Corporate Accounting Report: Analysis of ASX Listed Retail Companies

This report provides a comprehensive analysis of the financial statements of three ASX-listed companies: Woolworths Group Limited, Wesfarmers Limited, and JB Hi-Fi Limited, all operating within the Australian retail sector. The report examines key aspects including equity and liabilities, cash flow statements, other comprehensive income statements, and accounting for corporate income tax over a three-year period. The analysis covers contributed equity, reserves, and retained earnings; current and non-current liabilities; cash flows from operations, investing, and financing activities; and the treatment of items in other comprehensive income. The report also assesses the companies' debt-to-equity ratios and their approaches to corporate income tax, including the use of deferred tax assets and liabilities. The findings highlight the companies' investment in property, plant, and equipment, their operating cash flows, and the impact of dividend payments and financing costs. The report uses the annual reports of the selected companies to compare and contrast their financial performance and accounting practices.

Running head: CORPORATE ACCOUNTING
Corporate Accounting
Name of the Student:
Name of the University:
Author’s Note:
Course ID:

1CORPORATE ACCOUNTING
Executive Summary:
The report would concentrate on assessing the various financial statements of three ASX listed
organisations functioning in the identical sector. For meeting this purpose, the organisations
include Woolworths Group Limited, Wesfarmers Limited and JB Hi-Fi Limited that are
operating in the Australian retail sector. It has been analysed that these organisations have
invested largely in PPE; however, the positive cash flows generated from operations are adequate
to cover these outflows. Along with this, they do not consider the other comprehensive income
items to be included in their income statements owing to their extraordinary nature. Finally, from
the taxation part, it has been assessed that the companies take into account certain items like
income tax expense, deferred tax assets, deferred tax liabilities and finance cost for appropriate
calculation of their cash tax rates.

2CORPORATE ACCOUNTING
Table of Contents
Introduction:....................................................................................................................................4
Equity and liability:.........................................................................................................................5
Part (i):.........................................................................................................................................5
Part (ii):........................................................................................................................................6
Part (iii):.......................................................................................................................................7
Cash flow statement:........................................................................................................................8
Part (iv):.......................................................................................................................................8
Part (v):........................................................................................................................................9
Part (vi):.....................................................................................................................................12
Other comprehensive income statement:.......................................................................................13
Part (vii):....................................................................................................................................13
Part (viii):...................................................................................................................................13
Part (ix):.....................................................................................................................................13
Part (x):......................................................................................................................................14
Accounting for corporate income tax:...........................................................................................14
Part (xi):.....................................................................................................................................14
Part (xii):....................................................................................................................................15
Part (xiii):...................................................................................................................................15

3CORPORATE ACCOUNTING
Part (xiv):...................................................................................................................................15
Part (xv):....................................................................................................................................16
Part (xvi):...................................................................................................................................16
Part (xvii):..................................................................................................................................16
Conclusion:....................................................................................................................................17
References:....................................................................................................................................18

4CORPORATE ACCOUNTING
Introduction:
The report would concentrate on assessing the various financial statements of three ASX
listed organisations functioning in the identical sector. For meeting this purpose, the
organisations include Woolworths Group Limited, Wesfarmers Limited and JB Hi-Fi Limited
that are operating in the Australian retail sector. The analysis of the annual reports of the last
three years of these organisations is evaluated, in which the main aspects covered include cash
flow statement, equity and liability, accounting for corporate income tax and other
comprehensive income statement.
Woolworths Group Limited has been established in 1924 in Australia and it is involved in
operating retail stores via Australian Food, Endeavour Drinks, New Zealand Food, Big W Hotels
and other drinks. Moreover, it has liquor stores and hotels as well with an employee base of
around 201,522 (Woolworthsgroup.com.au 2019).
Wesfarmers Limited is the leading Australian retail organisation and its operations
mainly include retail, distribution of industrial and safety products, coal mining and production,
chemical and fertiliser production and investment businesses in Australia, UK, New Zealand and
others. The company has been established in 1914 and at present, it has staff base of 217,000
(Wesfarmers.com.au 2019).
JB Hi-Fi Limited is mainly involved in retailing home consumer products operating
through JB Hi-Fi Australia, The Good Guys and JB H-Fi New Zealand. The main products of the
organisation include audio equipment, cameras, computers, DVD products, musical instruments
and others. The company has been founded in 1974 with a staff base of around 12,229 in 2018
(Jbhifi.com.au 2019).

5CORPORATE ACCOUNTING
Equity and liability:
Part (i):
From the annual reports of Woolworths Group Limited, the equity section contains
contributed equity, reserves and retained earnings. It has been identified that contributed equity
would increase from $5,252.2 million in 2016 to $6,055 million in 2018, as additional equity
shares are issued in the market. However, reserves have increased from $93.9 million in 2016 to
$353 million in 2018, as there is presence of foreign currency translation reserve, hedge reserve
and others (Van Mourik 2014). Finally, there has been increase in retained earnings as well from
$3,124.5 million in 2016 to $4,073 million in 2018 (Woolworthsgroup.com.au 2019).
In case of Wesfarmers Limited, all items are same as Woolworths; the only addition is
reserved shares. The issued capital has increased from $21,937 million in 2016 to $22,277
million in 2018 owing to the increase in the issuance of equity shares in the market. However,
retained earnings have fallen significantly in 2018 due to the decline in overall net income
earned by the organisation. In addition, reserves have increased from $166 million in 2016 to
$344 million in 2018, as hedge reserve and foreign currency translation reserve have increased
over time. Finally, no significant change could be observed in reserved shares of the organisation
from 2016 to 2018 (Wesfarmers.com.au 2019).
For JB Hi-Fi Limited, the equity items are contributed equity, retained earnings and
reserves. Significant increase in contributed equity could be observed from 2016 to 2018, as the
firm has raised its issuance of equity shares in the market for meeting capital needs (Bauman and
Shaw 2016). After this, retained earnings are observed to increase during this period as well
owing to significant rise in profit margin. Finally, reserves are seen to be increased over the years
(Investors.jbhifi.com.au 2019).

6CORPORATE ACCOUNTING
Part (ii):
From the annual reports of Woolworths Limited, the main current liabilities disclosed are
trade payables, borrowings, current tax payable, provisions and other financial liabilities, which
are observed to increase from 2016 to 2018. The non-current liabilities are borrowings,
provisions, other financial liabilities and other non-current liabilities, which have fallen over the
three-year period (Woolworthsgroup.com.au 2019).
As per the annual reports of Wesfarmers Limited, the line items in current liabilities
comprise of trade and other payables, interest-bearing loans and borrowings, income tax payable,
derivatives, provisions and others, which have fallen slightly from $10,424 million in 2016 to
$10,025 million in 2018. The non-current liabilities after registering increase in 2017 has
declined in 2018 that constitute of interest-bearing loans and borrowings, derivatives, provisions
and others (Wesfarmers.com.au 2019).
The annual reports of JB Hi-Fi Limited contain certain line items in its current liabilities,
which include trade and other payables, provisions, deferred revenue, current tax liabilities and
others. The amount is witnessed to increase significantly from 2016 to 2018. On the contrary, the
non-current liabilities include borrowings, deferred tax liabilities, deferred revenue, provisions
and others, which after experiencing significant increase in 2017 has fallen in 2018
(Investors.jbhifi.com.au 2019).

7CORPORATE ACCOUNTING
Part (iii):
2016 2017 2018
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
1.80
2.00
1.68
1.33
1.17
0.78 0.68 0.62
1.45
1.88
1.63
Debt to Equity Ratio
Woolworths Group Limited Wesfarmers Limited JB Hi-Fi Limited
In accordance with the above figure, it could be stated that Woolworths and JB Hi-Fi use
more portion of debt capital than equity capital for funding their business assets. The only
exception could be observed in case of Wesfarmers, as it has relied on raising funds from the
equity shareholders so that its financial risk could be minimised (Kulikova, Garyntsev and
Gafieva 2015). Thus, the financial leverage is high for JB H-Fi Limited followed by Woolworths
and Wesfarmers.

8CORPORATE ACCOUNTING
Cash flow statement:
Part (iv):
From the cash flow statements of Woolworths Group Limited, the cash flows from
operations include receipts from customers, payments to employees and suppliers, payment of
net financing costs and income tax payment. This area after experiencing considerable rise in
2017 has declined in 2018. The cash flows from investing activities include proceeds from sales
of PPE, payments for PPE and intangible assets, payments for business purchase, Home
Consortium Trust and dividends obtained. These cash flows are observed to increase steadily
over the years. Finally, the cash flows from financing activities comprise of proceeds from share
issuance and borrowings, repayment of borrowings and payment of dividends. These cash flows
are observed to increase considerably in 2017; however, decline could be observed in 2018.
However, the increased operating cash flows have resulted in increased cash balance of the
organisation in 2018 (Woolworthsgroup.com.au 2019).
As per the cash flow statements of Wesfarmers Limited, increase and fall in operating
cash flows are witnessed from 2016 to 2017 and from 2017 to 2018 respectively. The significant
items under this head include all the items mentioned for Woolworths with the additions as
interest received and borrowing costs. The investing cash flows have declined massively in 2017
compared to the last year after which increase could be observed in 2018. The items falling
under this head comprise of payments for PPE and intangibles, proceeds from sale of PPE,
proceeds from business sale, investments in joint ventures, subsidiary acquisition and net
redemption of loan notes. On the other hand, the financing cash flows comprise of proceeds from
and repayment of borrowings, payment of equity dividends and demerger transaction costs. This
head after witnessing considerable increase in 2017 has fallen slightly in 2018. However, the

9CORPORATE ACCOUNTING
ending cash balance has fallen in 2018 compared to 2017 for Wesfarmers (Wesfarmers.com.au
2019).
For JB Hi-Fi Limited, the main operating cash flow items include receipts from
customers, payments to staffs and suppliers, payment of income tax, interest and finance costs
and receipts of interest. This head has experienced considerably from $185.1 million in 2016 to
$292.1 million in 2018. After this, the main investing cash flows comprise of payments for
business combinations and PPE and proceeds from sale of PPE. This head after experiencing
remarkable increase in 2017 has fallen significantly in 2018. Finally, the financing cash flows
comprise of proceeds from share issue, proceeds or repayment of borrowings, share issue costs,
payments for share issue costs and dividend payments. The trend is similar to that of the
investing cash flows owing to which ending cash balance has remained almost identical in 2018
compared to 2017 (Investors.jbhifi.com.au 2019).
Part (v):
Woolworths Group Limited:

10CORPORATE ACCOUNTING
2016 ($m) 2017 ($m) 2018 ($m)
-2,000.00
-1,000.00
-
1,000.00
2,000.00
3,000.00
4,000.00
2,357.50
3,122.00 2,930.00
-1,266.70 -1,431.00 -1,510.00-1,474.90 -1,729.00
-1,060.00
Woolworths Group Limited
Net Cash from Operating Activities Net Cash Used in Investing Activities
Net Cash Used in Financing Activities
It is evident from the above table that the net operating cash flows of Woolworths after
increasing in 2017 have declined in 2018, which signifies the fluctuating income of the
organisation from operating activities (Frank and James 2014). After this, the organisation has
invested heavily in purchasing PPE and investing in business and it has made considerable to the
shareholders in the form of dividend (Woolworthsgroup.com.au 2019).
Wesfarmers Limited:

11CORPORATE ACCOUNTING
2016 ($m) 2017 ($m) 2018 ($m)
-5,000.00
-4,000.00
-3,000.00
-2,000.00
-1,000.00
-
1,000.00
2,000.00
3,000.00
4,000.00
5,000.00
3,365.00
4,226.00 4,080.00
-2,132.00
-53.00 -658.00
-1,333.00
-3,771.00 -3,752.00
Wesfarmers Limited
Net Cash from Operating Activities Net Cash Used in Investing Activities
Net Cash Used in Financing Activities
In accordance with the above table, it could be observed that although the net operating
cash flows of the organisation after experiencing massive rise in 2017 have experienced a slight
decline in 2018 owing to increased payment of income tax. Besides, it has made considerable
investment in purchasing PPE in 2018. Finally, the payment of equity dividend has resulted in
increasing cash outflows from financing activities (Wesfarmers.com.au 2019).
JB Hi-Fi Limited: