Comprehensive Analysis of CSR Limited's Financial Statements and Tax

This report provides a detailed analysis of CSR Limited's financial statements, focusing on its cash flow statement, other comprehensive income, and accounting for corporate income tax. The analysis examines the cash flow from operating, investing, and financing activities, highlighting significant changes and trends from 2015 to 2017. The report also explores the components of other comprehensive income and explains the accounting treatment for corporate income tax, including deferred tax assets and liabilities. It identifies differences between reported and actual income tax expenses and the reasons behind these discrepancies. The study incorporates relevant financial data from CSR Limited's annual reports, offering a comprehensive 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’s Note

1CORPORATE ACCOUNTING
Table of Contents
Cash Flow Statement Analysis........................................................................................................2
Requirement [i]............................................................................................................................2
Requirement [ii]...........................................................................................................................4
Other Comprehensive Income Statement Analysis.........................................................................6
Requirement [iii]..........................................................................................................................6
Requirement [iv]..........................................................................................................................6
Requirement [v]...........................................................................................................................7
Accounting for Corporate Income Tax Analysis.............................................................................8
Requirement [vi]..........................................................................................................................8
Requirement [vii].........................................................................................................................8
Requirement [viii]........................................................................................................................8
Requirement [ix]..........................................................................................................................9
Requirement [x]...........................................................................................................................9
Requirement [xi]........................................................................................................................10
References......................................................................................................................................11

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Cash Flow Statement Analysis
Requirement [i]
The analysis of the cash flow statements of the business organizations provides greater
assistance in ascertaining the total amount of cash outflow as well as cash inflow in the business
organizations. The following discussion sheds light in each item in the cash flow statements of
CSR Limited, Australia.
Cash Flow from Operating Activities: As per the 2017 Annual Report of CSR Limited, there
are five major items under the cash flow from operating activities. They are receipts from
customers; payment to suppliers and employees; receive of dividends and distributions; interest
received and the payment of income tax (Heinrichs et al., 2013).
Receipts from the customers refer to the money that CSR Limited receives from their
credit sales. As per the cash flow statement, an increase in this item can be seen in 2017 as
compared to 2016; that is $2726 million from $2499.5 million (csr.com.au, 2018). Increase in
credit sales is the main reason for this increase. Payment to the suppliers refers to the money that
CSR Limited is required to pay for the credit purchase of building materials. At the same time,
the company has to make payment for the salaries of their employees for their business
operations. An increase in this can outflow is there in 2017 as compared to the past year; that is
$2424.6 million as compared to $2246.4 million. Increase in purchase as well as increase in the
number of employees is the main reason for this increase. The next item is the dividend that CSR
Limited has received from their investment in other company. Increase in this amount can be
seen that is $14.2 million in 2017 as compared to $11.2 million in 2016. However, decrease can
be seen in the cash inflow from interest received that is $1.9 million in 2017 and $2.5 million in

3CORPORATE ACCOUNTING
2016; and decrease in CSR Limited’s investment is the main reason for this decrease
(csr.com.au, 2018). As per the cash flow statement, there has been major increase in the payment
for income tax by CSR Limited due to the increase in their profitability; that is $52.7 million in
2017 as compared to 14.6 million in 2016.
Cash Flow from Investing Activities: Under this head, CSR Limited has registered five major
items. They are purchase and proceeds from the sales of property, plant and equipment with
other assets; purchase of businesses or controlled entities; acquisition costs and the repayment of
loans and receivables taken in advance (Heinrichs et al., 2013).
From the cash flow statement of CSR Limited, it can be seen that the company has
reduced the investment in purchasing property, plant and equipment along with other assets in
the 2017 as compared to the past year; that is -$92.2 million as compared to -$120.0 million in
2016 (csr.com.au, 2018). The presence of adequate amount of assets is the main reason for this
decrease in purchase. On the other hand, decrease in the proceeds from the sale of these asses
can be seen in the year 2017 as compared to 2016; that is $44.7 million from 71.2 million. In the
year 2016, CSR Limited did not do any major acquisition of business and massive decrease in
this expenses is the proof of this fact; that is $3.5 million in 2017 from $12.8 million in 2016.
Due to the decreased amount of acquisition, there is decrease in the costs related to this
acquisition in 2016; that is -$3.4 million in 2017 as compared to $12.8 million in 2016. In
addition, it can also be seen that CSR Limited has made large repayment of the taken advanced
loans in the year 2017; that is -$5.3 million in 2017 from $0.1 million in 2016 (csr.com.au,
2018).

4CORPORATE ACCOUNTING
Cash Flow from Financing Activities: CSR Limited has also recorded some major items under
this head of cash flow. They are buy-back of shares, repayment of the borrowings, payment of
dividend, shares acquisition, payment of interest and other finance cost and transactions with the
non-controlling interests (Collins Hribar & Tian, 2014).
Buy-back of shares refers to the process of repurchasing the shares. The 2017 cash flow
statement of CSR Limited shows that the company has increased the buy-back of shares in 2017
as compared to the past year that is -$4.3 million from -$1.1 million. In the year 2017, CSR
Limited has increased the drawdown of their borrowings from the payment of borrowings in
2016; that is $28.3 million in 2017 from -$10.4 million in 2016 (csr.com.au, 2018). Due to the
increase in the profitability, CSR Limited has increased their dividend payment that is -$146.7
million in 2017 from -$144.9 million. In case of the acquisition of shares by the CSR employee
share trust, decrease in this amount can be seen in the year 2017 as compared to 2016; that is -
$5.4 million from -$7.1 million. There is a slight increase in the payment of interest and other
costs that is $3.4 million and $3.2 million in 2017 and 2016 respectively. Lastly, in the year
2016, CSR Limited had to make the payment for transactions with the non-controlling interest
for -$126.4 million where there was not any such payment in 2016 (csr.com.au, 2018).
Requirement [ii]
The following figure shows the comparative analysis of the major heads of the cash flow
statement of CSR Limited from 2015 to 2017:

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2017 ($m) 2016 ($m) 2015 ($m)
(300.0)
(200.0)
(100.0)
-
100.0
200.0
300.0 264.8
(60.7) (80.8) (45.4)
(257.9)
(166.7) (126.8)
Comparative Analysis of Cash Flows of CSR
Limited
Cash Flow Operating Activities Cash Flow Investing Activities
Cash Flow Financing Activities
Figure 1: Comparative Analysis of Cash Flow Categories of CSR Limited
(Source: csr.com.au, 2018)
It is evident from the above table that has been continuous increase in the cash inflow
from the operating activities for CSR Limited; that is $234.3 million, $252.2 million and $264.8
million in the years 2015, 2016 and 2017 respectively (csr.com.au, 2018). The main reason for
the increase in this head is the increase in the proceeds from the customers. At the same time,
increase in interest received and dividend received can also be held responsible for this increase.
In case of the cash outflow from investing activities, it can be observed that the cash
outflow increased in the year 2016 as compared to 2015; that is -$80.8 million in 2016 as
compared to -$45.4 million in 2015 (csr.com.au, 2018). In the year 2016, CSR Limited made
huge purchase of property, plant equipment that contributed towards this increase in cash
outflow. However, in the year 2017, CSR Limited has been to decrease this cash outflow that is

6CORPORATE ACCOUNTING
$60.7 million as compared to $80.8 million. Decrease in the purchase of these assets can be held
responsible for this decrease in cash outflow (csr.com.au, 2018).
In case of the cash flow from financing activities, an increasing trend can be seen in this
cash outflow from 2015 to 2017; that is -$126.8 million in 2015, -$166.7 million in2016 and -
$257.9 million in 2017 (csr.com.au, 2018). It can be observed that CSR Limited increased the
payment of dividend over these three years along with the repayment of borrowings. These
reasons are responsible for this increase in cash outflow under this head to cash flow.
Other Comprehensive Income Statement Analysis
Requirement [iii]
As per the 2017 Statement of Comprehensive Income, CSR Limited has reported some
specific items. They are recognition of hedge profit or loss in equity, transfer of hedge profit to
the statement of financial performance, different of exchange in the foreign operations
translations, change in the fair value of cash flow reserve and income tax benefits related to these
items (csr.com.au, 2018).
Requirement [iv]
The following discussion provides understanding about the above-mentioned items in the
other comprehensive income statement:
The main aim behind the use of foreign currency translation reserve is the conversion of
the results of the foreign subsidiaries of the parent company to the currency in which the
business organization carries out their financial reporting. This aspect makes it as one of the
major parts in the process of consolidation in which the determination of the foreign currency of

7CORPORATE ACCOUNTING
the cross-border company is done into the currency in which financial reporting is carried out.
The next process involves in the re-measurement of the foreign currency into the reporting
currency. The main reason for this is the recording of the profit or loss in the reporting currency
(Ito & Kochiyama, 2014).
The main aim behind the use of cash flow hedge reserve is to plan the removal or
minimization of the developed exposure due to the major changes in the assets and liabilities
position of the business organizations. Change in some specific risks has major contribution
behind this like interest rate risk, interest on debt risk and others (Deol & Nazari, 2013).
In this aspect, it needs to be mentioned that the companies are required to impose taxation
on the above-discussed factors in the other comprehensive income statement. The companies can
gain tax benefits from these aspects (Deol, 2013).
Requirement [v]
Other comprehensive income statement provides the diversified view of the profitability
of the businesses. The main motive for CSR Limited to develop the other comprehensive income
statement is to provide the users with the required information about the above-discussed
aspects. With the help of this statement, the business organizations can provide a holistic and
transparent picture of these items. These reasons are not directly involved in the generation of
income (Amorim, 2014). Thus, for all these reasons, CSR Limited does not report all these items
in the income statement or profit and loss statement.

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Accounting for Corporate Income Tax Analysis
Requirement [vi]
It is the obligation on CSR Limited to carry out their taxation accounting as per the
regulations of Australian taxation law. For the year 2017 and 2016, the applicable tax rate of
CSR Limited was 30%. According to the 2017 Statement of Financial Performance, the reported
income tax expenses for the company in 2017 and 2016 are $61.7 million and $64.4 million
respectively (csr.com.au, 2018).
Requirement [vii]
The analysis of the taxation accounting of CSR Limited shows difference between the
reported income tax expense and actual income tax expenses for the company. The company has
some specific reasons that contribute to this difference. Share of net profit of joint venture
entities is that first factors due to the fact that the extra payment of tax was on this were adjusted
with the taxation expenses (Gale, Samwick & Center, 2014). Non-taxable profit on the disposal
property is another reason for this difference as the extra payment of tax on this sale was
adjusted with the actual tax expenses. The under payment and the overpayment of the income tax
in the year 2016 and 2015 is another reason for the difference as CSR Limited had to pay the
deficit amount of income tax along with gaining benefit from the over payment of income tax.
Requirement [viii]
The 2017 Annual Report of CSR Limited shows the reporting of both the deferred tax
assets and liabilities. As per the annual report, the reported deferred tax assets by CSR Limited
for the years 2017 and 2016 are $201.2 million and $239.3 million respectively. CSR Limited
did not have any deferred tax liabilities in 2017; and $20.9 million is the deferred tax liabilities

9CORPORATE ACCOUNTING
of CSR Limited in 2016 (csr.com.au, 2018). The main reason for CSR Limited for the recording
of deferred tax assets is the payment of advance tax by the company as the excess amount of paid
tax than the actual taxation expenses is considered as assets. On the other hand, CSR Limited had
to pay less amount of depreciation due to the difference in the rulings of income statement and
taxable income statement. Thus, the deficit amount of depreciation is considered as liability.
Requirement [ix]
As per the 2017 Annual Report of CSR Limited, the amounts of reported current tax
expenses of the company for the year 2017 and 2016 are 0.5 million for both of the years. On the
other hand, the reported current tax liabilities of CSR Limited in 2017 and 2016 are $10.3
million and $38.1 million respectively (csr.com.au, 2018). Thus, difference can be seen for
income tax expenses and income tax payable. Income tax expenses of CSR Limited includes all
the taxation related expenses of the company like current tax expenses, deferred tax expenses
and current tax payable. Thus, income tax payable is a major part of the income tax expenses of
CSR Limited and it can happen that the company might not pay the whole expenses under
income tax. This is the major reason for the difference (Harding, 2013).
Requirement [x]
As per the financial statements of CSR Limited, the reported income tax expense in the
income statement is $61.7 million and $64.4 million in 2017 and 2016 respectively. On the other
hand, the reported income tax expenses in cash flow statement for 2017 and 2016 are $52.7
million and $14.6 million respectively (csr.com.au, 2018). Thus, clear difference in evident in
the situation. It needs to be mentioned that the reported income tax expenses in the income
statement is the tax expenses for the current year of the company; and the company is required to
pay it in the next year. However, the income tax payment in cash flow statement includes the

10CORPORATE ACCOUNTING
payment of income tax for the previous; it can also include the advance payment of the income
tax. For this reason, difference can be seen in the income tax expenses from income statement
and cash flow statement.
Requirement [xi]
The above discussion indicates towards the fact that there are not any surprising or
confusing factors in the taxation treatment of CSR Limited as the company has provided all the
required justification and clarification of their taxation treatment in the notes to the financial
statements. In addition, the users do not face difficulties in understand the taxation testament of
CSR Limited as the companies has complied with all the standards and regulations of Australian
taxation law. Most importantly, one can gain insight about the treatment of deferred tax assets
and liabilities along with the treatment of the current tax payable from observing the taxation
operations of CSR Limited.

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References
Amorim, C. F. (2014). Reporting comprehensive income: Evidence from Portuguese listed
companies (Doctoral dissertation, NSBE-UNL).
Annual Meetings and Reports. (2018). Corporate. Retrieved 22 May 2018, from
http://www.csr.com.au/investor-relations-and-news/annual-meetings-and-reports
Collins, D. W., Hribar, P., & Tian, X. S. (2014). Cash flow asymmetry: Causes and implications
for conditional conservatism research. Journal of Accounting and Economics, 58(2-3),
173-200.
Deol, H. (2013). Analysts’ Earnings Forecasts and Other Comprehensive Income.
Deol, H., & Nazari, J. A. (2013). The Decision Usefulness of Comprehensive Income Reporting:
Evidence from Canada.
Gale, W. G., Samwick, A. A., & Center, U. B. T. P. (2014). Effects of income tax changes on
economic growth. Economic Studies, https://www. brookings.
edu/wpcontent/uploads/2016/06/09_Effects_Income_Tax_Changes_Economic_Growth_
Gale_Sa mwick. pdf.
Harding, M. (2013). Taxation of dividend, interest, and capital gain income.
Heinrichs, N., Hess, D., Homburg, C., Lorenz, M., & Sievers, S. (2013). Extended dividend, cash
flow, and residual income valuation models: Accounting for deviations from ideal
conditions. Contemporary Accounting Research, 30(1), 42-79.