Corporate Accounting Report: Financial Statement Analysis

This report provides a comprehensive analysis of a corporate accounting report, focusing on key financial aspects. It begins with an analysis of the cash flow statement, highlighting the changes in cash from operations and the overall liquidity position of the company, comparing it to a competitor. The report then delves into specific accounting standards, including AASB 107 and impairment assessments, explaining how assets are evaluated for impairment and the related accounting treatments. It examines dividend payment information, other comprehensive income items, and the executive share option plan. The report also covers reserves, auditor's remuneration, and the presentation of financial statements, including deferred tax liabilities and income tax calculations. Finally, it includes a reflection report summarizing the importance of the annual report in reflecting the financial position of the company and the role of auditors in verifying financial information.

Running head: CORPORATE ACCOUNTING
Corporate accounting
Name of the student
Name of the university
Author note

1CORPORATE ACCOUNTING
Table of Contents
a. Analysis of cash flow statement.........................................................................................2
b. AASB 107...........................................................................................................................2
c. Impairment..........................................................................................................................2
d. Dividend paid information..................................................................................................3
e. Other comprehensive income.............................................................................................3
f. Executive share option plan................................................................................................3
g. Reserves..............................................................................................................................4
h. Auditor’s remuneration.......................................................................................................4
i. Presentation of financial statement.....................................................................................5
j. Deferred tax liability...........................................................................................................6
k. Income tax...........................................................................................................................7
n. Accounting standard.............................................................................................................7
Reflection report.........................................................................................................................7

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a. Analysis of cash flow statement
It has been identified from the cash flow statement of the company that the cash from
operation amounted to $ 437,691 thousand for the year closing on 30th June 2016 whereas the
same for the year closing on 30th June 2015 was $340,448 thousand. Therefore, the
percentage increase was 28.56%. However, the closing cash balance decreased to $ 103,631
thousand in 2016 as compared $ 153, 220 of 2015. It indicates that the liquidity position of
the company is decreasing as the ability to pay off the short term obligation is reducing.
On the other hand, one of the competitors of the company Woolworths closing cash
for the year 2016 was $ 956,000 as compared to $ 133,340 thousand for 2015. Therefore, it is
identified that the liquidity position of Woolworths is better.
b. AASB 107
After the amendment in AASB 107 that is issued on March 2016 under the added
paragraph of 44A to 44E, note 28b given on page 112 is not required
c. Impairment
The asset is impaired when there is a indication that any loss event has been occurred
to the asset after its recognition or there is clear indication that the loss will have impact on
the forecasted future flows of cash from the financial asset or the group of asset that can be
estimated reliably. Amount of impairment is determined through calculating the carrying
amount and the market value of the asset. If the carrying amount of the asset is more than its
market value then the difference is charged to impairment. The impairment for the year
closed on 30th June 2016 provided for the following assets –
 Computer software - $ 18,83,000

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 Equity accounted investments - $ 72,35,000
d. Dividend paid information
Detail information for payment of dividend is given in Note 25 of the notes to
financial statements for the year closing dated 30th June 2016.
e. Other comprehensive income
Under the IFRS (international financial reporting standards) as well as the GAAP
(generally accepted accounting principles) the other comprehensive income are those
expenses, losses, revenues and gains which are not included in the calculation of net income
under the income statement rather they are listed after the net income in the statement of
income or shown separately through the statement of comprehensive statement after arriving
at the figure of the net income. Under the statement of comprehensive income the expenses,
losses, revenues and gains appear even before their realization. Other comprehensive income
gives the user of financial statement more detailed information regarding the financial status
of the company though practically it involves various complexities. Items under
comprehensive income for the year closed on 30th June 2016 were as follows –
 Translation related to foreign currency
 Net gain on the fair value of the investments available for sale
 Investment related to hedging of cash flows
 Effect of income tax on the hedging movement of cash flows

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f. Executive share option plan
During the year closed on 30th June 2016, under the executive share option plan, the
total number of vested options were 17,01,000 and the option remained unvested were
16,34,000. The details regarding this are as follows –
Name of the executive No. of vested
option
value No. of unvested
option
Value
J. E. Slack-Smith 567,000 $ 159,894 817,000 $ 287,394
D. M. Ackery 567,000 $ 159,894 - -
C. Mentis 567,000 $ 159,894 817,000 $ 287,394
Total 17,01,000 $ 479,682 16,34,000 $ 574,788
g. Reserves
The reserves of the company for the year closed on 30th June 2016 amounted to $
155,814,000. The information related to the reserves can be found in Note 24 of the notes
related to the financial statement. Various reserves of the company were as follows –
 Reserve related to foreign currency transactions
 Reserve related to revaluation of asset
 Reserves from available for sale
 Reserve from hedging of cash flow
 Acquisition reserve
 Reserves related to benefits on employee equity

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h. Auditor’s remuneration
The audit was carried out by Ernst & Young. Various items disclosed under the
remuneration of the auditor are as follows –
 Review or audit of the company’s financial statement and any other company
included under the consolidated organization
 Tax services with regard to organization and other organization included under the
consolidated organization, if any.
 Any other services with regard to the organization and other organization included
under the consolidated organization, if any.
Total amount of remuneration paid to the auditors for the year closed on 30th June
2016 amounted to $ 20,17,117. Other consulting fees paid by the company were as follows –
 Legal fees amounted to $ 24,59,461
Proportion of audit fees compared to legal fees was 45%. This proportion of fees is
acceptable as the legal fees is paid for providing the service throughout the year, whereas, the
audit work is carried out for short span of time. Through the auditing plays an important role
in approving the financial results of the company, the auditors have to dedicate only a part of
the year to carry on the audit of any organization. On the other hand, the legal works are
carried out all over the year. Therefore, the fees proportion as compared to the legal fees is
justified.
i. Presentation of financial statement
As per the AASB 101, Paragraph 71, no prescribed format is there to present the
financial statement. Para 68 just specified the items that are different in function or nature to
guarantee the separate presentation in the balance sheet or income statement. Further, the line

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items are involved while the function, nature or size of the item or in aggregate with the same
item is in such way that the separate presentation is required for understanding the financial
status of the company. Therefore, no specific ruling is there with regard to presentation of
items as per nature or function. However, Harvey Norman presents their expenses in the
income statement by function.
j. Deferred tax liability
The company identifies all the temporary differences that are taxable as the deferred
tax liabilities except –
 With regard to the temporary differences that are taxable and associated with the
investment in the associates, subsidiaries and the interest in the joint ventures except
the situation where the reversal of timing difference may be controlled and are
predicted that it will not take place in the foreseeable future.
 While it is arrived from initial recognition of the liability in transaction where it is not
the business combination at the time of transaction that does not have an impact on
the taxable profit or accounting profit.
Deferred tax liabilities recognized by the company were as follows –
 Revaluation of the investment properties to its fair values - $ 116,814,000
 Revaluation of the buildings and land that is occupied by the owner to its fair values
- $ 30,677,000
 Reversal of the depreciation on building for the investment properties - $ 70,085,000
 Non-allowable depreciation on building owing to the legislative changes of New
Zealand - $ 17,798,000

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 Difference among the computer software’s tax base cost and accounting carrying
amount - $ 479,000
 Development and research - $ 17,053,000
 Other items - $ 23,61,000
k. Income tax
As per the income statement the total income tax was $ 142,423,000 whereas as per
the changes in equity the income tax payable amount is $ 46,92,000. The amounts are
different as in the changes in equity the due amount at the close of the year is represented
along with the deferred tax whereas; in the income statement the amount of tax already paid
is stated.
n. Accounting standard
AASB amended or issued recently that are not yet adopted by the company are as follows –
 AASB 9 on financial instruments
 AASB 15 on revenue from the contracts with the customers
 AASB 16 on leases
Reflection report
While going through the annual report of Harvey Norman for the closing of the year
dated 30th June 2016, I found that the annual report is extremely important for reflecting the
financial position of the company as it includes the important information like shareholder’s
equity, profitability position of the company, liquidity position of the company and its
solvency. I found that an annual report that is prepared as per the IFRS and AASB guidelines
is an important part of the company that is issued at the closing of each accounting period.

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Further, I found that the auditors pay an important role in approving the financial position of
the company as he auditors are responsible for the auditing various issues like whether the
statements are prepared as per the required framework and issue their report accordingly. One
more crucial fact I found that the notes for the disclosures are very important as it clears the
basis of preparation of the statement, the concepts used for preparation, accounting treatment
of the items and details of each amount. Therefore, I can say that the annual report plays
important role in the growth and sustainability of the company as the investors, creditors and
lenders make their decision based on the information included in the annual report.