Financial Analysis of Audio Pixels Holdings Ltd - Finance Report

This report presents a financial analysis of Audio Pixels Holdings Ltd, examining various aspects of its financial performance. The analysis delves into the company's equity structure, including contributed capital, owner's equity, and retained earnings, highlighting the impact of losses on equity. It explores the company's tax expenses, noting the absence of income tax payments due to sustained losses. The report also investigates the differences between accounting and taxation rules concerning tax rates and deferred tax assets/liabilities, emphasizing the zero values recorded for deferred tax. Furthermore, it contrasts income tax expenses with income tax payable, differentiating between the current year's tax charges and the accumulated tax liabilities. The cash flow statement is compared to the profit and loss account in terms of tax reporting. Finally, the report discusses the treatment of tax in the company's financial statements, including the challenges and new insights gained from the tax recording process. The report is based on the annual reports of Audio Pixels Holdings Ltd.

RUNNING HEAD: Financial analysis of Audio Pixels Holdings Ltd 1
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Topic- Financial analysis of Audio Pixels Holdings Ltd
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Financial analysis of Audio Pixels Holdings Ltd
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Table of Contents
Answer to question-1.............................................................................................................................3
Answer to question-2.............................................................................................................................5
Answer to question no-3........................................................................................................................5
Answer to question no-4........................................................................................................................7
Answer to question no-5........................................................................................................................8
Answer to question no-6........................................................................................................................9
Answer to question no-7........................................................................................................................9
References...........................................................................................................................................12
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Financial analysis of Audio Pixels Holdings Ltd
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With the ramified economic changes and complex business structure, each and every
organization has to run their business effectively. In this report, tax implication on Audio
Pixels Holdings Ltd has been taken into consideration.
Answer to question-1
After analysing the annual report of Audio Pixels Holdings Ltd, it is considered that equity
capital of Audio Pixels Holdings Ltd is accompanied with contributed capital, owner’s equity
and retained earnings.
 Contributed Equity
 Reserve
 Retained Earning
Contributed equity – It is the amount of capital contributed by the shareholders for the
owners’ equity.
Retained earnings- It is the amount of profit which company has accumulated and not
distributed to its shareholders.
Reserve- It is accumulated total distributable profit which could be plugged back by
company in its business (Brigham and Ehrhardt, 2013).
Contributed capital could also be defined as stakeholder’s equity which shareholders have
invested in the company. In 2015, Audio Pixels Holdings Ltd is having AUD $ 37 million
contributed capital which increased AUD $ 45 million in 2016. Accumulated profit of Audio
Pixels Holdings Ltd has also shown negative data as company has been facing high amount
of loss in its business functioning.

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Equity (Amount in dollar
million) ($M)
2015 2016
Contributed equity 37 45
Retained earning (13) (18)
Total equity (24) (24)
Answer to question-2
Tax expenses of Audio Pixels Holdings Ltd
It is considered that tax amount is charged on the profit of company and deducted
from the overall net profit of company. The recording of tax expenses is shown in the profit
and loss accounts. On the other hand, excess payment of tax would be shown in the deferred
tax assets of company. The income tax paid by company is zero. It is observed that company
has been suffering from high amount of loss throughout the time. It is inferred that company
pays tax on its profit. In present case, Audio Pixels Holdings Ltd is having zero amount of tax
implication due to its loss incurring business (Audio Pixels Holdings Ltd, 2017).
Particular(AUD $ in million) 2015 2016

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Income tax expenses 0 0
This table given reflects that company has loss in its business. Therefore, it is not allowed to
pay tax on its loss.
Answer to question no-3
Tax rate figure of the Audio Pixels Holdings Ltd and its comparison with the tax deduction
from the overall accounting income
Current Tax: -
It is evaluated that tax payment of Audio Pixels Holdings Ltd in 2016 is zero. It is analysed
that company has been incurring high amount of losses in its business due to sluggish market
condition. It reveals that company has zero level of tax obligations. Income tax is charged on
the profit of company and for the recording of tax amount, Audio Pixels Holdings Ltd needs
to comply with the IFRS rules and AASB-112. Audio Pixels Holdings Ltd is international
company therefore, in order to harmonize with the domestic and international taxation rules;
it has to comply with the AASB-112.
In order to justify, whether the tax amount computed on the basis of computation i.e.
30% * net profit is no equal to recording of the tax charged on the profit in its financial
statement, following example could be given (Cucchiella, D’Adamo and Gastaldi, 2015).
It is observed that the main differences between both amounts are found due to the
difference between accounting and taxation rules and regulations. For instance, tax rate is

Financial analysis of Audio Pixels Holdings Ltd
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charged on the profit of company i.e. 30% *AUD $ (5) million= AUD .15 million. Company
could take rebate of this amount from the government from their future tax implication. On
the other hand, as per the income tax rules and regulations, tax amount would be zero if there
is no profit earned by company. The main difference between tax amounts arise due to
different recording of tax expenses, revenue in the books of account of Audio Pixels
Holdings Ltd. For instance, recording of bed debts recording, creating provisions and
donations payment is different in as per the accounting and income tax rules and regulations.
Therefore, it could be inferred that due to the difference between taxation rules and
regulations and accounting rules, Audio Pixels Holdings Ltd may not have same tax amount
figures computed by undertaking accounting income to recording of tax in financial statements.

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Answer to question no-4
Deferred tax assets/liabilities of the Audio Pixels Holdings Ltd
Audio Pixels Holdings Ltd has been following international accounting rules and regulations
for recording of taxes in its books of accounts. It is observed that company record deferred
tax amount in its books of account either in its liabilities side or assets side. In Audio Pixels
Holdings Ltd, company has non deferred tax assets or liabilities. Audio Pixels Holdings Ltd
has not recorded deferred tax in its books of accounts.
Recording of Deferred Tax:-
The deferred tax amount recorded in the books of accounts Audio Pixels Holdings Ltd is
zero. The deferred tax amount is recorded in the liabilities side or assets side of company so
that it could be recognized and carried forward to the limit that is reasonably certain for the
future taxable income against which deferred tax assets or liabilities would be realised. The
recording of deferred tax assets and liabilities is recorded due to the difference between
accounting and taxations rules. For instance, if Audio Pixels Holdings Ltd finds that due to
difference between accounting and taxation provision. If company charge higher tax by
considering accounting rules and regulations as compared to tax charged as per the taxations
rules then excess amount would be shown as deferred tax liabilities of company. On the other
hand, if tax is computed less due to different accounting and taxation rules and then excess
payment to government would be recorded as deferred tax assets (Cucchiella, D’Adamo and
Gastaldi, 2015).

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Particular (AUD $ million) 2017 2016
Deferred tax liabilities 0 0
Deferred tax assets 0 0
Note- Audio Pixels Holdings Ltd can never have deferred tax assets and deferred tax
liabilities in its books of account at the same time (Cobham and Loretz, 2014).

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Answer to question no-5
Current tax assets and other income tax payable by company
It is evaluated that current tax payable by Audio Pixels Holdings Ltd is AUD $ 0. Company
has been incurring losses in its business since very long time. It is observed that income tax
payable of company is also zero. Audio Pixels Holdings Ltd is having no tax liabilities as it is
incurring losses since four years. In addition to this, tax is charged on the profit of company.
Therefore, there is zero tax implication on the business functioning of Audio Pixels Holdings
Ltd.
Deferred tax assets of Audio Pixels Holdings Ltd are also zero.
Particular(AUD $ in million) 2016 2017
Income tax payable 0 0
It is observed that company has recorded zero tax payable in its books of accounts.
The income tax payable is the liability which needs to be paid by company.
Why income tax expenses is not same as the income tax payable
It is analysed that income tax expenses charged on the profit and recorded for the
current year in the profit and loss account of company. On the other hand, income tax payable
is the accumulation of the tax liabilities of company which need to be paid by company to
government (Brigham and Ehrhardt, 2013).

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Answer to question no-6
Is the income tax expense shown in the income statement same as the income tax paid shown
in the cash flow statement? If not
Why are the differences?
Cash flow statement could be defined as statement comprised of details about the cash inflow
and outflow from the business in current year irrespective of the fact whether it relates to
current year or previous year. It is the part of the financial statement that is prepared with a
view to analyse the inflow and outflow of cash from the business in particular year. The
On the other hand, profit and loss account of company is prepared with a view to record all
the expenses and revenue of company related to present year. It is prepared with a view to
identify the actual profit and loss of company.
A cash flow statement reveals all the tax payment made by Audio Pixels Holdings Ltd in the
current year irrespective of the fact whether they relates to current year or previous year.
Profit and loss account contains the tax amount which is charged on the current year profit.

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Answer to question no-7
Treatment of tax in your firm’s financial statements
Interesting thing about the recorded its entire tax amount
The main interesting thing about the recording of entire tax amount is related to recording of
tax as per the accounting rules and regulations and accounting rules. The income tax is
recorded in the books of accounts as per the AASB-122. The tax is not charged on the loss
making company. Audio Pixels Holdings Ltd is highly loss making company.
Surprising thing about the recorded its entire tax amount
It is observed that recording of entire tax in Audio Pixels Holdings Ltd related to corporate
governance and procedure of charging tax. It is evaluated that company can never have
deferred tax assets and deferred tax liabilities in its books of account (Henry, et al. 2009).
Difficulty in recorded the entire tax amount
It is observe that Audio Pixels Holdings Ltd may find difficult to record the tax charged on its
profit. It is considered that if company wants to books deferred tax liabilities in the books of
account then it will first have to set off its entire deferred tax assets amount from its financial
statements.
The main difficulty would be for stakeholders of Audio Pixels Holdings Ltd who
might find difficulty to understand the taxations rules and accounting policy of company.
However, by reading notes to account, shareholders may find easy to understand tax
recording process of company (Evans, 2016).

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