H15020 Corporate Accounting: In-Depth Financial Statement Analysis

This report provides a detailed analysis of corporate accounting principles, focusing on cash flow statements, other comprehensive income statements, and accounting for corporate income tax. It includes an examination of Boral Limited's financial statements from 2015 to 2017, comparing operating, investing, and financing activities. The report explains the components of comprehensive income, deferred tax assets and liabilities, and the differences between income tax expense and income tax payable. It also discusses the treatment of tax in financial statements and highlights the complexities and challenges in interpreting financial data. Desklib offers a wide range of solved assignments and study resources for students.

H15020 Corporate Accounting
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Contents
Cash Flow Statement..................................................................................................................3
(i)................................................................................................................................................3
ii)................................................................................................................................................4
Other Comprehensive Income Statement...................................................................................5
iii)...............................................................................................................................................5
iv)...............................................................................................................................................6
V)................................................................................................................................................7
Accounting For Corporate Income Tax;..................................................................................8
(vi)..............................................................................................................................................8
Vii) Is this figure the same as the company tax rate times your firm’s accounting income?
Explain why this is, or is not, the case for your firm.................................................................9
viii) Comment on deferred tax assets/liabilities that is reported in the balance sheet
articulating the possible reasons why they have been recorded...............................................10
ix).............................................................................................................................................11
X)..............................................................................................................................................12
(xi)............................................................................................................................................13
References:...............................................................................................................................14
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Cash Flow Statement
(i)
Boral Limited is an Australian listed company which is engaged in the business of
manufacturing and supplying of building materials.
Explanation of each item of cash flow and the changes made therein it from the annual
report of Boral Limited.
Cash flow from operating activities:
Receipts from customers: receipts of raw materials, generators etc.
Payment to suppliers/ employees: wages, salary, direct expenses.
Income Tax paid; manufacturing tax, levy of duties, penalties.
Merger/Acquisition cost paid: acquiring cost, cost paid to creditors.
Cash flow from investing activities:
Purchase of property/ land: outflow of cash for purchase of fixed assets.
Purchase of intangibles: purchase of patent and copyrights.
Purchase of entities and business: cash outflow for acquisition of controlled units.
Cash Flow from financing activities:
It includes all proceeds from borrowing, capital raising cost, dividends paid to investors etc.
Net change in cash and cash equivalents: it includes increase or decrease in beginning of
year.
Net change in end of the year: net cash at the end.
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ii)
A brief comparison is drawn for the three years 2015, 2016 and 2017 of Boral Limited as;
Operating activities:
The net cash flow from operating activities for the three respective years 2015, 2016, 2017
are 418, 477.5, 413.3. The difference in 2015-16 is -59.5 increase in cash flow from receipts
from customers and other interest and dividends received. In 2016-2017 the difference is
+64.2 cash outflow because of borrowing cost, income tax paid.
Investing activities:
The net cash flow from investing activities is as follows for the three years as (55.7), (259.5),
( 3731.3). Differences in 2015-16 are -315.2. Cash inflow through repayments of investors,
proceeds from sale non- current assets etc. 2016-17 -3990.8 cash inflow through the disposal
of controlled entities etc.
Financing activities:
The net cash flow from financing activities for the three years are as follows (251.6), (273.4),
3107.0. The differences in 2015-16 are -525 cash inflow from proceeds from borrowing other
receivable of income as market share. In 2016-17 -3380.4 inflow of cash through the
financing activities.
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Other Comprehensive Income Statement
iii)
The comprehensive income statement is the total of net income and excludes the income
statement because they haven't realized, it includes items like foreign currency losses or
gains, Los from the sale of securities. It used to add all the financial and operating activities
that have an effect in changing the interest of owners at large.
It includes the following;
1. Net profit:
2. Other comprehensive income
3. Items reclassified subsequently to income statements:
This includes any changes of foreign currency gains or losses, changes in cash flow hedges,
income tax on reclassified income statements.
4. Total comprehensive income;
5. Total comprehensive income which also attributes to:
Members of the parent entity.
Non- controlling interest.
6.Total comprehensive income
At the footnote it is described as statement of comprehensive income should be read in the
context with notes which form an integral part of financial statements.
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iv)
As we have discussed as comprehensive income includes the all losses, gains, expenses, and
profits when they have not been realised and excludes the net income from income statement.
Examples of comprehensive income are:
1. Gains and losses from unrealised holding from the investments that are available for sale.
2. Gains or losses from foreign currency
3. Gains or losses from pension plan
4. Pension prior service cost
1. Foreign currency losses or gains: it includes any gains or losses arising from the sale of a
product which is denominated in foreign currency. It means rise of foreign exchange rate. For
example whenever a product is sold which denominated in foreign currency the exchange
rate becomes high or low.
2. Pension Plans: pension plans like retirement benefits, gratuity and other pension benefits
are included in comprehensive income. Any gains and losses from comprehensive income are
included in this item.
3. Pension prior service cost: it is the cost of pension expense from the retirement benefits.
4. Gains and losses from unrealised holding: it is the benefits or losses arising from the return
on investments, that are often available for the sale.
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V)
To support this answer we have used the examples. These items are directly related to
unrealized value and profit and loss include only the realized items. On the other hand, the
comprehensive income includes the unrealized items as gains, losses, expenses and revenue
that we get from the foreign currency exchange rates, pension plans, speculation, and hedging
business. Or any gain or losses from other sources, it directly or indirectly does not include
any item of profit and loss.
Thus profit and loss do not include any item of comprehensive income because of net assets.
Now the net assets are the total of assets minus total of all liabilities. The profit and loss
include only the item of income and expense and excludes all realised gains and losses from
any investing, financing or operating activities.
Profit and loss include following income tax paid, all the income from operations and
business activities etc. Thus it is clear why items of comprehensive income are not included
in the profit and loss statements.
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Accounting For Corporate Income Tax;
(vi)
Tax expenses are the expenses of the company for a particular accounting period. They are
the taxes which are the calculated before the income tax rate. They are the actual tax expense
which is done with the calculated method. It totally differs from tax payable. They are the
actual tax. They are not the payable tax.
The income tax expense for the three years respectively is 2015, 2016, 2017 are (45.1),
(32.2), (51.4). These tax expenses reveal the actual tax which is in terms of company to be
paid to the govt they are derived from the various standard calculations. Every company has a
different formula to derive its tax expense.
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Vii)
No, the figure of tax expense is not same as because the net profit of the company is 296.9
and the income tax rate is 30% so it is very indifferent. Other things that income tax expense
does not include the entire amount which is not taxable areas:
Depreciation and amortisation, capital income or losses realised, tax benefits on acquisitions
and mergers etc. But in calculation of the accounting income, it used to take the entire
amount and all other respective principles. So, obviously, the figures are not going to be the
same.
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viii)
Deferred tax assets are depicted on the balance sheet are the taxes that are overpaid or
advance payment of taxes that used to reduce the taxable income. These taxes are returned to
the company as tax reliefs and tax rebates. The govt tries to set off the amount of
overpayment of taxes with the penalties and duties that are levied on the company.
All the deferred taxes are shown in assets side of the balance sheet. This helps to reduce the
company future taxation liability.
The reason as to why they are recorded on the balance sheet.
As explained above that they used to reduce the future tax liability. So they are treated as the
assets of the company and all the assets are shown on the right side of the balance sheet. Now
why they are treated as the assets. Deferred tax assets are the overpaid or advance tax paid are
intentionally paid by the company when they have a lot of repayments from the customers, so
they use it as weapon in order to get future tax reliefs, reduce taxable income, tax benefits
and set off their penalties, duties of tax with this amount.
So deferred assets are a weapon tool which an organisation tries use by former paying
advance tax and latter getting tax reliefs from that overpaid tax.
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ix)
Yes, the company has recorded the current tax assets which are shown as deferred tax assets
in the head of balance sheet for the year ended 30th June for 2015-16, 2016-17.
While the income tax payment is recorded in the head of cash flow statement.
The current tax assets or the deferred tax assets for the year 2015, 2016 and 2017 are as
follows 243.6, 237.4, 128.4.Income tax payable for the three years are as follows 2015, 2016
and 2017 (45.4), (69.4), (41.8).
The income tax payable and income tax expenses are not same as are shown in the figures
because the reason that all the income tax expenses are treated as before the tax and income
tax payable is treated as an after-tax payment.
Where income tax expense are 2015, 2016, 2017 are (45.1), (32.2), (51.4). The income tax
payable are 2015, 2016 and 2017 (45.4), (69.4), (41.8). So we can see the difference in
figures. Where Income tax expense is the firm tax expense and income tax payment is the
actual amount a firm paid after the levy of tax rate and which are given directly to the
government. Not actual that the firm pays the total amount as derived from the formula. So,
they differ in each manner.
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X)
The income tax expense shown in the income statement is 2015, 2016, 2017 ( 45.1), (35.6),
(51.4). Income tax payable for the three years are as follows 2015, 2016 and 2017 (45.4),
(69.4), (41.8).
There is always a difference in the company’s tax expense and tax payable because. As
discussed earlier in other answers as tax expenses are the actual countable tax in the context
of the firm. The company assumes that this is the actual amount of tax that the company has
to pay it is shown as expenses before the tax. It is always shown as a negative balance in the
income statement of the company.
While the income tax payable is always shown as a tax liability until and unless it is not given
to the government. The income tax payable is not the actual amount the company pay
sometimes company may pay advance payment on other hand sometimes it pay less.
Other major difference is: Income tax expense is calculated with standardised method while
income tax is derived only by putting a tax rate. Former is not a tax liability but latter is a tax
liability until its given.
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