Commonwealth Bank Australia: Corporate Tax Analysis & Financials

This report provides a financial analysis of Commonwealth Bank (CBA), focusing on its corporate tax strategy and overall financial health. It examines the bank's financial statements over three consecutive years to assess its profitability and investment potential. Key areas of analysis include cash flow, comprehensive income, income tax expenses, deferred tax assets and liabilities, and the reconciliation of tax figures between the income statement and cash flow statement. The report highlights discrepancies in tax reporting due to provisions for future taxes and explores the implications of these accounting practices. The document is available on Desklib, a platform offering a range of solved assignments and past papers to support students in their studies.

CORPORATE TAX IN COMMONWELATH BANK AUSTRALIA
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Executive Summary
The report is based on the financial analysis of the company Commonwealth Bank (CBA). The
report measures various financial statements of the bank for the purpose of finding out the profit
the bank from the point of investors. This report clears about that investors should invest in this
company or not.
Commonwealth Bank is situated New Zealand which is situated in Asia, the United States. The
Bank is a multinational bank. It has business across the world. It provides various facilities and
services over the international level. The report helps to find out the financial position of the
company over the last 3 consecutive financial years.

Contents
Business Profile of Organizations................................................................................................................3
Financial Statements of the Bank................................................................................................................4
References...................................................................................................................................................8

Business Profile of Organizations
It is a multinational bank situated in New Zealand providing its services to all over the world.
The bank commonly referred as CBA. It is a bank which has various services for its customers. It
provides financial services like business and institutional market, fund management, investment
and banking services, superannuation and many more services. The bank has the various types of
investors that may be companies, firms or individuals. The bank is listed on Australian Stock
Exchange & is one of the famous and popular bank in the world.
The bank was established in the year 1911. It was established by the Australian Government. But
it was privatized by the government in 1996. After that the Australian Stock exchange added this
in ASX in the year 1999. The former headquarter of the company was in the Sydney. It was
established there for the year 2012 (Niegel, 2017). The first branch of the bank was in
Melbourne. After that it moved to Sydney and started the services there. In the year 1920, the
bank achieved the powers of a central bank and acquires great position in the market.
The bank received the responsibility to issue the Australian Notes from the Department of
treasury of government. The bank has taken various responsibilities and powers over the years
that it becomes most popular bank (Hanam, 2013). It provides the financial services over great
time. The bank has the power to issue the funds as per its own policies. It helps to provide
various loans of big amount to the persons demanding the loans with the support of some
securities.
The bank was firstly working with the Central Bank The role of the bank was extended with the
help of central Government and provides various facilities to the investors. In the year 1931, the
bank came into a conflict with the central bank. The chairman Robert Gibson started the conflict.
He refused the bank to expand the creditors I the response of great depression. The bank
achieved all the powers of a Central Bank. It achieved the various powers that are not applicable
to a private bank. The powers are used by the bank that worked for the expansion of the
economy. It worked as dual function bank.

In the year 1960, the bank started as a new bank, It comes out of the business of insurance and
travel. The bank started more working in foreign trading and helps the foreigners to invest in the
bank and helps to provide various financial services to the investors.
Financial Statements of the Bank
The Bank is responsible to make the financial statements every year. It needs to make the Cash
Flow Statement, income statement, Balance sheet of the related current year. It needs to compare
the financial statements within the company to see the improvement of the company. The
comparison of important features related to the report is compared below:
1. The Cash Flow of the Commonwealth Bank recorded the information of operation activities,
financing activities an financial activities in the Cash Flow statements. The Financing
activities provide the information about the dividend paid to the owners of the company. it
describe the change in the capital of the Bank. There is repurchase and sale of common and
preferred stock. There is also change in the long term debt of the bank. The financing
activities show positive cash flow in the market. Investing activities of the bank also provide
the clear information. It clarify that there are expenses related to capital expenditure by the
company. The company in participated in asset and liability payment through The Operating
activities shows that the company has information about various incomes and expenses of
the bank. The Company is because of the strategies of the managers and the new techniques.
2. The cash flow from the operating, investing and financing activities are continues in millions
$(713), (771), 10472 in the year 2017. By comparing this data with the 3 consecutive years
shows that the bank is growing over the year. The Net cash flow in 2016 is $(4823)m but in

the year 2017 it shows the balance of $8670m. It shows that there is great change in the cash
flow of the company. In the year 2015, the cash flow was positive i.e. $6672m. But it comes
to negative in the year 2016 to $4823m. It shows that the company invested the amount and
had great expenses. These are maintained by the board in 2017. It makes the profit for the
firm.
3. The other comprehensive income has been stated in the down of the income and expenditure
account. The comprehensive income shows the income statement for the year that includes
many items. In the year 2017, the comprehensive income includes the gold that shows the
loss of (420)m$, shares in international contribution that shows that the Bank has loss of $
1m in this case. It also includes property of $72m. The superannuation fund of $ 383 is also
the part of comprehensive income. There are some other comprehensive income that has not
been classified by the Bank. It is of the total amount of $34m. Thus the total comprehensive
income of the bank is $ 863m. If this will added in the income statement, then the income
will be increased by this amount also.
4. The first item of comprehensive income shows that there is gold available for sale. If we sale
this in the current time, it will make the loss of $420m. Thus the transaction not been
auctioned by the bank. The next figure shows that the on the sale of available securities, the
Bank will face the loss of $ 1m. The property available for sale will realize the profit of
$72m. The Bank is expecting to increase the rate of property for sale. Thus in the current
year, this item makes the part of comprehensive statement. The Superannuation fund will
realize the amount of $ 383m. Other comprehensive incomes are also there. But we can’t
specify that what items are those.
5. Comprehensive income is the part of the income statement. It may be referred as the change
in the equity of the company or other income that is not been realized. It may be occurred
from the non owner sources of the income. These items are not included in the income
statement because the items may be the conclusion of the securities amount that are available
for sale. The sale has not been take place. The income is also from the gold of the Bank. The
amount that will realized on the sale is the income from gold that is included in the

comprehensive income. All these items will be the part of the income statement when these
transactions actually takes place.
6. The income tax is charged to every company. It is the basic requirement for every company
to pay taxes on the income of the company. The total tax expense for the Commonwealth
Bank for the year 2017 is stated in the income and expenditure statement of the Bank. The
total expense for income tax is $3992m recorded in the statement. This can be further
divided into 4 parts. The first part is the income tax for domestic income (Bodie, 20004). The
tax for domestic income is $3884m. The foreign income is also eligible to impose taxes. The
tax on foreign income is $435m. The deferred domestic tax is $336m in negative. The Bank
has foreign deferred income. The expense on this income is $ 9m.
7. The total tax liability for the year 2017 is $ 3992m. This is as per the statement of income
and expenditure of the company. In comparing the tax with the income statement and the
accounting of management, we find out that the tax rate is not the same. The management
creates provision for the income tax. Which are not taken in the income statement of the
Bank. The provisions helps to maintain the funds for the future taxes. In case of extra taxes
than the management discussion, it is the benefit that the taxes can be given out of the
provisions of the taxes. If tax is greater than paid, then this does not affect the financial
statements as the expense is already booked for the future expense. It acts as an asset for the
company.
8. The Deferred tax asset or liabilities are the part of the business that makes the profit over a
period of time. The deferred tax liability is the situation that becomes when the income for
taxable is less than the total income stated in the income statement of the company. The
company may have less taxable income due to the income that is not eligible for tax. The
deferred tax liability is the situation where the taxable income is less greater than the total
income of the company. The deferred taxes are recorded due to the reason of recording of the
income carry forward from last year that has not been find out in the statement. The

accounting standard are the reason for recording these taxes. The deferred tax asset is $
2634m in the year 2017 whereas the deferred tax liability is $ 2004m.
9. The income tax payable are the expense that are need to be paid by the company in the
future. The income tax expense or the income tax payable expenses are not same because the
income tax expense recorded in the income statement is the expense that has actually been
paid by the company. In this case, the total income tax expense that has been paid is $3992m.
The amount is actually paid. The income tax payable includes the provision for the tax
payment.
10. The income tax as per the income statement of the company is $ 3392m. But as per the cash
flow statement, the tax paid is $ 3976m. It shows that the tax paid is not same as per the
income statement and cash flow of the Bank. In the cash flow statement, the expense, the tax
payable is also calculated for the purpose of finding the operating income. The income
statement only shows the tax paid that does not show the provision of taxes. In the tax paid
column, it does not show the balance of provision for tax. The cash flow statement takes the
both taxes and find the corrective difference.
11. The calculation of tax is different in the cash flow statement and in the income statement of
the company. The financial statements show that the company is generating the cash in the
year. From this report, I also find out that there is difference between the tax paid in different
statements. The reason is due to the provision for tax. While examining the tax amount or
charges of the Bank, I recognized that the cash flow statement include the tax that is
recorded by the bank in its accounting books. But the income statement only record those tax
that is actually paid on the items related to income & expenditure. This is such an interesting
factor for me. The calculation of corporate tax is a big responsibility to find out the actual
profit of the Bank.

References
 Annual report of Commonwealth Bank, 2016.
 Annual report of Commonwealth Bank, 2017.
 Australia Through Time. Random House Australia. 2004
 Bodie, Zane; Alex Kane; Alan J. Marcus , 2004, “Essentials of Investments”, 5th ed.
McGraw-Hill Irwin
 Commonwealth Bank of Australia Annual reports 2017.
 Comparative analysis of Financial statements of commonwealth Bank, 2017.
 Hannam, Peter , 2013,. "Big banks finance reef destruction, activists claim". Sydney
Morning Herald.
 "Reducing the corporate tax rate". Australian Taxation Office, 2017. Stapledon, Nigel, 2017, "Callaghan, Sir Bede Bertrand (1912–1993)" , Australian
Dictionary of Biography. National Centre of Biography, Australian National University.