Corporate Accounting Report: A Financial Analysis of Harvey Norman Ltd

This report provides a detailed corporate accounting analysis of Harvey Norman Limited, an ASX-listed company, based on its financial statements from the last three years. It examines the cash flow statement, income statement, comprehensive income statement, and balance sheet. The analysis includes a discussion of changes in cash flow items, the components of comprehensive income, and an evaluation of the company's tax expenses and deferred tax liabilities. The report also addresses the differences between accounting profit and taxable income, providing insights into the company's financial recording processes and compliance with accounting standards. Desklib provides a platform for students to access similar solved assignments and past papers.

HARVEY NORMAN LIMITED
Corporate Accounting
Student’s Name
[25/5/2018]

Corporate Accounting
2
Contents
Introduction:.....................................................................................................................3
Harvey Norman limited:...................................................................................................3
Que 1:................................................................................................................................3
Que 2:................................................................................................................................5
Que 3:................................................................................................................................5
Que 4:................................................................................................................................6
Que 5:................................................................................................................................6
Que 6:................................................................................................................................7
Que 7:................................................................................................................................7
Que 8:................................................................................................................................8
Que 9:................................................................................................................................9
Que 10:..............................................................................................................................9
Que 11:............................................................................................................................10
Conclusion:.....................................................................................................................10
References:.....................................................................................................................11

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Introduction:
Evaluating the income statement recording process, cash flows recording process and
taxation recording process are one of the major elements of the accounting process. It
examines the standards and the accounting process which has been used by the company to
measure the accounting figures and their recording process in the annual report. It examines
the fair accounting valuation method, disclosure policy, materiality policy, notes to accounts
and a detailed description about all the accounting figures in the annual report of the
company.
The report explains about the various financial statement of the company such income
statement, cash flow statement, comprehensive income statement and the balance sheet of the
company. It measures the different figures and the recording style of the company to identify
that whether the company has used proper rules, regulations and the policies to record the
financial and accounting figures of the company in the final financial statement of the
company.
Harvey Norman limited:
Harvey Norman limited is one of largest Australian company in the retailing and
electrical industry. Mainly, the comapny operates it business in retailing of furniture,
computers beddings, consumer electrical products and combination products. The company
operates it business through various franchise, it has been founded in 1982. Home (2018)
explains that around 2820 franchise stores are owned by the company to run the business and
manage the performance of the company. The brand names of the company are Harvey
Norman, Domayne and Joyce, Mayne etc. the company is also operating its business at
overseas. Annual report of the company briefs that the company has followed the AASB,
FASB and IFRS rules to determines and record all the accounting activities and figures in the
annual report of the company.
Que 1:
Cash flow statement is crucial statement of an organization which is prepared by the
companies to evaluate the changes in the cash in a particular period; this statement measures

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4
the entire cash outflow and inflow of an organization of a particular period and measure
about the liquidity and solvency position of the company. Cash flows statement does not
affect by the outstanding expense and revenue of the company. It only records those activities
which have been impacted on the cash position of the company. Every listed company is
required to prepare this statement according to IFRS rules (Walsh, McGregor‐Lowndes and
Newton, 2008).
The Harvey Norman limited explains that the cash flow statement of Harvey Norman
limited explains about huge changes into the cash position of the company from 2016 in
2017. The main changes into the cash flow position of the company has been occurred due to
investments, purchase of PPE, acquisitions, investment purchase, debt issuance, repayment of
debt amount, dividend amount etc.
The below table explains that the investments and purchase of PPE has enhanced the
cash outflow of the company which has directly impacted on the total cash flow position of
the company. In addition, it has been recognized that the long term debt issuance has
enhanced the cash inflow position of the company from last year (Horngren et al, 2012).
Though the higher dividend amount has been paid to shareholders of the company and
it has impacted the cash inflow position. The changes could be seen on the net changes in the
cash. It explains about the improved position of cash items of the company from 2016.
CASH FLOW STATEMENT
Amt in AUD 2015 2016 2017
Investments in property, plant, and
equipment -55012000 -68155000 -89366000
Property, plant, and equipment reductions 7152000 9051000 28592000
Acquisitions, net -4000 -25349000
Purchases of investments -19876000 -64484000
-
130397000
Long-term debt issued 44349000 349000 72075000
Long-term debt repayment -52000000 -45862000 -15250000
Cash dividends paid
-
333664000
-
266882000
-
344962000
Net change in cash
-
302400000
-
487280000
-
485889000
(Yahoo finance, 2018)

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Que 2:
The cash flow statement further explains about the comparison of cash position of last
3 years. It briefs that the cash flow position of the company has been changed due to various
factor which has taken place into the current year of the company.
Firstly the cash flow from the investing activities of the company explains that the cash
outflow of the company has been higher than the cash inflow of the company because of
higher investments into the property and equipment of the company. It explains that the cash
position of the company has been lowered in context with the investment activities of the
company.
In addition, the cash flow from the financing activities of the company explains that
the cash outflow of the company has been lower than the cash inflow of the company from
last year because of higher investments into the cash dividend and the debt issuance factors of
the company. It explains that the cash position of the company has been lowered in context
with the investment, operating and financial activities of the company from last 2 years.
CASH FLOW STATEMENT
Amt in AUD 2015 2016 2017
Net cash used for investing activities -81803000
-
179853000
-
198765000
Net cash provided by (used for)
financing activities
-
220597000
-
307427000
-
287124000
Net change in cash
-
302400000
-
487280000
-
485889000
Free cash flow 285041000 368900000 335774000
(Morningstar, 2018)
It explains that the performance of the cash flows of the Harvey Norman limited has
been lower from last 2 years and the recording process of the company and the notes to
accounts explains that the free cash flow of the company is quite competitive.
Que 3:
Comprehensive income statement of Harvey Norman limited explains that the total
profit of the year of the company is $ 462966000 which has been impacted due to the
translation in foreign currency, cash flow hedges, available for sales investment, income tax
effect etc.

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The changes into the total profit of the company explain that the total comprehensive
income of the company is $ 17,226,000 which has enhanced the total profitability level of the
company.
Randolph and Tice, (2014) explains that the comprehensive income statement is
prepared separately in the annual report of the company to measure the total profit of the
company. However, the items in the comprehensive income statement are not related with the
daily activities of the company.
Que 4:
The main items in the comprehensive income statement of the company is foreign
currency, cash flow hedges, available for sales investment, income tax effect etc. It indicates
about the noncurrent and non operating activities of the company. these items explain about
those figures and items which have incurred due to the industry and economical fluctuations
these items explains about the current changes in the assets of the company and thus it is not
recorded in the income statement of the company (Nobes, Parker and Parker, 2008).
Que 5:
The comprehensive income statement explains about those items which are not related
with the daily operations of Harvey Norman and neither has it indicated about the exact value
of the company. It only explains about fair value of foreign investment and other investment
of the company (Nielsen, Raimondos-Møller and Schjelderup, 2010). Thus it is not recorded

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in the income statement of the company. As the income statement prepares on the basis of the
daily activities of the company and the comprehensive income statement of Harvey Norman
limited explains about the fair value of the assets and the liabilities of the company.
Que 6:
The tax expenses of the company in the income statement of Harvey Norman limited is
$ 186,840,000 in the year of June 2017. It explains that the total tax liability of the company
on the basis of the total EBT of the company is $ 186,840,000. The tax amount of Harvey
Norman limited has been improved from 2016 in 2017 (Morningstar, 2018). The reasons
behind increasing in the income tax expenses of the company are higher sales revenue of the
company and improved gross profit of the company.
Que 7:
The income tax expenses of Harvey Norman limited is $ 186,840,000 in 2017
according to the annual report (2017). However, it has been recognized that the accounting
profit of the company is $ 639806 and on the basis of the Australian taxation office, the
corporate income tax rate of the company is 30%. It explains that the actual at amount of the
company should be $ 191,942,000 instead of $ 186,840,000.
It explains that the actual tax amount of the company is lower than the taxation
amount on the basis of the accounting profit of Harvey Norman limited. The report explains
that the various non deductable expenses and income have affected the accounting taxation

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amount of the company and due to it; the taxation amount of the company has been lowered
by $ 5,102,000.
The main reasons behind the difference among the actual tax amount and accounting
tax amount is various expenses and income which are not deductable on the basis of the
Australian taxation officer and the Australian accounting standards board (Floropoulos et al.
2010).
Que 8:
The balance sheet of Harvey Norman limited explains that the deferred tax liabilities
and deferred tax assets of the company. These figures explain about the differences among
the changes into the value of the assets and liabilities of the company and their impact on the
total taxation of the company.
In the year of 2017, it has been recognized that the deferred tax liabilities of the
company has been improved from last year to $ 267,219,000. These changes have occurred
into the changes into the PPE and other intangible assets of the company. The amount
explains that it must be set off form the provisions of the company and through paying the tax
amount to the Australian government (Morris, 2017).

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Que 9:
The balance sheet of Harvey Norman limited explains that the current tax assets and
current tax liabilities of the company. These figures explain about the differences among the
tax amount paid and the actual tax amount of the company.
In the year of 2017, it has been recognized that the current tax liabilities of the company
has been improved from last year to $ 39,680,000. These changes have occurred into the
changes into the total tax amount paid of the company. The amount explains that it must be
paid to the Australian government in short run by the company.
Que 10:
The cash flow statement of Harvey Norman limited explains that the total tax amount
which has been paid in the year of 2016-17 by the company is $ 152,454,000. Further, the
income statement of Harvey Norman limited explains that the total tax amount which has
been occurred in the year of 2016-17 by the company is $ 186,840,000. These figures explain
about the differences among the tax amount paid and the actual tax amount of the company
(Robinson, Stomberg and Towery, 2015).
It explains that the lesser amount has been paid by the company to the government
than expected. The balance amount of this figures have been presented in the balance sheet of
the company under the current tax liabilities head.
The difference has occurred due to the less payment of the taxation amount in the year
of 2016-17 than the expected amount.

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Que 11:
The study on the Harvey Norman limited, its annual report and its tax amount in the
balance sheet, income statement and the cash flow statement explains that the study was quite
interesting as it is interested to read the annual report of a real company and measure that
how the items are recorded in the annual report of the company.
Though, few minor difficulties have also been faced while evaluating the accounting
process and the recording process of Harvey Norman limited. It has been found that the tax
amounts are required to be studied in depth to understand all the factors of the company.
Conclusion:
To conclude, Harvey Norman limited has recorded the entire accounting figures on the
basis of IFRS, AASB and IASB rules. The taxation figures have been added by the company
on the basis of AASB 112 rules. The performance of the company explains about the better
performance of the company.

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References:
Annual report. 2017. Harvey Norman limited. [online]. Available at:
https://static1.squarespace.com/static/54803162e4b08e1b8a472201/t/
59cded6780bd5e4dbeef7f83/1506667916831/2017-Annual-Report.pdf (accessed 24/5/18).
Floropoulos, J., Spathis, C., Halvatzis, D. and Tsipouridou, M., 2010. Measuring the success
of the Greek taxation information system. International Journal of Information
Management, 30(1), pp.47-56.
Home. 2018. Harvey Norman limited. [online]. Available at:
http://www.harveynorman.com.au/ (accessed 24/5/18).
Horngren, C., Harrison, W., Oliver, S., Best, P., Fraser, D., Tan, R. and Willett, R.,
2012. Accounting. Pearson Higher Education AU.
Morningstar. 2018. Harvey Norman limited. [online]. Available at:
http://financials.morningstar.com/cash-flow/cf.html?t=HVN&region=aus&culture=en-US
(accessed 24/5/18).
Morris, J.L., 2017. Classification of Deferred Tax Assets and Deferred Tax Liabilities: An
Evaluation of FASB's Attempt at Standards Simplication. Journal of Accounting and
Finance, 17(8), pp.198-208.
Nielsen, S.B., Raimondos-Møller, P. and Schjelderup, G., 2010. Company taxation and tax
spillovers: Separate accounting versus formula apportionment. European Economic
Review, 54(1), pp.121-132.
Nobes, C., Parker, R.B. and Parker, R.H., 2008. Comparative international accounting.
Pearson Education.
Randolph, B. and Tice, A., 2014. Suburbanizing disadvantage in Australian cities:
sociospatial change in an era of neoliberalism. Journal of urban affairs, 36(s1), pp.384-399.
Robinson, L.A., Stomberg, B. and Towery, E.M., 2015. One size does not fit all: How the
uniform rules of FIN 48 affect the relevance of income tax accounting. The Accounting
Review, 91(4), pp.1195-1217.

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Walsh, P., McGregor‐Lowndes, M. and Newton, C.J., 2008. Shared services: Lessons from
the public and private sectors for the nonprofit sector. Australian Journal of Public
Administration, 67(2), pp.200-212.
Yahoo Finance. 2018. Harvey Norman limited. [online]. Available at:
https://au.finance.yahoo.com/quote/HVN.AX/ (accessed 24/5/18).