9 million. On the other hand, items reported under retained profit comprised
of dividends paid of 226.2 million and transferred of the other reserves to the retained
earnings of 12.7 million. Reserves on the other hand comprised of share acquisition of 38.3
million, share-based payments of 11.3 million, acquisition of the non-controlling interest by
the associates of 5.8 million as well as transfer of the other reserves to the retained earnings
of 12.7 million.
Basically, issued capital for the company increased from 2,246.2 million reported in
2016 to 4,265.1 million reported in 2017. Further, Boral Limited reserves decreased from 162
million in 2016 to 19.3 million in 2017. The decrease was attributable to increase in total
comprehensive income as well as increase in share acquisition. On the other hand, Boral
Limited retained earnings increased from 296.9 million in 2016 to 1,156.1 million reported in

CORPORATE ACCOUNTING 6
2017. The increase was attributable to increased total comprehensive income as well as net
profit.
Debt and Equity Position of Both BCI Limited and Boral Limited
Based on the above highlight of some of the items reported on equity for the two
companies, it is evident that Boral Limited equity increased over the past two years from
3,506.3 million in 2016 to around 5,440.5 million in 2017. The increase was attributable to
the significant increase in its issued capital which is found to have increased with around
40% from the previous year (Boral Limited 2017). On the other hand, BCI Limited equity
increased from 76,676 million to 107, 156 million in 2017. This is a clear sign that for the
past two years BCI Limited had relatively higher equity amount compared to Boral Limited.
Besides, the increase in BCI Limited equity is attributable to increase in the company
contributed equity amount (BCI Limited 2017). Basically, based on these facts, it is evident
that BCI Limited was at better stands in terms of equity compared to Boral Limited. This is
due to the fact that BCI Limited equity was relatively high in the past two years compared to
Boral Limited.
Further, BCI Limited total debts over the last two years experienced significant
decrease. In essence, BCI Limited total debt decreased from 33,076 million in the year 2017
to around 17,332 million in 2017. The decrease is a good sign that BCI Limited is reducing
what is well known financial risk through decreased debt burden. On the other hand, Boral
Limited total debts increased over the past two years from 2,294.2 million to 3,873.1 million
in 2017. The increase is a sign that the company is increasing its financial risk through
increased debt burden. Basically, over the last two years, it can be stated that BCI Limited
had relatively higher total debts compared to the Boral Limited. Nonetheless, despite BCI
Limited having relatively high debts in comparison to Boral Limited, the decreasing trend in

CORPORATE ACCOUNTING 7
its total debt is a clear sign that the company is financially leverage or has relatively
decreased risk compared to its counterpart.
CASH FLOWS STATEMENT
Item Reported in the Cash Flows Statement of BCI Limited and Boral Limited
Based on BCI Limited cash flow statement, it is clear that there were a number of
items which were reported within the three categories of its cash flow. In essence, it is
evident that the items reported in BCI Limited were categorized into three; that is, the net
cash from operations section, net cash inflow from investments and the net cash inflow from
the financing actions. The main items reported in the net cash from operation section include
receipts from the customers of around 66,588. Receipt from the customers for the company
decreased from 159,173 million in 2016 to around 66,588 million. Other item reported in this
section was payments to the employees and suppliers of 55,320 million. The payments to the
employees and suppliers decreased with a significant margin from 204,537 million in 2016 to
55,320 million by 2017 (BCI Limited 2017). Management fees received is the other item
reported in the net cash from the operations section. BCI Limited management fees received
decreased from 530 million in 2016 to around 15 million in 2017. Finally, there was interest
received of 577 million. Interest received for BCI Limited decreased from 603 million in
2016 to approximately 577 million in 2017. On overall, BCI Limited cash inflow from the
operations decreased over the last two years from 44,231 million in 2016 to 11,860 million in
2017.
On the other hand, items reported it cash inflow from investment section comprised of
the payment for the mine property and the development expense of 122. Payment for the
mine property and the development expense decreased from 7,982 million in 2016 to 122
million in the year 2017. The second item reported in this section was payment for PPE.
Payment for the plant and equipment for BCI Limited experienced a rapid decrease from 93

CORPORATE ACCOUNTING 8
million reported in 2016 to 1,598 million which was reported in 2017. Another item reported
in this section is payment for the exploration projects of 500. The amount for exploration
projects increased from the previous year (BCI Limited 2017). On overall, BCI Limited net
cash used for investment activities decreased from 8,075 million in 2016 to 2,220 million in
2017.
Further, items reported in the financing activities section comprised of proceeds from
the issuance of the shares of around 24,189 million, repayment of borrowings of 1,966
million and repayment of the royalty rebate of 5,151 million. repayment of borrowings for
BCI Limited decreased from 4,850 million in 2016 to 1,966 million by 2017 while its
repayment of the royalty rebates increased from 2,575 million in 2016 to around 5,151
million in 2017 (BCI Limited 2017). On overall, BCI Limited net cash inflows from the
financing action increased from negative 7,425 million in 2016 to roughly 17,072 million in
2017.
On the other hand, based on Boral Limited cash flow statement, it can be noted that
there are a number of items reported which are categorized into three; that is, cash from the
operations, cash used in the investment activities as well as net cash from the financing
events. In the cash flow from the operations section, a number of items are reported. The first
item reported in this section is receipt from the customers of 4,583.3 million. Boral Limited
receipts from the customers are found to have decreased with a slight margin from 4,635.7
million in 2016 to 4,583.3 million in 2017 (Boral Limited 2017). The second item reported in
the section was payments to the employees and suppliers of 4,049.2 million. Boral Limited
payments to employees and suppliers decreased slightly from 4,069.5 million in 2016 to
4,049.2 million by 2017. Dividends received is the other important item reported in the
section. Dividends received for Boral Limited increased over the past two years from million
75.9 in 2016 to around 87.9 million in 2017. The other item reported in this section was

CORPORATE ACCOUNTING 9
interest received of 24.4 million. Interest received increased from 8.5 million in 2016 to
approximately 24.4 million by 2017. Further, there was borrowing costs paid of 74.4 million.
In essence, Boral Limited borrowing costs paid increased from 69.2 million in 2016 to 74.4
million in 2017. Another crucial item in the section was income tax paid of 41.8 million.
Boral Limited income tax paid decreased over the past two years from 69.4 million to 41.8
million in 2017. Finally, restructure, integration and acquisition cost paid was the other item
reported in the section. Restructure, integration and acquisition cost paid by Boral Limited
increased from 34.5 million in the year 2016 to around 116.9 million by 2017. In general,
Boral Limited cash offered by operations decreased in the last two years from 477.5 million
in the year 2016 to 413.3 million by 2017.
In the investment activities section, a number of items were also reported. First,
purchase of the PPE was reported in this section. Boral Limited purchase of the PPE
increased from 320.3 million in 2015 to around 336.4 million by 2017. Secondly, there was
purchase of the intangibles of around 3.7 million. Purchases of the intangibles for this
company increased from 3.5 million in the year 2016 to around 3.7 million in the year end
30th June 2017. Thirdly there was purchase of the controlled businesses and entities of
3,636.5 million. the company amount for purchase of the controlled business and entities
increased from zero value to 3,636.5 million by 2017. Fourth there was cash acquired linking
to the acquisition of the controlled entities of 74.8 million. The company cash acquired linked
with acquisition of the controlled entities increased over the past years from zero to 74.8
million in 2017. Another item reported in the section was repayments of the loans by the
associates of around 8.8 million (Boral Limited 2017). Boral Limited repayments of the loans
by the associates for the past three years remained constant. Another important item reported
in the investing activities section was proceeds on the disposal of the non-current assets of
around 39.2 million. Proceeds on the disposal of the non-current assets decreased from 55.5

CORPORATE ACCOUNTING 10
million reported in 2016 to 39.2 million reported in 2017. Finally, there were the proceeds on
the disposal of the controlled associates and entities of around 122.5 million. In general,
Boral Limited cash utilized in the investment increased from 259.5 million in the year 2016
to 3,731.3 million in the year 2017.
In the financing activities sections a number of items are also reported. The first item
reported in this section was capital raising the net of the transaction costs of around 2,018.9.
The capital raising the net of the transaction costs increased from zero to 2,018.9 million in
2017. The increase was attributable to introduction of the capital raising net of the transaction
costs. Secondly, there was on-market share purchase-back. The on-market share the buy-back
for Boral Limited decreased from 115.4 million in 2016 to zero. The third item reported in
this section was the dividends paid. Boral Limited dividends paid increased over the last two
years from 154.2 million in 2016 to 226.2 million in 2017. Another item reported in the
section were the proceeds from the borrowings of 1,803.6 million (Boral Limited 2017).
Proceeds from the borrowing increased over the last two years from 2.2 million in 2016 to
1,803.6 million in 2017. Finally, there was the repayment of the borrowings for the company
of around 489.3 million. Boral Limited repayments of the borrowings increased from 6
million in 2016 to 489.3 million in 2017. In general, Boral Limited cash provided by its
financing activities increased over the years from 273.4 million in 2016 to 3,107.0 million.
Analysis of BCI Limited and Boral Limited Based on the Three Categories of the Cash
Flows
Based on the above analysis, it is evident that it is evident that for the past two years
BCI Limited and Boral Limited experienced an increase trend in the cash inflow from the
financing activities. This is evident by the movement of Boral Limited cash flow from the
financing activities from 273.4 million in 2016 to 3,107.0 million while that of BCI Limited
increased from negative 7,425 million in 2016 to roughly 17,072 million in 2017. Further,

CORPORATE ACCOUNTING 11
their cash flow from the operations were moving in different direction with Boral Limited
indicating a negative movement from 477.5 million in the year 2016 to 413.3 million by 2017
while BCI Limited recorded a decreasing trend in this category from 44,231 million in 2016
to 11,860 million in 2017 (Boral Limited 2017). Finally, their cash utilized in investment
activities were facing similar trend with BCI Limited recording a decreasing trend from 8,075
million in 2016 to 2,220 million in 2017 while Boral Limited reporting an increasing trend
from 259.5 million in the year 2016 to 3,731.3 million in the year 2017.
Comparative Analysis of BCI Limited and Boral Limited
Based on the above analysis, it is evident that BCI Limited was in a better position to
generate high cash flow both from its operations, from its investment as well as from its
financing operations in comparison to Boral Limited. This is based on the fact that despite the
decreasing trend in BCI Limited cash from operations, the company had relatively high cash
inflow from these activities unlike its counterpart.
OTHER COMPREHENSIVE INCOME STATEMENT
Items Reported in BCI Limited and Boral Limited Statements of the Other
Comprehensive Income
Based on BCI income statements, items reported in the other comprehensive income
comprised of some items which might be at time be reclassified to income account or
statement, variations in fair value of the cash flow hedges. The variation in fair value of the
cash flow hedges increased from -2,706 to a negative value in 2017.
On the other hands, based on Boral Limited latest financial statements, it is evident that there
were a number of items reported in the other comprehensive income statements. Some of the
key items reported in this statements included items which might be reclassified or items
classifiable concurrently to profit/loss account. These include the foreign current translation
reserve transferable to the net income on the disposals of the controlled firms of -24.5

CORPORATE ACCOUNTING 12
million. The amount for this item is said to have increased from 0 which was reported in the
year 2016 (Boral Limited 2017). Another item reported in the statement is fair value
adjustments on the cash flow hedges of around 2.6 million. Fair value adjustment on the cash
flow hedges for Boral Limited increased from -7.7 million reported in 2016 to its current
value of 2.6 million in 2017. The third item reported was net exchange variations from the
translation of the foreign operations moved to the equity of -99.4 million. The amount for net
exchange variation from the translation of the foreign operations moved to equity for Boral
Limited decreased from -7 million in 2016 to -99.4 million in 2017. Finally, another item
reported in this statement was income tax on all items which might be reclassified or items
classifiable to the profit/loss account of -1.3. Income tax on the items classifiable to
profit/loss account decreased from 10.4 million in the financial year 2016 to around -1.3
million by 2017. Generally the total of the other comprehensive income for Boral Limited in
2017 was 122.6 million.
Why the items are not reported in the Profit/Loss Statements
The items are not reported in the profit and loss accounts since they are not yet
realized. In fact they are reported since they have an impact on the organization’s balance
sheet values; but this impact is not necessarily reported on organization profit/loss statement
(Park, 2018).
How inclusion of the items could affect profit attributable to shareholders
In case, these items were reported in the profit/loss account, the profit attributable to
the shareholders would have been affected significantly. In fact, it would have caused to
abnormal increase in their profits attributable to the shareholders.
Whether the other comprehensive income ought to be included in evaluation of
managers’ performance