Detailed Financial Report Analysis of Industria REIT (2015-2016)

This report provides a comprehensive financial analysis of Industria REIT, an Australian real estate investment company. It examines the company's equities, including contributed equity and retained earnings, and analyzes the changes in these values. The report delves into Industria REIT's tax expenses, comparing current and deferred tax figures, and explores the company's taxation policies, including its adherence to AASB 112. It details deferred tax treatments, tax assets and liabilities, and the differences in income tax expenses as shown in the cash flow statement versus the profit and loss statement. The analysis concludes with an overview of Industria REIT's tax structure, including its tax consolidation structure and the recognition of deferred income tax assets.

Running head: FINANCIAL REPORT ANALYSIS OF INDUSTRIA REIT
FINANCIAL REPORT ANALYSIS OF INDUSTRIA REIT
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FINANCIAL REPORT ANALYSIS OF INDUSTRIA REIT
Executive Summary
The key objective of this assignment is to analyse the annual financial report of Industria Reit
ltd and comment on the same. The report will be recognizing different kind of equities which
are depicted in the annual financial reports of Industria Reit and also access the reason for the
changes in the value of equity in the financial statements. The report will be providing more
emphasis on the treatment of taxes of the company and analyse the tax expenses of the
company in contrast with figures of previous year. The report will then be concluding with
how the company will be handling its taxes and also deal with the current and deferred tax
expenses in the company.

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FINANCIAL REPORT ANALYSIS OF INDUSTRIA REIT
Table of Contents
Introduction................................................................................................................................3
Overview of the Company.........................................................................................................3
i. Equities of Industria Reit....................................................................................................3
ii. Tax Expenses of Industria Reit...........................................................................................4
iii. Taxation Policy of Industria Reit....................................................................................4
iv. Deferred Tax Treatments of Industria Reit.....................................................................5
v. Tax Assets/Liabilities of Industria Reit Ltd........................................................................5
vi. Difference in Income Tax Expenses...............................................................................6
vii. Tax Structure of Industria Reit........................................................................................6
Conclusion..................................................................................................................................6
Reference....................................................................................................................................7

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FINANCIAL REPORT ANALYSIS OF INDUSTRIA REIT
Introduction
Corporate Accounting is defined as the process of preparing of financial reports of a
company in a systematic and presentable manner which can display the financial performance
of the particular in that particular year. The financial reports of any organisation consist of a
Consolidated statement of profit and loss, a consolidated Balance sheet and a Consolidated
Balance Sheet (Wang, C., 2014). The main purpose of a financial report is to show the
financial performance of the company in a particular year. In other words a financial report is
a summarised report which contains the financial data of a company. The financial reports are
prepared following certain established principles, standards and conventions.
Overview of the Company
Industria Reit is an Australian listed company which is engaged Real Estate
investment business. Its headquarters is situated in Australia. The company has businesses in
Melbourne, Sydney and Adelaide. The total valuation of the company as per recent estimates
is around $ 638 million (Industriareit.com.au.2018).
i. Equities of Industria Reit
The stocks or securities which the company issues to the public in order to acquire
capital are shown as equities in the balance sheet of the company. These types of equities
may comprise of shares, bonds and other marketable securities (Koijen, Lustig and Van
Nieuwerburgh 2017).
As per the balance sheet of Industria Reit, the company has two items as shown as
equity:
1. Contributed Equity: This means the equity capital of the company which is
contributed by the public when shares are issued by the company. This is the capital

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FINANCIAL REPORT ANALYSIS OF INDUSTRIA REIT
which is contributed by the investors to the company as investments in shares. In
other words, it is a figure which shows all the stock which the investors invest in
during a particular year in the company. The contributed equity of the company was
$165674000 in 2015 which decreases to amount of $165096000 in 2016 which shows
that there is a decrease in contributed equity from the past year. The reason for
decrease in the contributed equity from last year is due to the buyback programs
which the business has undertaken.
2. Retained Earnings: Retained earning refers to that part of profits which are kept aside
by the business for either reinvesting in business or distribute it as profits.
Accumulated losses refer to a situation where the company does not have profits and
has incurred loss over some years which has accumulated over the years. In most
practices in accounts, retained earnings are used to set off accumulated losses of the
company so that the balance sheet is cleared out of such accumulated losses. The
company has accumulated losses of $384000 in 2015 and this becomes positive figure
and shows retained earnings of $10922000.
ii. Tax Expenses of Industria Reit
The company does have any current tax expenses in the year 2016 which was in the
$74000 in 2015. The company follows the relevant tax policies which is as required by
AASB. Deferred tax and current tax expenses combined together makes up the tax expense of
the company. The deferred tax of Industria Reit which is as $ 78000 in 2015 and $ 234000 in
2016.
iii. Taxation Policy of Industria Reit
The company follows all the tax laws which are in force in the country. There are no
current tax expenses of the company for the present year 2016 and only has a deferred tax

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FINANCIAL REPORT ANALYSIS OF INDUSTRIA REIT
benefit of $ 234000. The current tax expenses of 2015 was $ 74000 and the deferred tax was
$ 78000. The company charges taxes at the rate of 30% as per the relevant rules of
Australia . The company does not have any tax expenses for the current year as the profit
which the company earns from ongoing operations amounts to $ 31027000 and the company
also has control over a non taxable trust entities which has a loss of $ 31917000 which will be
set off. After the set off is done the company has a net loss figure of $ 890000 (Sialm and
Starks 2012). The tax rate is charged at the rate of 30% on the figure of $ 890000 which
results in the tax benefit figure of $ 267000 as shown in the notes of accounts in the financial
statement of Industria Reit.
iv. Deferred Tax Treatments of Industria Reit
Deferred tax asset and Deferred Tax liabilities are both related to the tax treatments
which is followed in the company. The deferred tax assets and deferred tax liabilities arises
due to temporary difference between accounting treatments and tax treatments. The deferred
tax liability of the business for the year 2015 is $ 2069000 and the same has increased to $
2303000 in 2016. One of the examples to a situation where deferred tax assets or liabilities
arise is in treatment of depreciations which have separate treatment in accounts and tax as
well (Wahab and Holland 2012).
v. Tax Assets/Liabilities of Industria Reit Ltd
There is no current tax asset or liability in the balance sheet as shown in the financial
statements for the year 2016. However there was income tax recoverable of $ 82000 in the
year 2015. This figure is shown in the other assets in the balance sheet for the year 2015
(Gallemore, Maydew and Thornock 2014). The notes to accounts show that other assets
contain an income tax recoverable of $ 82000 for the year 2015.

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FINANCIAL REPORT ANALYSIS OF INDUSTRIA REIT
vi. Difference in Income Tax Expenses
The cash flow statement shows that there is tax refund of $ 71000 in 2016 and the tax
paid in 2015 was $ 437000. There is a difference between the figures shown in cash flow
statement and figures shown in profit and loss account. The system in which the company
pays its taxes can also be a reason for the difference in income tax expenses. Another reason
may be that the income tax expense as shown in the current year also contains part of
deferred tax assets which might have caused the variation.
vii. Tax Structure of Industria Reit
The financial reports analysis of Industria Reit ltd shows that the company follows the
AASB 112 in order to calculate the tax of the company. The company has a deferred tax
liabilities which can be used to adjust the taxes which are to be paid in future. Deferred
income tax assets are recognised in the financial statements for a variety of reasons which are
mainly due to difference in treatment of tax and accounts or due to excessive tax paid or not
paid in the previous years. The company follows tax consolidation structure for its operating
business and non taxable trust.
Conclusion
The main aim of this assignment is to analysis the annual financial report of Industria
Reit. The assignment will be covering the different types of equity which the company has
shown in the balance sheet and also cover the areas of how much tax the company pays and
also if there is any deferred tax or current tax assets in the financial report of the company.
The report also states the tax rate at which the company is charged with and the reasons as to
why the tax paid as shown in cash flow statement differs from the tax payments in the profit
and loss statement.

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FINANCIAL REPORT ANALYSIS OF INDUSTRIA REIT
Reference
Gallemore, J., Maydew, E.L. and Thornock, J.R., 2014. The reputational costs of tax
avoidance. Contemporary Accounting Research, 31(4), pp.1103-1133.
Industria REIT. (2018). Industriareit.com.au. Retrieved 21 January 2018, from
http://www.industriareit.com.au
Koijen, R.S., Lustig, H. and Van Nieuwerburgh, S., 2017. The cross-section and time series
of stock and bond returns. Journal of Monetary Economics.
Sialm, C. and Starks, L., 2012. Mutual fund tax clienteles. The Journal of Finance, 67(4),
pp.1397-1422.
Wang, C., 2014. Accounting standards harmonization and financial statement comparability:
Evidence from transnational information transfer. Journal of Accounting Research, 52(4),
pp.955-992.