Detailed Analysis of CSR Limited's Corporate Accounting and Financials

This report offers a comprehensive analysis of CSR Limited's corporate accounting practices, examining key components of their financial statements, including equity, tax expenses, and deferred tax assets and liabilities. The analysis begins with an overview of the company's equity, detailing issued capital, reserves, retained profits, and non-controlling interests. It then delves into the company's tax expenses, including current and deferred tax expenses, and provides a tax reconciliation statement to explain any discrepancies between the actual and reported income tax expenses. The report also discusses deferred tax assets and liabilities, current tax assets and liabilities, and the reporting of tax expenses in both the income statement and the statement of cash flows, providing a clear understanding of the company's financial health.

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

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Table of Contents
Answer to Question I.......................................................................................................................1
Answer to Question II......................................................................................................................2
Answer to Question III....................................................................................................................3
Answer to Question IV....................................................................................................................4
Answer to Question V.....................................................................................................................5
Answer to Question VI....................................................................................................................5
Answer to Question VII...................................................................................................................6
References........................................................................................................................................7

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Answer to Question I
Different types of financial statements provide the overall picture of the financial health
of the companies. Three major substances of the financial statements of the companies are
Assets, Liabilities and Owner’s Equity (Brigham & Ehrhardt, 2013). This part attempts to
analyze all the items of equity of CSR Limited, Australia.
According to 2017 Annual Report of CSR Limited, four items of equity of the company
are Issued Capital, Reserves, Retained Profits and Non-Controlling Interests (csr.com.au, 2017).
Issued capital refers to the share capital issued to the shareholders in order to raise capital for
business operations. The latest annual report of CSR Limited shows a slight fall in issued capital
in 2017 from 2016; that is $ 1036.8 in 2017 and $ 1041.1 in 2016 (csr.com.au, 2017). Total
number of share issued in 2017 and 2016 are 504,480,858 and 505,700,315. Less number of
issued shares is the reason for the decrease in issued capital in 2017 over 2016 (csr.com.au,
2017). The next item is Reserves. Reserves refer to the excess amount of money paid by the
shareholders apart from the par value of shares. As per the annual report of CSR Limited, the
amount of reserve was positive in 2016 that is $ 20.4 million; but in 2017, drastic decline in
reserve can be observed and it has become negative that is $ (73.4) million (csr.com.au, 2017).
The major purpose of reserve in CSR Limited is reserve for hedge, restive for foreign currency
transition, reserve for employee shares, reserve for share-based payment trust, non-controlling
reserve and other reserves. In 2017, the major reasons for the decline in reserve are
compensation of hedge loss in equity, transfer of hedge profit, recycling of foreign currency,
disposal of equity investments, acquisition of treasury shares and non-controlling interest on
subsidiary acquisition (Brigham & Houston, 2012). The next item in equity is Retained Profit

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that is the total profit or loss of the organizations from foundation time. The annual report of
CSR Limited shows a large increase in retained profit in 2017 from 2016; the amount is $ 191.6
million and $ 123.2 million in 2017 and 2016 respectively (csr.com.au, 2017). The main reason
for CSR Limited to increase their retained profit is the increase in profit after tax. The next
equity item is non-controlling interests that shows a massive dip in 2017 as compared to 2016;
that is $ 51.5 in 2017 and $ 132.5 in 2016 (csr.com.au, 2017).
Answer to Question II
Companies have to incur different types of expenses like selling expenses, administrative
expenses and other operating expenses. One of such important expense for CSR Limited is Tax
Expenses. Tax expenses can be obtained by multiplying the tax rate with the before tax income
of the companies after the process of tax reconciliation (Thomas & Zhang, 2014). It needs to be
mentioned that CSR Limited owes their business tax expenses to the government of Australia.
According to the regulation of Australian Taxation Law, income tax rate for CSR Limited in
2017 and 2016 was 30%. According to the annual report of CSR Limited, decrease in income tax
expenses can be seen; that is $ 61.7 million in 2017 and $ 64.4 million in 2016 (csr.com.au,
2017). CSR Limited has shows their total income tax expenses in two parts; they are Current Tax
Expenses and Deferred Tax Expenses for the movement of deferred tax balances. Decrease in
current tax expenses can be seen in 2017 from 2016; that is $ 29.3 million in 2017 and $ 43.9
million in 2016 (csr.com.au, 2017). On the contrary, increase in deferred tax expenses can be
seen for CSR Limited in 2017 from 2016; that is $ 32.4 million in 2017 and $ 20.5 million in
2016. CSR Limited has $ 9.3 million and $ 34.5 million as income tax payable for their
consolidated group; that are PGH Bricks & Pavers Pty Limited and Gove Aluminium Finance
Limited (csr.com.au, 2017).

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Answer to Question III
According to 2017 Annual Report of CSR Limited, the company has $ 266.8 million and
$ 233.7 million as profit before income tax in 2017 and 2016 respectively. At the same time,
CSR Limited has 30% tax rate applicable on profit before income tax (csr.com.au, 2017). In this
tax rate, the tax expense of CSR Limited should be $ 80.0 million ($ 266.8 million*30%) in 2017
and $ 70.1 million ($ 233.7 million*30%) in 2017. However, the reported income tax expenses
of CSR Limited are $ 61.7 million and $ 64.4 million in 2017 and 2016 respectively. It implies
CSR Limited has clear differences between the actual and reported income tax expenses. The
observation of the tax reconciliation statement of CSR Limited shows the presence of some
specific factors that are responsible for this difference in CSR Tax expenses. These items are
adjusted with the calculated tax expenses of CSR Limited after the payment of tax and thus,
difference can be seen. The first item is share of net profit of joint venture entities. It implies that
CSR Limited has earned some profit from their joint venture business and thus, it is required to
deduct tax from that portion of profit (Dhaliwal et al., 2013). For this purpose, $ 4.3 million in
2017 and $ 3.7 million has been deducted (csr.com.au, 2017). The next item is non-taxable profit
on property disposal. It needs to be mentioned that companies are required to pay tax on the
income from disposal of any asset and the same has happened with CSR Limited. For this
reason, CSR Limited had to deduct $ 1.9 million in 2017 and $ 5.9 million in 2016. The next
substance is under payment and over payment of income tax in 2016 and 2015. For this reason,
in 2016, CSR Limited received a tax refund of $ 3.0 million that has been added with the tax
expenses. However, in 2017, CSR Limited had to pay the rest of income tax of 2016 that leads to
the payment of $ 11.4 million as income tax in 2017 (csr.com.au, 2017). The next item is other
items that include the impact of permanent differences regarding significant items (Armstrong,

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Blouin & Larcker, 2012). For this reason, $ 0.7 million has been deducted in 2017 and $ 3.0
million has been added in 2016 (csr.com.au, 2017). These above-mentioned factors are
responsible for creating difference in income tax expenses in the presence of same tax rate.
Answer to Question IV
There are many instances of the payment of extra amount of tax on the assets by the
companies and these assets are called Deferred Tax Assets (Laux, 2013). On the other hand,
companies have been seen to pay less amount of tax for the liabilities and they are called
Deferred Tax Liabilities (Harrington, Smith & Trippeer, 2012). In the balance sheet or statement
of financial position of CSR Limited, the reporting of both deferred tax assets and liabilities can
be observed. As per the statement of financial position of CSR Limited, in 2017 and 2016, the
amounts of deferred income tax assets are $ 201.2 million and $ 239.3 million respectively
(csr.com.au, 2017). The observation of the statement of financial position of CSR Limited shows
that the company has not reported ant differed tax liabilities in 2017 and CSR Limited had $ 20.9
million in 2016 as deferred tax liabilities. Thus, the net deferred tax assets of CSR Limited are $
201.2 million and $ 218.4 million in 2017 and 2016 respectively (csr.com.au, 2017). There are
some reasons in CSR Limited behind the recording of deferred tax assets and liabilities. The
main reason is the cost of depreciation of the assets as difference can be seen in the value of
depreciation in income statement and taxable income statement. In CSR Limited, the company
has paid advance tax due to the difference in the cost of depreciation and thus, it has been
considered as an asset for the company. The main reason for the recording of deferred tax
liability is the less amount of tax payment.

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Answer to Question V
Current tax assets or income tax receivables generate when the companies have already
paid excess income tax in advance. On the other hand, current tax liabilities or tax payable
generate when the companies are supposed to pay certain amount of taxes of pervious year in the
current year (Hutchens & Rego, 2013). Both are important in tax treatment of the companies. As
per the annual report of CSR Limited, the company has $ 0.5 million in 2017 and $ 0.5 million in
2016 as current tax assets (csr.com.au, 2017). In addition, the company has $ 10.3 million in
2017 and $ 38.1 million in 2016 as current tax liabilities. The annual report of CSR Limited also
shows that the company has $ 61.7 million and $ 64.4 million as income expenses for 2017 and
2016 respectively (csr.com.au, 2017). It can be observed that there is a difference between
income tax payable and income tax expenses. After observing the financial notes of income tax
expenses of CSR Limited, it can be seen that the income tax expenses represents all expenses
under for that particular year under tax; they are current tax expenses, deferred tax expenses and
current tax payable. It implies that income tax payable is a part of the total income tax expenses
of CSR Limited. In addition, the company many not pay the whole amount of income tax
payable in the current year. Thus, for all these reasons, there is a difference between the amounts
of income tax payable and income tax expenses of the company.
Answer to Question VI
In the financial statements, the companies use to report their tax expenses in two places;
they are the Income Statement and Statement of Cash Flows. There is not any exception of this
fact in case of CSR Limited. The annual report of CSR Limited shows the reporting of tax
expenses by the company in Income statement and statement of cash flows. The amount of tax
expenses in income statement is $ 61.7 million in 2017 and $ 64.4 million in 2016; and the

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amount of tax payment in the statement of cash flows is $ 52.7 million in 2017 and 14.6 million
in 2016 (csr.com.au, 2017). Thus, a clear difference can be seen in the amounts of tax expenses
reporting in income statement and statement of cash flow. It needs to be mentioned that
statement of cash flow shows the amount of cash inflow or outflow due to the increase or
decrease in the current assets and liabilities of the companies. It implies that the statement of
cash flows only takes into consideration the current assets and current liabilities. Now, the
statement of financial position of CSR Limited states that only income tax payable comes under
the head of current assets. Hence, it is clear that the statement of cash flows has only shown the
payment of income tax payable and it has not included the tax expenses of this current year
(Rego & Wilson, 2012). For this reason, difference can be seen between the tax expenses in
income statement and statement of cash flows.
Answer to Question VII
From the above discussions, it can be observed that CSR Limited has carried on their
different tax treatments in a well controlled and interesting manner. It needs to be mentioned that
CSR Limited has provided all the necessary justification as well as clarification of their tax
treatment in the financial notes along with proper calculation. The most important part is tax
reconciliation statement and the deferred tax statement. In the tax reconciliation statement, the
company has mentioned about all the factors responsible for creating difference between the
calculated and reported tax expenses. After observing the tax treatment of CSR Limited, one can
come to know the reasons behind the difference in tax expenses recorded in income statement
and statement of cash flows. As CSR Limited provided necessary supporting evidence to each
tax treatment, it is very much helpful in developing deep insight about the manners of tax
treatment of the companies.

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References
Annual Meetings and Reports. (2018). Corporate. Retrieved 6 January 2018, from
http://www.csr.com.au/investor-relations-and-news/annual-meetings-and-reports
Armstrong, C. S., Blouin, J. L., & Larcker, D. F. (2012). The incentives for tax planning. Journal
of Accounting and Economics, 53(1), 391-411.
Brigham, E. F., & Ehrhardt, M. C. (2013). Financial management: Theory & practice. Cengage
Learning.
Brigham, E. F., & Houston, J. F. (2012). Fundamentals of financial management. Cengage
Learning.
Dhaliwal, D. S., Kaplan, S. E., Laux, R. C., & Weisbrod, E. (2013). The information content of
tax expense for firms reporting losses. Journal of Accounting Research, 51(1), 135-164.
Harrington, C., Smith, W., & Trippeer, D. (2012). Deferred tax assets and liabilities: tax benefits,
obligations and corporate debt policy. Journal of Finance and Accountancy, 11, 1.
Hutchens, M., & Rego, S. (2013). Tax risk and the cost of equity capital. Available at SSRN9.
Laux, R. C. (2013). The association between deferred tax assets and liabilities and future tax
payments. The Accounting Review, 88(4), 1357-1383.
Rego, S. O., & Wilson, R. (2012). Equity risk incentives and corporate tax
aggressiveness. Journal of Accounting Research, 50(3), 775-810.
Thomas, J., & Zhang, F. (2014). Valuation of tax expense. Review of Accounting Studies, 19(4),
1436-1467.

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