Coca-Cola Amatil: Analysis of Financial Statements and Tax Expenditure

This report offers a comprehensive analysis of Coca-Cola Amatil's financial statements, focusing on key aspects such as cash flow, income tax expenditure, and other comprehensive income. It examines changes in the cash flow statement over several years, providing reasons for these shifts, and conducts a comparative analysis across operating, investing, and financing activities. The report delves into other comprehensive income statement items, explaining why certain items are not reported in the income statement, and explores the company's income tax expenditure, deferred tax, and current tax assets/liabilities. It also compares income tax expense with income tax paid, identifies unique features in the financial statements, and offers insights and recommendations based on the analysis. The report uses the annual reports of Coca-Cola Amatil to provide a detailed overview of the company's financial performance and accounting practices.

Running head: CORPORATE ACCOUNTING
Corporate Accounting
Name of the Student
Name of the University
Author Note

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Table of Contents
Brief Overview of the Company................................................................................................3
Changes in item of cash flow statement over the past few years and reasons for the change...3
Comparative analysis of the company’s three broad categories of cash flows that is operating
activities, investing activities and financing activities:..............................................................4
Other Comprehensive Income Statement items and analysis of each items..............................5
Causes for the above items not reported in the income statement.............................................5
Explanation of the about the chosen company’s income tax expenditure.................................6
Whether tax figure that is same as company tax rate times the company’s accounting income6
Deferred tax reported in balance sheet and reasons for the record............................................7
Income tax payable or current tax assets recorded by the firm..................................................7
Whether Income tax expenditure that is shown in income statement same as income tax paid
shown in cash flow statement....................................................................................................8
Unique Features in the financial statements and the new insights along with recommendations
....................................................................................................................................................8
References..................................................................................................................................9
Appendix..................................................................................................................................11

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Brief Overview of the Company
The chosen company is Coca Cola Amatil that is listed under the ASX is that deals
with the soft drinks and non-alcoholic beverages in Australia. In order to analyze the annual
report the chosen organization listed on the Australian Stock exchange (ASX) The Company
offers a stable cash flows and comparatively low risks and it facilitates payment to the
investors along with the potential long-term growth. It seeks to establish the diversified
portfolio with regard to regulated utility infrastructure assets and continuing to be in the lead
position under the Australian infrastructure investment fund. Further, the values upon which
the company is maintaining its growth are fairness, honesty, maximizing the value of the
security holder and maintenance of the high standards for corporate governance.
Changes in item of cash flow statement over the past few years and reasons for the
change
By the evaluation and analysis of the cash flow statements of the business
organizations, it becomes easier to gain an understanding of their inflows as well as outflows.
For this paper, Coca Cola Amatil has been chosen and each item of its cash flow statement is
analyzed. The cash flow statement mainly consist of three sections that involves cash flow
from investing activities, operating activities, financing activities and net cash as well as cash
equivalents (Brooks, 2015). The items that are included in the operating activities involves
depreciation, adjustments to net income, liabilities changes, inventory changes, changes in
accounts receivable and changes in other operating activities. The items that are included in
the investment activities are capital expenses, investments and other cash flow from
investment activities. In this cash flow statement of Coca cola Amatil, financing activities
mainly consists of the paid dividends, net borrowings, purchase as well as sale of stocks and
other cash flows from the financing activities (Grant, 2016).

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Comparative analysis of the company’s three broad categories of cash flows that is
operating activities, investing activities and financing activities:
Cash flows from operations:
It has been seen that the total cash flow of operating activities has increased in the
year 2017 to $5, 89,200 from the year 2016 and 2015.
Cash flows from investing activities:
It is evident that the total cash used for the investment activities increased in the year
2016 to -1, 89,800 from $ -3, 21,400 in the year 2015 and then again increased to $ -1, 82,600
in the year 2017.
Cash flows from financing activities:
There has been rise in total cash used in the financing activities in the year 2017 to -6,
84,500 from the year 2015 but in comparison to 2106 the cash out flow has been enhanced
from $-4, 38,500.
Moreover, the change in cash and cash equivalents amounts to $-3, 40,700 in the year
2017, $1, 39,600 in the year 2016 and $4, 34,400 in the year 2015.
Particular
2017 in
$m
2016 in
$m
2015 in
$m
Net cash flow from operating
activities 5,89,200 7,74,800 6,26,800
Net cash flow from investing activities -1,82,600 -1,89,800 -3,21,400
Net cash flow from financing
activities -6,84,500 -4,38,500 1,22,400

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2017 in $m 2016 in $m 2015 in $m
-800,000
-600,000
-400,000
-200,000
0
200,000
400,000
600,000
800,000
1,000,000
Segment wise comparison of the cash
fl ow items
Net cash flow from operating activities Net cash flow from investing activities
Net cash flow from financing activities
Other Comprehensive Income Statement items and analysis of each items
Various significant items are reported under the comprehensive income statement in
the annual report of Coca Cola Amatil in 2017.The Other comprehensive income Items to be
reclassified to the income statement in subsequent periods includes the Foreign exchange
differences on translation of foreign operations that has been decreased to -$141.4 m in 2107
from the year 2016 which was $ 31.9 m. There is also the Reclassification of foreign
exchange differences on disposal of a business that amounts to $ 1.2m in 2017 and was -
$1.6m in 2016. The other comprehensive income statement also has Cash flow hedges that
amounts at -$34.3m. Income tax effect relating to cash flow hedges amounts to $ 6.7.There
are also other reserve movements and Income tax effect relating to other reserve movements
in the other comprehensive income statement of the company of Coca Cola Amatil (Gordon,
et al., 2017).

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Causes for the above items not reported in the income statement
The comprehensive income statement is mainly used for measurement of change in
owner’s interest in the business. It generally incorporates income as well as expenditure
which have not yet realized and is utilized for bypassing income statement. In addition to
this, other comprehensive income mainly considers items that involve debt security on the
unrealized profits and losses, changes in transactions of foreign currency, profit or loss
obtained from the derivative instruments and any other pension profits or losses (Damodaran,
2016). The main purpose of Coca cola Amatil in forming the other comprehensive income
statement delivers the users with the essential information in relation to the above-mentioned
aspects. Thus, this statement provides an overview of transparent and holistic approach of
such items. Such causes are not engaged directly in order to derive income (Kroes &
Manikas, 2014).
Explanation of the about the chosen company’s income tax expenditure
The Coca Cola Amatil is obliged to conduct its tax accounting in accordance with the
norms of the Australian taxation. In the years 2016 and 2017, the tax rate that could be
applied to the organization is 30%. Based on the statement of financial performance in 2017,
the income tax expense reported has been -$148.6million in 2017 and- $135.8million in 2016.
The tax was calculated as expense of income tax divided by profit before income tax expense
from discontinued and continuing operations (Hackbarth & Sun, 2015).
Whether tax figure that is same as company tax rate times the company’s accounting
income
The amount of income tax has been computed by using tax rates, which have been
mainly ratified significantly from the statement of companies financial. Based on the
statement of financial performance in 2017, the income tax expense reported has been -

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$148.6million in 2017 and $-135.8million in 2016. The tax was calculated as expense of
income tax divided by profit before income tax expense from discontinued and continuing
operations. This shows that the income tax amount had decreased considerably in the year
2017. However, it cannot be estimated that whether the income tax expenditures figures are
same as that of tax rate times this company’s accounting income (Najmi, Sarraf & Darabi,
2015).
Deferred tax reported in balance sheet and reasons for the record
The Deferred tax is accounted using the method of balance sheet liability resulting
from temporary differences between the tax bases of liabilities and assets and their carrying
amount in the financial statements. The initial recognition of liabilities and assets does not
lead to recognition of deferred income tax and this does not have any impact on accounting or
taxable loss or profit (Delkhosh et al., 2017). Recognition of deferred tax assets are done to
the extent that the availability of future taxable profits is probable against the temporary
differences that are deductible. In current year, there has been deferred tax liabilities of Coca
Cola Amatil is $ 283.8 m in 2017 and $ 303.2 in 2016.
Income tax payable or current tax assets recorded by the firm
In the chosen company of Coca Cola Amatil the current tax assets amounts to $5.1 m
in 2017 and $ 1.5 m in 2016. There has also been current tax payable identified in the balance
sheet that amounts to $27.6 m in 2017 from $42.0 m in the year of 2016.
The Income tax assets is the amount that is calculated based on the standard
accounting rules and on the amount of tax that is owed by company to tax authorities (Chen,
Feldmann & Tang, 2015). Income tax payable is the amount that the entity owes in terms of

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tax based on rules of tax code.Until the company makes the payment of tax, the amount of
income tax payable appears on the balance sheet liability section.
Whether Income tax expenditure that is shown in income statement same as income tax
paid shown in cash flow statement
According to the latest annual report of Coca Cola Amatil, the income tax expense
shown in the income statement is not same as the income tax paid shown in the cash flow
statement which is -$173.4 m in 2017 that have been reduced from -$145.0 m. The Income
tax payments includes the impact of income tax of certain loss or gain relating to financing or
investing activities so that after tax cash flow is reflected in the subtotals of net cash flow. On
other hand Income tax expense is the amount that represents the recording of income tax
costs. Income tax payable is the liability account that helps in recording of the income tax
amount that is owed by organization but is yet to be paid (Almamy, Aston & Ngwa 2016).
Income tax expenses on other hand represent the amount that is incurred rather than being
paid. In this case, it is worth mentioning that the income tax expense recorded in the income
statement is the amount incurred in the current taxation year of the organization and the
payment is required to be made in the upcoming year (Scholes, 2015).
Unique Features in the financial statements and the new insights along with
recommendations
On the basis of the analysis of all the disclosed financial information, no surprising or
confusing elements could be observed in the tax-related treatment of Coca Cola Amatil. This
is because the organization has supplied the needed justifications and clarifications of the
taxation treatment as footnotes in the financial report. From the annual report, it can be
recognized that the total amount for income tax has been basically made based on the
adjusted profits which are generally attributable for non- assessable or disallowed items (Reid

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& Myddelton, 2017). It can be seen from the above discussion that this enterprise has
followed all the basic requirements of the Australian Tax Office (ATO) while estimating
different taxes that has been included in the financial statement of the company (Robinson &
Sensoy, 2016).

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References
Almamy, J., Aston, J., & Ngwa, L. N. (2016). An evaluation of Altman's Z-score using cash
flow ratio to predict corporate failure amid the recent financial crisis: Evidence from
the UK. Journal of Corporate Finance, 36, 278-285.
Brooks, R. (2015). Financial management: core concepts. Pearson.
Chen, L., Feldmann, A., & Tang, O. (2015). The relationship between disclosures of
corporate social performance and financial performance: Evidences from GRI reports
in manufacturing industry. International Journal of Production Economics, 170, 445-
456.
Damodaran, A. (2016). Damodaran on valuation: security analysis for investment and
corporate finance (Vol. 324). John Wiley & Sons.
Delkhosh, M., Malek, Z., Rahimi, M., & Farokhi, Z. (2017). A comparative study of
information content of cash flow, cash value added, accounting earnings, and market
value added to book value of total assets in evaluating the firm
performance. International Journal of Accounting and Economics Studies, 5(2), 112-
117.
Gordon, E. A., Henry, E., Jorgensen, B. N., & Linthicum, C. L. (2017). Flexibility in cash-
flow classification under IFRS: determinants and consequences. Review of
Accounting Studies, 22(2), 839-872.
Grant, R. M. (2016). Contemporary strategy analysis: Text and cases edition. John Wiley &
Sons.
Hackbarth, D., & Sun, D. (2015). Corporate investment and financing dynamics.

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Kroes, J. R., & Manikas, A. S. (2014). Cash flow management and manufacturing firm
financial performance: A longitudinal perspective. International Journal of
Production Economics, 148, 37-50.
Najmi, M., Sarraf, F., & Darabi, R. (2015). Relationship between Capital Structure, Free
Cash Flow and Performance in Companies Listed on Tehran Stock
Exchange. European Online Journal of Natural and Social Sciences:
Proceedings, 4(1 (s)), pp-1229.
Reid, W., & Myddelton, D. R. (2017). The meaning of company accounts. Routledge.
Robinson, D. T., & Sensoy, B. A. (2016). Cyclicality, performance measurement, and cash
flow liquidity in private equity. Journal of Financial Economics, 122(3), 521-543.
Scholes, M. S. (2015). Taxes and business strategy. Prentice Hall.

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Appendix
Cash Flow(All numbers in thousands) 2017 2016 2015
Net Income 4,45,200 2,46,100 3,93,400
Operating Activities, Cash Flows Provided By or Used In
Depreciation 2,32,100 2,42,000 2,42,900
Adjustments To Net Income -62,600 1,88,200 29,400
Changes In Accounts Receivables - - -
Changes In Liabilities - - -
Changes In Inventories - - -
Changes In Other Operating Activities -55,200 71,200 -66,200
Total Cash Flow From Operating Activities 5,89,200 7,74,800 6,26,800
Investing Activities, Cash Flows Provided By or Used In
Capital Expenditures -2,93,700 -2,83,500 -2,46,400
Investments -2,000 -2,000 -2,000
Other Cash flows from Investing Activities - 90,300 -74,900
Total Cash Flows From Investing Activities -1,82,600 -1,89,800 -3,21,400
Financing Activities, Cash Flows Provided By or Used In
Dividends Paid -3,45,600 -3,39,800 -3,20,700
Sale Purchase of Stock - - -
Net Borrowings 12,500 -98,500 -2,03,700
Other Cash Flows from Financing Activities -200 -200 6,46,800
Total Cash Flows From Financing Activities -6,84,500 -4,38,500 1,22,400
Effect Of Exchange Rate Changes -62,800 -6,900 6,600
Change In Cash and Cash Equivalents -3,40,700 1,39,600 4,34,400