Corporate Accounting Report: Ausnet Ltd Financial Analysis

This report provides a comprehensive analysis of corporate accounting, focusing on the financial statements of Ausnet Ltd. It begins with an examination of the cash flow statement, detailing the significant items within operating, investing, and financing activities. A comparative analysis of these three classifications over several years highlights trends and performance. The report then explores the comprehensive income statement, explaining items included in other comprehensive income, such as movements in hedge reserves and defined benefit funds, and their tax implications. The report also delves into the tax items of the business, including current tax paid, tax rates, and the treatment of deferred tax assets and liabilities. The analysis considers the differences between income tax expenses and income tax paid, along with the company's tax policies. The report utilizes the indirect method for preparing the cash flow statements. Overall, the report provides a detailed understanding of Ausnet Ltd's financial performance and accounting practices.

Running head: CORPORATE ACCOUNTING
Corporate Accounting
Name of the Student:
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Author’s Note:

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Table of Contents
Cash Flow Statement.......................................................................................................................2
Significant Items of the Cash Flow Statement............................................................................2
Comparative Analysis of Three Classification of Cash Flow Statement....................................4
Comprehensive Income Statement..................................................................................................6
Items which are included in Other Comprehensive Income............................................................7
Understanding of Items shown under Comprehensive Income...................................................7
Reporting for Comprehensive Items................................................................................................7
Tax items of the Business................................................................................................................8
Current Tax Paid..........................................................................................................................8
Tax rate Charged by the business................................................................................................8
Deferred Tax Assets and Liabilities............................................................................................8
Current Tax Assets and Liabilities..............................................................................................9
Difference in Income tax expenses and Income Tax paid.........................................................10
Tax policy of the Company.......................................................................................................10
Reference.......................................................................................................................................11

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Cash Flow Statement
Significant Items of the Cash Flow Statement
The cash flow statement depicts the cash flow of the business that is the cash inflows and
outflows of the business. The cash position of the business is depicted with the help of cash flow
statement as prepared by the business (Chang et al. 2014). The reason due to which cash flow
statement is prepared is to show the businesses liquidity position at the end of the financial year.
For the purpose of this assignment, Ausnet Ltd is selected which is engaged in energy generation
and distribution of the same.
The cash flow statement of Ausnet Ltd reveals that it is made up of cash from operating
activities, cash from investing activities and cash from financing activities
(Ausnetservices.com.au. 2018). The various cash inflows and outflows of the business is
recorded on the basis of the above mentioned three activities. The items which are shown in the
cash from operating activities of the business are shown to be working capital movement,
income tax which is paid by the business, the cash from investing activities of the business show
payments which are made for purchasing property, plant and equipment, sales of property, plants
and equipment, the cash from financing activities of the business includes dividends which are
paid by the business, borrowings which the business took during the year and the repayment of
loans. The cash from operations includes working capital movements which is shown to be $ 0.2
million in the cash flow statement. The cash flow statement is prepared following indirect
method and therefore items which are deductible from the net profit is deducted and the non-
deductible expenses are added back to the net profit to arrive at the cash flow from operations of
the business (Kaspina, Molotov and Kaspin 2015). The profit of the business for the year 2017 is

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shown to be $ 255.1 million which has significantly increased from previous year 2016 which is
shown to be $ 489.3 million. This shows that the business has significantly improved from
previous year and the operations of the business has also improved in a similar manner. The cash
from operations also show income tax which is actually paid by the business and the same is
shown to be $ 49.4 million and another significant item which is included under the head cash
from operating activities is net interest paid by the business (Radhakrishnan and Wu 2014). The
net interest of the company for the year 2017 is shown to be $ 285.3 million which has reduced
from the previous year which was shown to be $ 296.9 million as per the cash flow statement of
the business. The non-cash item which is shown in the cash flow statement is depreciation,
interest and tax is added back to profit figure and the same is shown to be $ 818.2 million for the
year 2017.
The cash from investing activities show proceeds which are received from the sale of
property, plant an d equipment which is shown to be $ 4.3 million which has increased from the
previous year. The company has also purchased property during the year for which the same is
shown in the cash flow statement is $ 888.2 million which has significantly increased from the
previous year. The major portion of the cash from investing activities is made up of the items
which are shown above.
The cash from financing activities show that the company has paid a dividend which is a
cash outflow for the business which is shown to be $ 211.9 million which has increased from
previous year’s estimate. This suggest that the business’s profitability has increased from the
previous year’s estimates. The company has taken a loan during the year which is shown to be $
987.8 million and the same is shown to be $ 1100 million. The repayment of debt which is
shown to be $ 756.2 million during the year is shown in the cash flow statement of the business.

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The business also had repaid a significant amount of loan in the previous year 2016 which is
shown to be $ 1373.4
Comparative Analysis of Three Classification of Cash Flow Statement
Particulars 2015 (in $M) 2016 (in $M) 2017 (in $M)
Cash flows from operating activities:
Profit for the year 22.60$ 489.30$ 255.10$
Add back interest, tax, depreciation 1,024.60$ 653.20$ 818.20$
Other non-cash items -$ -12.90$ 4.40$
Disposal of property, plant and equipment 7.00$
Write-off of assets 28.10$
Contributed assets -20.10$
Net defined benefit expense 7.50$
Working capital movement 94.10$ 19.00$ -0.20$
Payment of MSA termination fee (inclusive of goods and services tax) -39.30$
Income tax paid -54.50$ -141.70$ -49.40$
Net interest paid -302.40$ -296.9 -285.3
Net cash flows from operating activities 767.60$ 710.00$ 742.80$
Cash flows from investing activities:
Payments for property, plant and equipment (ii) -800.50$ -692.90$ -888.20$
Proceeds from sale of property, plant and equipment 5.70$ 0.70$ 4.30$
Receipts from desalination licence receivable 8.80$ 8.80$ 8.80$
Payments for acquisition of a subsidiary (net of cash acquired) 0.40$ -$ -$
Net cash flows used in investing activities -785.60$ -683.40$ -875.10$
Cash flows from financing activities:
Dividends paid (iii) -179.20$ -194.90$ -211.90$
Proceeds from borrowings 1,830.30$ 1,100.00$ 987.80$
Repayment of borrowings -1,159.00$ -1,373.40$ -756.20$
Net cash flows used in financing activities 492.10$ -468.30$ 19.70$
Net increase/(decrease) in cash and cash equivalents 16,233.00$ -441.70$ -112.60$
Cash and cash equivalents at beginning of year 409.80$ 883.10$ 441.40$
Cash and cash equivalents at end of year 16,642.80$ 441.40$ 328.80$
Figure 1: (Table showing comparative analysis of Cash flow statement)
Source: (Created by Author)

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Particular 2015 2016 2017
Net cash flows from operating activities $ 767.60 $ 710.00 $ 742.80
Net cash flows used in investing activities $ -786.40 $ -683.40 $ -875.10
Net cash flows used in financing activities $ 492.10 $ -468.30 $ 19.70
2015 2016 2017
$-1,000.00
$-800.00
$-600.00
$-400.00
$-200.00
$-
$200.00
$400.00
$600.00
$800.00
$1,000.00
$767.60 $710.00 $742.80
$-786.40
$-683.40
$-875.10
$492.10
$-468.30
$19.70
Comparative analysis of cash flow categories of Ausnet Services Limited
($ in Millions)
For the purpose of comparative analysis, a graph and table shown cash from operating
activities, cash from investing activities and cash from financing activities are shown above. The
cash from operating activities show that the cash from operating activities has increased from
2016 estimate which is shown to $ 742.80 and the same is shown to be $ 710. This shows that
the operation of the business has improved from the previous year and the cash generating
capacity of the business has also increased. The method which is used by the management for

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preparing the cash flow statement is using indirect method as shown in Figure 1. The non-cash
items such as depreciation have been added back as shown in the above figure. The cash flow
from operating activity for the current year has improved which suggests that the cost of
operations of the business has reduced.
The cash which is generated from investing activities show that the expenses has
increased from the previous year which can be attributed to the purchase of property, plant and
equipment during the year and the amount for purchase is significant and the same is shown to
be $ 888.2 and the same affects the cash from investing activities of the business. The business
also has sold property, plant and equipment during the year for which the cash proceeds are
shown in the cash flow statement.
The cash from financing activities of the business has improved from previous year’s
estimate which shows the business has tremendously improved. The company has repaid a
significant amount of loans and also has taken loan in 2017 as shown in the table above
Comprehensive Income Statement
The comprehensive income statement which is shown in the annual reports of the
business depict those items which are extraordinary in nature and affect the profits of the
business. As per the financial statement of Ausnet ltd, the company has prepared a separate
comprehensive income statement which is shown below the statement of profit and loss of the
business Eaton, T.V., (Easterday and Rhodes 2013).

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Items which are included in Other Comprehensive Income
The comprehensive income items which are shown in the financial statements of the
business are movements in hedge reserves, income tax charged on hedge reserve, movement and
tax which is charged on defined benefit fund. The items are shown in a separate statement
showing comprehensive income which is prepared by the business of Ausnet Service ltd.
Understanding of Items shown under Comprehensive Income
As per the comprehensive income statement which is shown by the business in the
financial statements of the company, defined benefit fund which is shown in the statement as $
46.5 million on which tax is charged which is about $ 14 million. Defined benefit fund refers to
the fund of the business which the business has created for a specific purpose and the fund will
be used for that specific purpose only. The comprehensive income statement shows that the
company has also engaged in Hedge transactions for which hedge reserves are created by the
business (Schaberl and Victoravich 2015). The hedge reserve represents the profit which the
business makes from hedge transactions. The hedge accounts refer to the activities of the
business which tends to make profits from fluctuations of prices in home and foreign currency.
Reporting for Comprehensive Items
The items which are shown in the comprehensive income statement are not recorded in
the profit and loss account due to the fact that such items are of extraordinary nature and are
quite different from day to day activities of the business. The primary reason for recording such
transaction in the financial statements is due to the fact that the company wants to follow the full
disclosure principle of the business. The comprehensive income items of the business disclose
extraordinary items to the users of the financial statements of the company.

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Tax items of the Business
Current Tax Paid
The current tax expenses which is shown in the financial statements of Ausnet ltd is
shown to be $ 108.2 million. In 2016 the company received a tax benefit which is shown to be $
31.4 million as per the profit and loss statement of the business. The company may have paid
extra tax therefore the business has received tax benefits in 2016.
Tax rate Charged by the business
The tax which is charged by the business is according to the relevant tax laws and
provisions which are applicable in Australia. The tax is charged on the profits which are made by
the business during the year. The tax which is actually applicable to the business considering the
tax rate and tax provision which are prevalent in Australia and the tax expense which is shown in
the profit and loss statement of the business is slightly different which suggest that there must be
certain setoff and exemptions which are applicable to the business. The tax rate of the business
and which is applicable in Australia is 30%. This suggest that there are certain deferred tax assets
and deferred tax liabilities which are present in the financial statement of the company. The
items which are included in the comprehensive income statement of the business are also
applicable to tax such as tax which is charged defined benefit fund and hedge reserve which the
business has maintained. The taxes are also included in the total tax which is to be paid by the
business.

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Deferred Tax Assets and Liabilities
Deferred tax assets are components of tax which is included in the financial statements
represents the excess tax which is paid by the individual and companies and such acts as assets
of the business. On the other hand, deferred tax liabilities represent the amount paid by the
individual or the company is less than what actually should be paid to the tax authorities of the
business (Laux 2013). As per the financial statements of Ausnet ltd, the company has deferred
tax liabilities which is shown in the balance sheet of the company. The deferred tax liabilities of
the business is shown to be $ 586.4 million which has increased from previous year’s estimate
which is shown to be $ 465.8 million as per the balance sheet of the company (Chytis 2015). The
primary reason for such items to arise is due to the temporary difference which exist in the
timing of the transaction. In some cases, such deferred tax liability is carried forward from
previous years and therefore the same is shown in the financial statement of the business
(Hanlon, Navissi and Soepriyanto 2014).
Deferred tax liabilities and assets are shown in the financial statements are shown in the
financial statements so that the business can set off the same in the future years. The financial
statement of Ausnet ltd shows that all the relevant provisions for tax is followed by the company.
Current Tax Assets and Liabilities
The current assets of the business are shown to be $ 25.9 million and the current tax
liabilities of the business is zero for the year 2017. The current tax liabilities of the business
which is shown in the balance sheet reflect for the current year’s tax liability of the business. The
company also has income tax receivable which represents that the business has certain tax
benefits which accrue to the current year. The figure of income tax payable is not same as

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income tax expenses because income tax payable also contains taxes which are carried forward
from previous year and also due to deferred tax assets and liabilities which are recorded in the
financial statements of the business.
Difference in Income tax expenses and Income Tax paid.
The income tax expenses which is shown in the profit and loss statement reflects the
actual amount which the business is liable to pay during the current year and the income tax
expenses which is shown in the cash flow statement of the company signifies that the tax
expense which is actually paid by the business. The reason for such a difference may be due to
the difference in accounting treatments such as cash flow statement follows cash basis while
profit and loss account is prepared on the basis of accrual basis. There might also be other
reasons for such difference such as difference in timing for recording the transaction.
Tax policy of the Company
The analysis of the financial statement of company reveals that the company has made all
the necessary adjustments which is related to the tax expense which the company incurs during
the period. The tax liability of the business which the business is not able to pay is shown in the
balance sheet of the business as current tax liability of the business. The company follows all the
relevant standards for preparation of the financial statements of the company.

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Reference
Laux, R.C., 2013. The association between deferred tax assets and liabilities and future tax
payments. The Accounting Review, 88(4), pp.1357-1383.
Hanlon, D., Navissi, F. and Soepriyanto, G., 2014. The value relevance of deferred tax attributed
to asset revaluations. Journal of Contemporary Accounting & Economics, 10(2), pp.87-99.
Chang, X., Dasgupta, S., Wong, G. and Yao, J., 2014. Cash-flow sensitivities and the allocation
of internal cash flow. The Review of Financial Studies, 27(12), pp.3628-3657.
Ausnetservices.com.au. (2018). Home. [online] Available at: https://www.ausnetservices.com.au/
[Accessed 23 May 2018].
Kaspina, R.G., Molotov, L.A. and Kaspin, L.E., 2015. Cash flow forecasting as an element of
integrated reporting: an empirical study. Asian social science, 11(11), p.89.
Radhakrishnan, S. and Wu, S.L., 2014. Analysts' cash flow forecasts and accrual
mispricing. Contemporary Accounting Research, 31(4), pp.1191-1219.
Eaton, T.V., Easterday, K.E. and Rhodes, M.R., 2013. The presentation of other comprehensive
income. The CPA Journal, 83(3), p.32.
Schaberl, P.D. and Victoravich, L.M., 2015. Reporting location and the value relevance of
accounting information: The case of other comprehensive income. Advances in
Accounting, 31(2), pp.239-246.

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Chytis, E., 2015, February. Deferred Tax Assets from unused Tax Losses under the prism of
Financial Crisis. In International Conference on Business & Economics of the Hellenic Open
University, Athens. Retrieved from http://193.108 (Vol. 160).