Corporate Accounting HI5020: Cash Flow, OCI & Tax Expense Analysis

This report provides a comprehensive analysis of corporate accounting principles, focusing on Northern Star Resources Limited's cash flow statement over three years. It examines receipts and payments from customers, interest and income taxes paid, and investments in property, plant, and equipment. The report includes a comparative analysis of operating, investing, and financing activities, highlighting key changes and trends. Additionally, it discusses items reported in the Other Comprehensive Income statement and analyzes the company's tax expense, deferred tax assets/liabilities, and reconciliation of income tax expense with income tax paid. The report concludes with an assessment of the company's financial position and the importance of accurate accounting practices for effective decision-making. Desklib provides past papers and solved assignments for students.

HI5020 Corporate Accounting
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Contents
Introduction:....................................................................................................................................3
CASH FLOWS STATEMENT....................................................................................................4
OTHER COMPREHENSIVE INCOME STATEMENT............................................................9
ACCOUNTING FOR CORPORATE INCOME TAX..............................................................10
Conclusion:....................................................................................................................................12
References:....................................................................................................................................13
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Introduction:
The following report is related with preparing and presenting the corporate accounting principles
and concepts in context of a given organization. The report will involve a critical evaluation of
the cash flow statement of an enterprise named Northern Star Resources Limited which is a
resources company and has been listed ion Australian Stock Exchange. The company’s cash flow
statement for the last three years will be compared and analyzed for the purpose of any
observations and findings. The description of each item of the cash flow statement will help the
users in gaining a deep knowledge about the corporate accounting techniques. Also the tax
expense of the company during the concerned year 2017 will be evaluated and noted for the
purpose of making interpretations. This will help the users in performing necessary evaluations
regarding deferred tax assets and liabilities of company and understanding any interesting,
confusing or other aspects.
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CASH FLOWS STATEMENT
The various items along with their reasons for changes during the last financial year are
presented below:
Receipts and payments form customers – The cash inflow and outflow relating with customers
and suppliers payments are related with ordinary course of business operations in a company.
The cash inflow can happen due to sale of goods and services to the customers of company for
the type of consideration received in cash and the payments can be associated with use of raw
materials and other services required in the course of manufacturing or producing (Northern Star
Resources Limited, 2017). The receipts form customers in the year 2017 has been $878296000
which was higher in the year 2016 amounting to $897701000. This shows that the decrease can
be the result of inefficiently in marketing activities of the company or the poor performance of
company however the payments to suppliers have also decreased in comparison to last year.
Interest and income taxes paid – The payment of interest and income tax expense during the
year represents the statutory obligation of the company which is concerned with paying interest
obligation on operating activities and the taxes which are calculated in the income earned during
the year. The income taxes paid during the year has increased significantly for the company
which was $10873000 in the year 2016 and increased to $73100000 in the year 2017 (Beekes, et
aussi. al., 2015).
Payments and proceeds associated with property, plant and equipment, investments and
other assets of company – The type of activities are related with investing activities of the
company in which the cash inflow and outflow is concerned with investing the funds of company
in order to continue the business operations and earning some returns. The cash flow form
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payment form mine properties of the company have resulted in significant increase in the cash
outflow of $135345000 which can be concerned crucial for the company.
Proceeds from issues of shares and other equity securities – The type of activity refers to the
financing activity in a business where the cash inflow is concerned with obtaining funds from the
equity shareholders of company by offering the portion of stake in a company. The issue of
equity shares and other securities is a source of funding for the company. The changes in equity
capital and cash flow can be the result of changes in capital structure of company.
Finance lease payments – The finance lease payments are concerned with paying the
installments and interest amount on the amount of lease obtained by the company. The changes
in the cash flows concerned with this item can be the result of terms and conditions of ease
agreement or the variations in interest rates.
Dividends paid to Company’s Shareholders – The dividends paid to equity shareholders
represent the amount of dividends declared on the proportion of equity capital and the changes in
the cash outflow can be the result of variations in the dividend policy of company along with its
dividend rates (Northern Star Resources Limited, 2017).
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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
$(000)
%
increase/d
ecrease
2016
$(000)
%
increase/d
ecrease
2015
$(000)
Cash flows from operating activities
Receipts from customers (inclusive
of GST
878,29
6
-2 897,70
1
6 847,08
6
Payments to suppliers and
employees (inclusive of GST)
-
452,19
8
-11 -
506,08
5
13 -
449,67
6
Interest received 6,051 57 3,850 85 2,079
Interest paid -319 -75 -1,258 -1,917
Income taxes paid -
73,100
572 -
10,873
-72 -
38,563
Net cash inflow from operating
activities
358,73
0
-6 383,33
5
7 359,00
9
Cash flows from investing activities
Payments for property, plant and
equipment
-
40,153
124 -
17,918
-80 -
90,729
Payments for exploration and
evaluation
-
56,423
-8 -
61,538
200 -
20,524
Payments for mine properties -
135,34
5
23 -
110,18
4
209 -
35,619
Payments for available for-sale- -1,000 558 -152 -100 -
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financial assets 93,524
Payments from disposal of business 18,089
Proceeds from sale of property,
plant and equipment
547 69 -500
Proceeds from sale of investments 9,897 -100 1,438
Net cash (outflow) from investing
activities
-
204,38
8
8 -
189,72
3
-21 -
239,45
8
Cash flows from financing activities
Proceeds from borrowings 70,750
Repayment of borrowings -
70,750
Proceeds from issues of shares and
other equity securities
2,151
Finance lease payments -8,724 -10 -9,700 22 -7,966
Dividends paid to Company's
Shareholders
-
60,050
67 -
36,014
36 -
26,529
Net cash outflow from financing
activities
-
66,623
46 -
45,714
33 -
34,495
Net increase in cash and cash
equivalents
87,719 -41 147,89
8
74 85,056
Cash and cash equivalents at the
beginning of the financial year
315,34
1
88 167,44
3
103 82,387
Cash and cash equivalents at the end
of the financial year
403,06
0
28 315,34
1
88 167,44
3
Analysis:
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Cash flows from operating activities – By recognizing the movements and increase and
decrease in the cash flows it can be observed that the cash inflow from investing activities of
company have increased in the year 2016 but the same has decreased in the year 2017. The same
has been the result of significant decrease in the cash received from customers of company and
the increase in the income taxes paid by the company in the year 2017.
Cash flow from investing activities– By recognizing the investing activities of the company
which are concerned with acquiring the property, plant and equipments and other investment for
the company it can be established that the cash outflow was $239458000 in the year 2015 which
has decreased by 21% in the year 2016 and the same has been amounting to $189723000 in the
year 2016. Also the same has increased in the year 2017 by 8% and therefore the investing
activities of the company are not maintaining any constant proportion of investment (Beekes, et
aussi. al., 2015).
Cash flows from financing activities– By evaluating and interpreting the result showed in cash
flow statement of company it can be observed that in the year 2015 there has been proceeds
associated with borrowings obtained by the company amounting to $70750000 and the same was
repaid in the same year. Also there has been significant increase in the net cash outflow
concerned with financing activities of company which has increased by 67% in the year 2017
and the same is the result of increase in dividend payment of company. Therefore the financing
activities of the company need to be controlled (Northern Star Resources Limited, 2017).
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OTHER COMPREHENSIVE INCOME STATEMENT
3. What items have been reported in the other comprehensive income statement?
The items which have been reported in comprehensive income statement are as follows:
Items that may be reclassified to profit or loss:
 Changes in the fair value of available-for-sale financial assets
 Share of other comprehensive income of associates and joint ventures accounted for
using the equity method
 Income tax relating to these items
4. Explain your understanding of each item reported in the other comprehensive income
statement
The items reported are as follows:
The changes in the fair value is recognized in the comprehensive income for recognizing and
obtaining the actual group profit and the share of other associates and joint ventures helps in
obtaining the group profit in the systematic way. The taxes relating to these item shave also been
considered (Warren & Jones, 2018).
5. Why these items have not been reported in Income Statement/Profit and Loss Statement.
These types of matters have been reported in the complete income statement of company because
the same affects the equity situation of company but does not directly affects the actual profit and
loss recognized by the company during the year.
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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
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 same is not in agreement with the accounting income tax expense of company and the
reconciliation for the same is provided is below:
(Source: Northern Star Limited, 2017)
This represents that the difference is due to temporary differences as mentioned in the notes to
accounts. There has been included many adjustments which are relating to prior period items and
matters of the company and which ahs been considered in the current tax calculation of the
company.
8. Comment on deferred tax assets/liabilities that are reported in the balance sheet
articulating the possible reasons why they have been recorded.
Deferred tax asset- The concept of deferred tax asset is associated with recognizing the advance
tax payments which have been paid by the company due to temporary differences recognized in
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income statements of company (Northern Star Resources Limited, 2017). The amount of
deferred tax asset as recognized in balance sheet of company is Nil.
Deferred tax liability – It represents the amount of tax liability which has not been paid in the
current year due to any temporary differences recognized by income tax authority but the same
would be payable on the happening of an uncertain event. The deferred tax liability as reported
in financial statement is $49346000 in the year 2017. These can be represented as the noncurrent
liabilities for the company.
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?
Yes there has been a current tax liability reported in the balance sheet of company amounting to
$40811000 in the year 2017. The difference is due to adjustments relating to prior periods.
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?
No the income tax expense as shown in the income statement is not same as the income tax paid
in cash flow statement because the company may have made adjustments while paying the
income tax liability according to its ability and cash position (Warren & Jones, 2018).
It is confusing to notice that the company has recognized deferred tax liabilities without being
mentioning the reasons for the same however the deferred tax assets have been set off in the
current year fully without testing the incurrence procedure.
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Conclusion:
The report prepared above concludes that the financial statements as presented and provided by
the company annual helps in making evaluation about its financial position and performance and
this will assist in decision making function of company. Therefore the necessary accounting
work should be conducted carefully in order to take appropriate decisions. This will help in
recognizing the appropriateness of current tax expense and deferred tax expense recognized by
the company.
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References:
 Ali, S., 2016. Corporate governance and stock liquidity in Australia: A pitch. Journal of
Accounting and Management Information Systems, 15(3), pp.624-631.
 Beekes, W., Brown, P. and Zhang, Q., 2015. Corporate governance and the
informativeness of disclosures in Australia: a re‐examination. Accounting &
Finance, 55(4), pp.931-963.
 Bhasin, M.L., 2015. Corporate accounting fraud: A case study of Satyam Computers
Limited.
 Duff, A., 2016. Corporate social responsibility reporting in professional accounting
firms. The British Accounting Review, 48(1), pp.74-86.
 Henderson, S., Peirson, G., Herbohn, K. and Howieson, B., 2015. Issues in financial
accounting. Pearson Higher Education AU.
 Lee, T.A., 2014. Evolution of Corporate Financial Reporting (RLE Accounting).
Routledge.
 Ramanna, K., 2014. Political standards: Accounting for legitimacy.
 Sivathaasan, N., 2016. Corporate governance and leverage in Australia: A pitch. Journal
of Accounting and Management Information Systems, 15(4), pp.819-825.
 Northern Star Resources Limited, 2017 Annual Report Concise Annual Report 2017,
Available at: Annual-Report-2017-Amended-Final-22-08-2017.pdf, [Accessed on:
27/05/2018]
 Warren, C.S. and Jones, J., 2018. Corporate financial accounting. Cengage Learning.
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Appendix
Profit and loss statements
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Balance Sheet
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Cash Flow Statement
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