Corporate Accounting Analysis: Isentia Group Limited Financial Report

This report provides a comprehensive analysis of the corporate accounting practices of Isentia Group Limited. It delves into the key components of the company's balance sheet, focusing on equity, including issued capital, reserves, and retained earnings, and how these elements evolved from 2016 to 2017. The report examines the calculation and impact of tax expenses, including the standard corporate tax rate and the factors contributing to differences between tax expenses and actual tax payments, such as non-deductible expenses, differing tax rates for subsidiaries, and non-assessable income. It also explores deferred tax assets and liabilities, explaining their origins and implications for the company's financial position. Furthermore, the report discusses the relationship between income tax expense and income tax payable, highlighting the reasons for any discrepancies and the impact of tax accounting and financial accounting rules. Finally, it evaluates the company's tax treatment as presented in its financial statements, including the differences between the income statement and cash flow statement, and concludes that the company adheres to Australian Taxation Law regulations.

Running head: CORPORATE ACCOUNTING
Corporate Accounting
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Table of Contents
Answer 1..............................................................................................................................2
Answer 2..............................................................................................................................3
Answer 3..............................................................................................................................4
Answer 4..............................................................................................................................5
Answer 5..............................................................................................................................6
Answer 6..............................................................................................................................7
Answer 7..............................................................................................................................8
References............................................................................................................................9

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Answer 1
There are three vital aspects within the company’s balance sheet and one among these
aspects is considered to be equity. There is no exception to this fact in case of Isentia group
limited. In the year 2017, the company’s balance sheet elucidated that its capital issued has
reserves, earnings those are retained along with contributed equity. Issued capital is deemed to be
equity associated with the business organizations. Computation of capital issued is carried out
through overall outstanding share multiplication along with every shares face value. As part the
annual report of Isentia group limited an increase on the issue capital cab be observed in the year
2017 in comparison to 2016, which is $ 402,472,000 in 2017 from $ 424,072,000 in 2016
(Agrawal and Cooper 2017). There are various major aspects pertaining to the issued capital and
such aspects include issuance of ordinary shares, issuance related to share cost and income tax
pertaining to issuance of shares. Another aspect that is considered within the equity of the
company is reserves. Taking into account financial accounting concept, reserve is deemed as a
fraction of the organization’s equity. Instead of primary share capital, this could be termed as the
additional amount. According to the annual report of Isentia Group in 2017, it could be observed
that the equity reserves of the year have raised considerably compared to those in 2016. Three
types of equity reserves acquired by the company includes employee benefit equity reserve,
reserve for translation of foreign currency and reserve for hedging.
In its current asset base, the organization considers its income tax payout. In its statement
of cash flow, Isentia Group has depicted decrease in income tax paid in 2017, which signifies
positive usage of cash. This signifies that certain aspects of the tax expenses that have been

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deducted before mentioning them within the cash flow statement. For such causes, the
differences within tax expenses might be observed within cash flows and income statement.
Another component within Isentia group limited Company is retained earnings. With the
help of retained earnings, the total losses and profits of the organization could be identified along
with the payment of dividends made to the shareholders. The current annual report of this
company signifies that Isentia group limited has retained earnings of around in the year 2017 in
comparison to year 2016 that has around (Warren and Jones 2018). This denotes that the
organization has made additional net income, which has helped in retaining a greater portion of
its income even after the shareholders are rewarded with dividend payouts. Certain aspects of
retained earnings within Isentia group limited include net profit linked with the members of the
company, dividends paid or given along with restatement effect. All such aspects fall under the
major components of equity within Isanti group limited.
Answer 2
Within business companies, several kinds of expenses can be observed that includes
administrative expenses, selling expenses along with many more and one such expense is
considered to be tax expense. Moreover, tax expense is deemed to be a major liability for the
company that is a part of the federal, state along with municipal governments of the nation. The
tax expense is calculated by subtracting all expense and costs from the revenue and interest
expense and tax rate are deducted from the remainder along with non-deductible items, tax assets
and liabilities (Arnold, Harris and Liu 2016). The annual report of Isentia Group Limited states
that the profit after tax of the organization has been $77,613,000 in 2017, which was
$66,583,000 in 2016. The Australian regulatory authority has set the standard corporate tax rate

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of 30%. Relied on such tax rate, overall tax expenses of the company are deemed to be $
35,686,000 in 2017 and $ 43,620,000 in 2016. It might also be gathered that there is a drastic
increase in overall tax expenses of Isentia group limited due to increase in the business income
for the organization in 2017 in contrast to the year 2016.
Answer 3
Considering the above explanation, it can be gathered that Isentia group limited has
profits of around in the year 2017 and in the year 2016 from its continuing operations before the
income tax changes. As identified from the annual report of the organization, it has applied tax
rate of 30% in order to compute its tax expense. Through implementation of definite rate of tax,
the company might have $ 76,284,000 ($ 87,613,000*35%) in 2017. On the other hand, in the
year 2016 it is observed to have 32,975,000 ($ 66,583,000*30%). Conversely, the real tax
expense of Isentia group limited in the years 2017 and 2016 are respectively $87,613,000 and
$66,583,000. A high difference can be observed within the tax expenses of the company. In the
company’s situation there are certain causes for certain differences within tax expenses despite
of having the identical tax rate of 30% (Balakrishnan, Watts and Zuo 2016). Within the
preliminary expenditure of overall tax, various partial items are either taken into account or they
are not considered at all. These aspects might be deemed as the causes for the tax expense
differences.
Within Isentia group limited, there are more than five aspects that has further impact on
the company’s total tax expenses. The first component encompasses non-deductible expenses in
order to determine the taxable profits. There are several expenses within the company that must
not be eliminated from the organization’s income. Due to the same, $ 79,000 and $ 538,000

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added within the years 2017 and 2016 respectively. Another component is the existence of
distinct tax rates for the organization’s subsidiaries. Isentia group limited applies the standard
rate of 30% in Australia, while it operates in New Zealand and USA as well. In New Zealand,
the standard tax rate of 28% is applied, while in USA, it applies the tax rate of 34%, as laid out in
the legislations of the nation. Due to such difference within tax rate $ 15000 and $ 18000 was
reduced from the company’s tax expenses on the year 2016. There are certain items that must be
added back with the company’s tax expenses and because of the same $ 79,000 and $ 538,000
was added. The final component includes existence of non-assessable income as certain incomes
are not needed to be evaluated within the taxation and for this reason; $66,583,000 is added with
overall tax expenses.
Answer 4
The most crucial concepts related to the tax functioning of the companies comprise of
deferred tax assets and liabilities. The occurrence of deferred tax assets is inherent at the time the
companies make more payments than the actual amount of taxes to be paid or they make prior
payments of tax on their financial assets. In addition, deferred income tax liability indicates a
condition in which differences can be observed as tax and profit carrying value of the
organization. In case of Isentia group limited, it might be gathered that the organization has
presented its deferred tax liability along with assets within the financial position statement. It has
been observed that the deferred tax asset base of the organization has been $7,394,000 in 2016,
which increased to $13,637,000 in 2017. The deferred tax liability base of the organization has
been $113,908,000 in 2016, which increased to $119,433,000 in 2017. For deferred tax assets,
the company might have incurred additional amount on depreciation due to the variation among
depreciation and taxable depreciation rate (Dagwell, Wines and Lambert 2015). Because of high

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payment within depreciation, Isentia group limited might not be capable to address the tax
amount in the next year because of which it is deemed as an asset. Considering the deferred tax
liabilities, it might take place because of temporary differences in the organizational profit and
the organization has to pay less taxes within the current year. For this reason, it is necessary for
the business to address that in the upcoming years because of which it can be addressed as
liability.
Answer 5
Payable income tax and current tax assets is deemed to be a vital factor for the
companies. Within the annual report of Isentia group limited, the company is observed to report
about their current tax assets. Based on the annual report of 2017, it could be found that the
company has not disclosed any current tax asset in the year. Moreover, in the year 2016, the
organization reported to be $ 21,460,000 as the current tax assets and liabilities.
Additionally, it has been found out that the income tax expense and income tax payable
of the organization vary from each other due to specific reasons for such disparity. The presence
of deferred tax assets is the sole reason. There exist several cases in which the organization pays
additional amount of taxes in contrast to the tax expenses. Under such scenario, the excess
payment of tax leads to generation of deferred tax assets making the variation. However, the
rules related to tax accounting and financial accounting are not similar, which could be
considered as another reason (Ermakova and Gudshatullaeva 2016). Within this concept, an
instance of depreciation might be explained. Depreciation based differences might be observed
within financial along with tax accounting for distinct depreciation rate. For this reason, the final

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depreciation payable amount might be either decreased or enhanced and there are certain causes
behind differences among income tax payable and expenses.
Answer 6
Within the financial statements of Isentia group limited, the organization has explained
regarding certain tax expenses within the income statement along with the cash flow statement.
Additionally, it might be gathered that the company has presented to distinct amount set within
cash flow and income statement (Shapiro 2015). In the profit and loss account, Isentia Group
Limited has reported its income tax expense as $ 25,686,000 in 2017, which was $23,620,000 in
2016. On the other hand, the income tax paid in the cash flow statement of the company has been
$ 21,460,000 in 2016, which has fallen to $19,298,000 in 2017. There are certain major causes of
such disparity within the income tax expense amounts. In the statement of income, it has been
found that the company applies the 30% standard tax rate on its profit before tax to arrive at the
net income. However, this process is not applicable when it comes to the cash flow statement.
For this reason, it requires being explained that the tax expenses fall within the cash flow from
the operating conducts (Feng et al. 2014). The case of the cash flow statement varies in this
aspect. In such scenario, it requires being explained that the tax expenses fall within the cash
flow from the operating conducts and certain aspects of the income statement are treated in a
distinct manner. Various changes have occurred in the liabilities and assets of the company as
identified. In the current asset base, Isentia Group Limited takes into account the income tax
payment. In its statement of cash flow, Isentia Group has depicted decrease in income tax paid in
2017, which signifies positive usage of cash. This signifies that certain aspects of the tax
expenses that have been deducted before mentioning them within the cash flow statement. For

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such causes, the differences within tax expenses might be observed within cash flows and
income statement.
Answer 7
Based on the above evaluation, it could be cited that Isentia Group Limited presented its
tax treatment in an effective fashion and there are less confusing or surprising parts associated
with the same. The company has carried out all its tax treatments through abiding by the
Australian Taxation Law regulations and rules. Because of high payment within depreciation,
Isentia group limited might not be capable to address the tax amount in the next year because of
which it is deemed as an asset. Considering the deferred tax liabilities, it might take place
because of temporary differences in the organizational profit and the organization has to pay less
taxes within the current year. For this reason, it is necessary for the business to address that in the
upcoming years because of which it can be addressed as liability (Lee 2016).
Conversely certain justifications and objections was dealt by the firm in concern to
taxation factors which encompass deferred tax liabilities as well as assets, current tax liabilities,
rate of tax along with other assets. Equally, there are certain interesting aspects within the tax
treatment of the company. The most vital a factor is concerning the company’s examination
regarding the difference among overall tax expense. Isentia group limited has offered elaboration
regarding five vital aspects that is accountable for generating difference within tax expenses.
Within the table, the company has presented all its commutations. One vital factor takes into
account tax expenses variations within income along with cash flow statement (Ramanna 2014).
There are all vital factors that supports in enhancing improving the understanding and knowledge

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of company’s taxation. From such evaluation, a person can attain a view and knowledge
regarding the company’s tax treatments.

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References
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Arnold, L.W., Harris, P. and Liu, M., 2016, January. CORPORATE ACCOUNTING
MALFEASANCE: AN OVERVIEW. In Global Conference on Business & Finance
Proceedings (Vol. 11, No. 1, p. 202). Institute for Business & Finance Research.
Balakrishnan, K., Watts, R. and Zuo, L., 2016. The effect of accounting conservatism on
corporate investment during the global financial crisis. Journal of Business Finance &
Accounting, 43(5-6), pp.513-542.
Dagwell, R., Wines, G. and Lambert, C., 2015. Corporate accounting in Australia. Pearson
Higher Education AU.
Ermakova, N.A. and Gudshatullaeva, E.M., 2016. Peculiarities of the Application of Income Tax
Standards by the Subsidiary Company in the Russian Accounting Practice. International Journal
of Environmental and Science Education, 11(13), pp.5873-5882.
Feng, L., Xiao, X., Zhao, T. and Wang, Y., 2014, June. Accounting conservatism and corporate
financial constraint—A research based on two conservatism perspectives. In Service Systems
and Service Management (ICSSSM), 2014 11th International Conference on (pp. 1-6). IEEE.
Lee, R.T., 2016. Fixed and Variable Costs: When Accounting Is the Opposite of Cash Flow
Reality. Journal of Corporate Accounting & Finance, 27(4), pp.31-35.

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Ramanna, K., 2014. Political standards: Accounting for legitimacy.
Shapiro, D.M., 2015. Assessing Corporate Governance in M&As. Journal of Corporate
Accounting & Finance, 26(2), pp.35-39.
Warren, C.S. and Jones, J., 2018. Corporate financial accounting. Cengage Learning.