HI5020 Corporate Accounting: CIMIC Group Limited Financial Report

This corporate accounting report provides an analysis of CIMIC Group Limited's financial statements, including a comparative analysis of cash flow statements, an examination of the other comprehensive income statement, and an assessment of the company's income tax expense, deferred tax assets, and liabilities. The report identifies key changes in cash flows from operating, investing, and financing activities over three years, noting an increase in operating cash inflows and a decrease in financing cash outflows. It also explains the items reported in the other comprehensive income statement and why they are not included in the profit and loss statement. Furthermore, the report reconciles the company's income tax expense with its accounting income, comments on deferred tax assets and liabilities, and discusses the differences between income tax expense and income tax paid. The analysis reveals that CIMIC Group follows a corporate income tax rate of 30%, but also points out potential inconsistencies in the creation of deferred tax assets.

HI5020 Corporate Accounting
1

Introduction:
The corporate accounting report is associated with identifying and obtaining knowledge about
various concepts of corporate accounting to be applied in the company financial accounts. The
application of various corporate accounting principles and practices will help the company in
evaluating and analysing the financial performance and position in respect of industry and
market factors. For the purpose of preparing this re[port the organization chosen is CIMIC Group
Limited which is engaged in providing services related to international construction contracting
with operations extending to Australia, New Zealand, Asia and others. The report will include a
comparative analysis of the cash flow position of company and the income statements while
recognizing the various items of comprehensive income statement of the company. The other
part of the report will be concerned with identifying the tax expense of company and obtaining
the knowledge about deferred tax assets and liabilities of company. This will help in
understanding the financial position of company.
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CASH FLOWS STATEMENT
The various items along with their reasons for changes during the last financial year are
presented below:
Cash receipts and payments in the course of operations – The inflows and outflows
concerned with these types of operation are associated with obtaining revenues from the ordinary
business operations of company. The same ill also include the portion of GST in the payment
paid or received. The same has increased significantly for the company which ahs resulted in
increase in cash flow form operating activities (CIMIC Group Limited).
Other operating activities – The other operating activities of the company includes dividend
and interest received by the company in relation to operation al activities and finance cosy and
incomes taxes paid by the company for the period concerned. The same ahs also increased
significantly for the company.
Proceeds and payments related to properly, plant and equipment and other intangible
assets and investments of company – The payments related to intangibles and property, plant
an equipment are related to amount paid in relation to acquisition of these types of assets. The
other items related to these types of activities have increased during the year and the net cash
from investing activities have resulted in cash outlay of $432.8 million in the year 2017.
Proceeds and repayments related to borrowings – The proceeds and repayments related to
financing activities of the company includes the amount of instatements and interest paid for
the borrowings made by the company during the year. Also this will include an amount received
due to acquisition of these types of borrowings by the company. The cash received in respect of
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financing activities have increased significantly in the concerned year and therefore the cash
outlay ahs decreased significantly in the current year 2017 (CIMIC Group Limited).
2. Provide a comparative analysis of your company’s three broad categories of cash flows
(operating activities, investing activities, financing activities) and make a comparative
evaluation for three years.
The comparative analysis is provided below:
Comparative cash flow statement
Particulars 2017
$(m)
%
increase
/decreas
e
2016
$(m)
%
increase
/decreas
e
2015
$(m)
Cash flows from operating activities
Cash receipts in the course of operations
(including GST)
14,0
89.9
0
14 12,4
02.7
0
-22 15,9
81.0
0
Cash payments in the course of operations
(including GST)
-
12,5
66.5
0
12 -
11,2
01.3
0
-20 -
14,0
61.4
0
Cash flows from operating activities 1,52
3.40
27 1,20
1.40
-37 1,91
9.60
Dividends received -100 6.9 -56 15.7
Interest received 26 4 24.9 -24 32.7
Finance costs paid -
106.
2
-
85.2
-58 -
202.
8
Income taxes (paid) / received -
80.8
285 -21 -93 -315
Net cash inflow from operating activities 1,36 21 1,12 -22 1,45
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2.40 7.00 0.20
Cash flows from investing activities
Payments for intangibles -
14.2
-3 -
14.7
-3 -
15.2
Payments for property, plant and equipment -
424.
1
51 -
280.
2
5 -
266.
3
Proceeds from sale of property, plant and
equipment
118.
6
21 97.8 -37 156.
2
Proceeds from sale of investments 46.9 -74 180.
8
-89 1,67
1.00
Cash acquired from acquisition of investments
in controlled entities and businesses
-100 244.
4
Income tax paid in relation to proceeds from
sale of investments in controlled entities and
businesses
-59 -32 -263
Payments for investments -
60.1
-82 -
325.
1
826 -
35.1
Loans to associates and joint ventures -
40.9
-
152.
7
Net cash (outflow) from investing activities -
432.
8
54 -
281.
7
-123 1,24
7.60
Cash flows from financing activities
Own shares purchased from shareholders of
the Company
-98 -
425.
9
5

Cash payments in relation to employee share
plans
-8.6 -
18.8
359 -4.1
Proceeds from borrowings 1,51
7.00
299 380.
4
-56 871.
2
Repayment of borrowings -
1,70
5.90
349 -
380.
1
-87 -
2,91
5.40
Repayment of finance leases -
21.2
-92 -
276.
9
122 -
124.
7
Dividends paid to non-controlling interests -100 -
12.6
Dividends paid to shareholders of the Company -
395.
6
23 -
320.
5
-17 -
385.
9
Payments to acquire non-controlling interests -
29.3
-92 -389
Net cash inflow from financing activities -
643.
6
-55 -
1,44
3.40
-44 -
2,55
8.90
Net increase in cash and cash equivalents 286 -148 -
598.
1
-531 138.
9
Cash and cash equivalents at the beginning of the
financial year
1,57
6.50
-27 2,16
7.80
10 1,97
6.90
Effects of exchange rate changes on cash and
cash equivalents
-
48.7
-816 6.8 -87 52
Cash and cash equivalents at the end of the
financial year
1,81
3.80
15 1,57
6.50
-27 2,16
7.80
Analysis:
Cash flows from operating activities – The cash flows from operating activities of the company
includes the movement of cash related to operational activities of the company which is
concerned with daily business transactions in the business. It can be observed that the cash
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inflow relating to operating activities have increased significantly by 21% and this has been the
result of increasing revenues for the company.
Cash flow from investing activities– By recognizing the results for investing activities of the
company it can be observed that the cash outflow for these kind of activities have increased
majorly and this has resulted in the increase in cash outlay by 54% which should be controlled
by the company. The major investment is related with acquisition of property, plant and
equipment for the company (Beekes, et aussi. al., 2015).
Cash flows from financing activities– The results obtained for financing activities of the
company states that the cash outflow has decreased significantly by 55% which can be
recognized an improving factor for the company. The same has been very high in the year 2015
which ahs been controlled by the company in recent years. The dividends received by the
company have increased and the repayments the amount of money borrowed have increased for
the company.
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OTHER COMPREHENSIVE INCOME STATEMENT
3. What items have been reported in the other comprehensive income statement?
The items related to comprehensive income or expense which are attributable to the parent
company are recognized and reported in the king of statement prepared by the company. There
are two types of items that are classified and reported in these statements which are as follows:
 Items that may be reclassified to profit or loss: these types of items can be
reclassified into the profit and loss account of company (CIMIC Group Limited).
 Items that will not be reclassified to profit or loss: These cannot be reclassified
into the profit and loss statement of company.
4. Explain your understanding of each item reported in the other comprehensive income
statement
The items reported are as follows:
Foreign exchange translation differences (net of tax) – These are the differences recognized in
the payments and receipts related to foreign transactions which have not been recognized in the
profit and loss account of company.
Effective portion of changes in fair value of cash flow hedges – The same refers to the changes
in the fair value recognized for various cash flow hedges related with the company and this
cannot be reported in actual profit and loss account (Beekes, et aussi. al., 2015).
Recycling of associate and fair value reserve – These refers to the items which will not be
reclassified to profit and loss account of company.
5. Why these items have not been reported in Income Statement/Profit and Loss Statement.
These types of items have been reported in the comprehensive income statement of company
because the same affects the equity position of company but does not directly affects the actual
profit and loss recognized by the company during the year.
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9

ACCOUNTING FOR CORPORATE INCOME TAX
6. What is your firm’s tax expense in its latest financial statements?
The current income tax as recognized in the income statements of the company is $268.6 million.
7. Is this figure the same as the company tax rate times your firm’s accounting income?
Explain why this is, or is not, the case for your firm.
No the income tax expense recognized by the company in its income statement is not same as per
the company tax rates times the accounting income of company and the reason for the same is
presented below along with the reconciliation:
(Source: CIMIC Group Limited)
The difference in income tax expense is due to the timing differences associated with the
recognition in allocable expenses and incomes as per income tax rules and accounting rule of the
company.
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8. Comment on deferred tax assets/liabilities that are reported in the balance sheet
articulating the possible reasons why they have been recorded.
The deferred tax assets which have been recognized during the year have amounted to $145.4
million in the year 2017. The amount related to deferred tax assets have been recognized due to
deductible temporary differences and unused tax losses that are probable to bring future income
tax benefits for the company. The temporary differences have been recognized after considering
the accounting rules and regulations for company and the income tax rules and regulation
concerned.
9. Is there any current tax assets or income tax payable recorded by your company? Why is
the income tax payable not the same as income tax expense?
The current tax liability recognized by the many in the statement of financial position has been
amounting to $40.4 million in the year 2017. The same is different from the income tax expense
recognized by the company due to the fact that the tax liability includes the past payments related
to the tax expense of company and also the due payment which has not been paid during the year
(Warren & Jones, 2018).
10. Is the income tax expense shown in the income statement same as the income tax paid
shown in the cash flow statement? If not why is the difference?
The income tax expense recognized in the year is $68.6 million however the income taxes paid
during the year and recognized in the cash of statement are $80.8 million. The difference is due
to the fact that the company has not paid all so it income tax expense during the year and the
some part of expense will be paid in future years by the company.
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By recognizing the income tax expense in the company it can be observed that the company
follows the corporate income tax rate of 30% while calculating the amount of income tax during
the year. For the purpose of calculating the tax expense the sources of income along with the
deductible expense are recognized by the company and these are applied for the rate of 30% in
order to obtain the tax expense. However it is confusing to find that the creation of deferred tax
assets does not include any satisfactory explanation and therefore there is a possibility of error
which can be recognized afterwards (Warren & Jones, 2018).
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