Accounting for Managers: Qantas Balance Sheet Analysis Report

This report provides a comprehensive financial analysis of Qantas Airways, the flag carrier of Australia, operating within the aviation industry. It examines the industry's characteristics and its contribution to the Australian economy. The report delves into the specifics of Qantas's financial statement...Read More

Running head: ACCOUNTING FOR MANAGERS
Accounting for Managers
Name of the Student
Name of the University
Author’s Note

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Table of Contents
I. The Business.................................................................................................................................2
II. Industry and Financial Statement Characteristics.......................................................................2
Industry........................................................................................................................................2
Characteristics of Financial Statements.......................................................................................3
III. Major Elements of Balance Sheet..............................................................................................3
IV. Accounts with particular Interest...............................................................................................4
References........................................................................................................................................6

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I. The Business
Qantas Airways (Qantas) is the flag carrier of Australia and it is regarded as the largest
airline in the country in terms of size of fleet, international flights and international destinations.
In addition, Qantas is also considered as the third oldest airlines of the world after KLM airlines
and Avianca airlines (qantas.com, 2018). Qantas commenced their business operation in the year
of 1921 and the company is headquartered at Mascot, Sydney, Australia. The fleet size of Qantas
is 127 and it covers a total of 85 destinations. The company has some major subsidiaries; they
are QantasLink, Jetstar Airways, Jetconnect, Qantas Holidays, Qantas Freight and others. In the
recent years, the company has been developing their business strategies by considering four
major forces that are likely to have biggest impact on their business; they are geopolitical shift
along with the rise of Asia, big data as well as digitalization, shifting the customers along with
the preferences of workforce and climate change along with resource constraints (qantas.com,
2018).
II. Industry and Financial Statement Characteristics
Industry
In this context, it needs to be mentioned that Qantas operates in the aviation industry of
Australia. The aviation or airline industry is a major contributor in the development of the
economic condition of Australia. In the year 2017, the aviation industry of Australia fetched
annual revenue of $43.54 billion and it contributed $15.91 million to the Australian economy in
the same year (australianindustrystandards.org.au, 2018). The aviation industry of Australia
provides employment to more than 88,000 people in five major subsectors; they are international
commercial aviation, domestic commercial aviation, general aviation, air-freight transport and
aviation support infrastructure. The presence of some major competitors can be seen like Qantas
and Virgin Australia; and the performance of these major players affects the Australian aviation
industry (aph.gov.au, 2018). For this reason, the presence of major price completion can be seen
in this industry. In the year 2017, the aviation industry of Australia was able to fetch a profit of
$4.12 billion. The aviation industry of Australia consists of almost 1865 businesses. After

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considering the progress of this particular industry, it is expected that there will be 11.5% growth
in employment in this industry by 2023 (australianindustrystandards.org.au, 2018).
Characteristics of Financial Statements
The financial statements of Qantas have some specific characteristics and these
characteristics largely depend on the country specific accounting frameworks. The major
characteristics of the financial statements of Qantas are shown below:
o The consolidated financial statements of Qantas for the year 2017 consist of the interests
of Qantas and its controlled entities in investments under the equity method
(investor.qantas.com, 2018).
o The consolidated financial statements of Qantas for the year 2017 were authorized for
issue as per the resolution of the Directors of the group (investor.qantas.com, 2018).
o The consolidated financial statements of Qantas are considered as the general purpose
financial statements and they have been prepared according to the Australian
Accounting Standards Board (AASB); and the company also follows the standards of
Corporations Act 2001 (investor.qantas.com, 2018).
o The compliance of the financial statements of Qantas can also be seen with the
regulations and standards of International Financial Reporting Standards (IFRS) as
provided by the International Accounting Standard Board (IASB) (investor.qantas.com,
2018).
o The financial statements of Qantas for the year 2017 have been prepared on the
historical cost basis; and the exceptions of this rule are derivatives, assets classification
and net defined benefits from assets as they are measured under fair value basis
(investor.qantas.com, 2018).
III. Major Elements of Balance Sheet
In the Balance Sheer as at June 2017 of Qantas, the presence of some major elements can
be seen that are related to the major interest area of the industry. The first element is the
investments accounted for under the equity method and increase in this asset can be seen in 2017
from 2016 that is $214 million from $197 million (investor.qantas.com, 2018). This increase
implies that investment in the company has been increased. The next aspect is the asset position

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of the company that includes PPE (property, plant and equipment) and intangible assets. In both
of the cases, it can be seen that there is increase in these aspects in 2017 as compared to 2016.
After the assets, liabilities hold major interest in the Australian aviation industry. It can be seen
that there is an increase in both the total current liabilities and total non-current liabilities of the
company (investor.qantas.com, 2018). Under the liabilities, there is an increase in the current
payable of Qantas in the year 2017 from 2016; and it indicates towards the increase in the
present business obligation of the company (investor.qantas.com, 2018). At the same time,
Qantas received revenue in advance in the year 2017 as compared to 2016; and it has increased
the current business obligation of Qantas. It can also be seen from the balance sheet that the
interest bearing liabilities of the company have decreased in the year 2017 as compared to 2016
(investor.qantas.com, 2018). Interests bearing liabilities in Qantas are both the secured and
unsecured bank loans; and the decrease in this indicates that Qantas has become less dependent
on these loans for capital. The balance sheet also shows that there is decrease in the issued
capital in 2017 as compared to 2016. This is for the reason that the company has issued less
number of shares in 2017 as compared to 2016 (investor.qantas.com, 2018).
IV. Accounts with particular Interest
The presence of some specific accounts can be seen in the balance sheet of Qantas that
occurred due to some special event in the financial year of 2017 and they are discussed below:
o The first aspect is the presence of deferred tax liabilities in the balance sheet that is $353
million in the year 2017 where there was not any deferred tax liabilities in the year 2016
(investor.qantas.com, 2018). Deferred tax liability is an item of balance sheet that is
occurred due to the temporary difference in taxes for future payment and the taxes for
today (Laux, 2013). It can be seen from the notes to the financial statements that Qantas
has some specific items that have created difference in taxation; they are inventories,
PPE, intangible assets, interest bearing liabilities, provisions, other financial assets and
others. The taxation differences in all these aspects lead to the creation of deferred tax
liabilities of $353 million in 2017 (Bauman & Shaw, 2016).
o The next account in the balance sheet of Qantas is to receive revenues in advance
(investor.qantas.com, 2018). According to the notes to the financial statements of Qantas,

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the main reasons for the happening of advanced revenue received are due to unvalued
revenue of the passengers, unredeemed Frequent Flyer revenue and other revenue
received in advance (investor.qantas.com, 2018).

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References
Australian Industry Standards., (2018). AVIATION INDUSTRY 2018 KEY FINDINGS
DISCUSSION PAPER. Retrieved 31 October 2018, from
http://www.australianindustrystandards.org.au/wp-content/uploads/2018/02/Aviation-
Key-Findings-Paper2018V4Web.pdf
Bauman, M. P., & Shaw, K. W. (2016). Balance sheet classification and the valuation of deferred
taxes. Research in Accounting Regulation, 28(2), 77-85.
Laux, R. C. (2013). The association between deferred tax assets and liabilities and future tax
payments. The Accounting Review, 88(4), 1357-1383.
Parliament of Australia., (2018). Australian Airline Industry. Retrieved 31 October 2018, from
https://www.aph.gov.au/About_Parliament/
Qantas Group., (2018). Annual Report 2017. Retrieved 31 October 2018, from
https://investor.qantas.com/FormBuilder/_Resource/_module/doLLG5ufYkCyEPjF1tpgy
w/file/annual-reports/2017AnnualReport.pdf
Qantas Group., (2018). Qantas Group Corporate Information. Qantas.com. Retrieved 31
October 2018, from https://www.qantas.com/au/en/qantas-group.html