HI5020 Corporate Accounting Assignment: Financial Analysis of Banks

This report provides a comprehensive analysis of the corporate accounting practices of three publicly listed companies on the Australian Securities Exchange (ASX): Bendigo and Adelaide Bank, Bank of Queensland, and Westpac Bank. The analysis focuses on key aspects of their financial statements, including owners' equity (share capital, reserves, and retained profits), a comparative evaluation of equity and debt, and an examination of cash flow statements (operating, investing, and financing activities). The report also delves into the Other Comprehensive Income statement, discussing its components and implications, and addresses the accounting for corporate income tax, including income tax expense, effective tax rate, and deferred tax assets/liabilities. Through comparative analysis and close evaluation, the report aims to provide insights into the financial health and performance of these three major players in the Australian banking sector. Desklib provides solved assignments and past papers for students.

Running Head: CORPORATE ACCOUNTING 0
Corporate Accounting

Running Head: CORPORATE ACCOUNTING
Table of Contents
Executive Summary...............................................................................................................................1
Introduction...........................................................................................................................................3
Owners’ Equity......................................................................................................................................3
Ordinary Share capital...........................................................................................................................4
Reserves............................................................................................................................................6
Retained profits.................................................................................................................................6
Comparative Evaluation of Equity and Debt.........................................................................................6
Comparative Analysis...........................................................................................................................7
Cash flow statements.............................................................................................................................7
Operating Activities...........................................................................................................................8
Comparative Evaluation..................................................................................................................13
Close Evaluation..............................................................................................................................13
Other Comprehensive Income statement.............................................................................................14
Comprehensive income Analysis.....................................................................................................16
Non-inclusion of profit and loss account.........................................................................................17
Reasons for exclusion......................................................................................................................17
Performance of managers................................................................................................................18
Accounting for Corporate Income Tax................................................................................................18
Income tax expense.........................................................................................................................20
Effective tax rate..............................................................................................................................20
Deferred tax assets/liabilities...........................................................................................................20
Deferred tax calculation...................................................................................................................20
Cash tax amount..............................................................................................................................21
Distinction between cash tax rate and effective rate........................................................................21
References...........................................................................................................................................22

Running Head: CORPORATE ACCOUNTING
Introduction
The company Bendigo, was engaged in the selling of the financial products via 900 outlets in
Australia before the merger. The chief headquarters of the bank are located in the city of
Bendigo, with the main branches at the Victoria and Queensland, and the location of the main
office is at city of Adelaide. The revenue of the entity for the year 2016 was AU$1.551
billion. At present, the company as a whole is chiefly managed by Robert Johanson and
Marnie Baker (Bendigo and Adelaide Bank, 2017).
The Bank of Queensland is considered as one of the oldest banks, comprising of about 252
branches across the globe. These include the 166 owner managed branches and the 78
corporate branches. The company was established in the year 1863 that is after the formation
of the Bendigo and Adelaide bank. The entity received its official banking license on the year
1942 (Bank of Queensland, 2017). Roger Davis and Jon Sutton are key people responsible for
managing the affairs of the bank.
The entity Westpac Bank received its name from the combination of the words Western and
Pacific. The Westpac Bank is regarded as the first bank of Australia and is a popular entity in
the financial sector of Australia. As per the reports of the entity, in March 2018, Westpac had
record of 14 million customers and approximately 40000 employees as the part of the entity
(Westpac Bank, 2017).
Owners’ Equity
Bendigo Adelaide Bank
Shareholder's Equity 2017 2016 2015
Share Capital

Running Head: CORPORATE ACCOUNTING
Ordinary Share
capital 4448 4288 4355
Reserves 110 43 134
Retained profits 254 240 205
4812 4571 4694
The shareholders equity is regarded as one of the essential components of the financial
statements of any entity. The term shareholders equity is comprised of share capital, the
retained profits and the reserves. The shareholder capital is further bifurcated into ordinary
share and treasury shares. The overall shareholders equity in the year 2015 was recorded to
be the $ 4694 million which further reduced to $ 4571 million in the year 2016 and increased
to $ 4812 in the year 2017. The chief reason for the increase in the shareholders equity in the
year 2017 can be stated to be the reserves and the retained profits. Thus, it can be stated that
share capital of the Bendigo and Adelaide bank has been fluctuating over the years (Dorn
Katz, Patterson and Van Reenen, 2017).
Ordinary Share capital
The ordinary share capital refers to the sum that has been brought by the promoters of the
business in the association for the organisation. The said amount is called by the organisation
as an offer for the capital contribution of the entity. The allotment of the said shares is done
after the applications have been received for the shares.
Bank of Queensland
Shareholder's Equity 2017 2016 2015
Share Capital

Running Head: CORPORATE ACCOUNTING
Ordinary Share
capital 3367 3250 3128
Reserves 48 18 75
Retained profits 347 223 166
3762 3491 3369
Westpac Bank
Shareholder's Equity 2017 2016 2015
Share Capital
Ordinary Share
capital 34889 33469 29280
Treasury Shares -437 -369 -385
Reserves 858 790 1031
Retained profits 16871 15311 23172
52618 49570 53483
There is an upward trend in the in the period of three years starting from 2015, in terms of the
shareholder’s equity of the entity, the Bank of Queensland. While the reserves of the bank
reduced for the year 2016, the greater pace in the retained profits can be attributed towards
the overall increase in the shareholder’s equity for the year 2016. The same increasing trend
continues for the year 2017 for the retained profits. The reserves have contributed in the
payment of the expenses, leading to an overall increase in the share capital. The share capital
has increased from $3128 to $3367 from 2015 to 2017. It is evident that the performance of
the bank has improved from the year 2015 to 2017 (Stiglitz and Rosengard, 2015).

Running Head: CORPORATE ACCOUNTING
Reserves
The reserves are displayed as a part of the shareholders equity. These depict a credit balance
and are comprised of various range of profits accumulated in the entity for the various
specific purposes. Some of the instances of the purposes for which the reserves are used by
the entity are the payment of the bonuses, purchasing the furniture, paying for the legal
settlement and others. Among the three entities as stated above, the reserves of the Westpac
bank depict the highest balance and the lowest reserves are that of the Bank of Queensland in
the year 2016, amounting to $18 million (Stiglitz and Rosengard, 2015).
Retained profits
Another essential component of the balance sheet and the shareholder’s equity are the
retained profits. These refer to the surplus balance of profits of the entity, which have been
earned for the sale of the services to the customers. The said amounts are primarily used by
the enterprise towards the payment of the future liabilities and the dividends to the
shareholders. It must be noted that the balances of the reserves have fallen for that of the
Westpac Bank from $23172 to $16871. These are in addition to the highest overall equity
amount of the Westpac bank, as compared to the data of the two other banks. The said high
can be attributed towards the trust and the brand name earned by the company for the
customers, over the years (Westpac Bank, 2017).
Comparative Evaluation of Equity and Debt
The following table displays the amount of the total debt and equity of all the three banks.
Basis Bendigo and
Adelaide Bank
Bank of Queensland Westpac Bank
Debt 66941 44692 842688
Equity 4812 3762 52181

Running Head: CORPORATE ACCOUNTING
The fact that the all the three entities possess the debt higher than then the equity, is
descriptive that the entities are less willing to take the risks. In addition, the higher debt
component is also yielding the leverage against the income earned, in terms of the tax
advantage over the finance costs paid (Bank of Queensland, 2017).
Comparative Analysis
As per the discussions conducted in the previous parts, it can be concluded that there is an
overall increasing trend in the shareholder’s equity of the all the three entities. The
comparative analysis as conducted above depicted the comparison and the contrast of the
financial position in terms of the shareholder’s equity, of the all the three banks. The current
shareholder capital of Banks of Queensland, Bendigo Adelaide Bank and the Westpac Bank
are $3762, $4812 and $52618 respectively. The same depicts the amount of investment made
by the promoters and the shareholders of the companies.
Cash flow statements
The cash flow statement tool aids to get an insight of the cash inflow and the cash outflow of
the organisation concerning a financial year. The tool is a measure of the management of the
cash position of an entity. This is in addition to the evaluation of the company’s ability to pay
off the expenses and the obligations of the organisation. The preparation of the cash flow
statement is done under the three major heads that are the operating, investing and financing
activities.

Running Head: CORPORATE ACCOUNTING
Operating Activities
The operating activities refer to those activities that are directly attributable to the chief
operations of the business enterprise. Thus, there exists an explicit relationship between the
core objectives of the enterprise, the overall administration and the revenues of the entity.
The results of the core activities like manufacturing and trading are dealt in this section of the
statement of cash flow.
Changes in the Working Capital
The working capital refers to the difference between the amounts of the current assets and the
current liabilities of the entity. The calculation of the working capital is done in order to
evaluate the existence of balance of assets to cover the payment of the liabilities.
Net Operating Cash Flow
In terms of the banking activities, the net cash flow from the operations refers to the money
needed by the bank to grow its financing operations, which is the core activity of the banks.
In addition, the segment also aids in the reporting of the whether there are any external
requirements of cash to finance the expansion of the business operations.
Investing Activities
The investing activity segment of the cash flow statement evaluates the amount invested by
an entity for the purchase of the assets and the benefits derived from the same. The benefit of
the use of the asset is described in the form of generation of the realizable value after the
usage of the assets. It must be noted that these benefits share a direct relationship with the
efficient use of the assets.
Capital Expenditures

Running Head: CORPORATE ACCOUNTING
The capital expenditure in relation to the assets refers to the amount utilised for the
acquisition of the fixed assets like plant and apparatus, building, capital speculation and
others. The fact that the fixed assets hold the potential to generate the future benefits and
revenues for the business, the same needs to be recorded.
Sale of Fixed Assets & Businesses
The sales of the fixed assets are descriptive of the facts that the capital fixed assets have
either become obsolete nature or are in the non-working conditions and the same are sold. In
addition, the assets fully or in part may have been sold in exchange of another assets in part
or the full payment in cash. The machinery and the fixed assets are essential components of
the business operations of the entity, and the same generate beneficial outcome in the form of
cash flows to the business.
Net Change in Cash
The figure of the net change in cash is the sum of the amounts of the cash flows from
operating activities, cash flows from financing activities, and the cash from investing
activities. This gives an insight of the change in the increase or decrease of the money the
varied stages of the technique of the cash flow statement.
Free Cash Flow
The free flow income is referred to as the income that is earned by the banks by selling their
products and services to the customers. The same is also regarded as the leftover with the
entity, after the payment for its operations and the expenses to carry out the said operations
(Free cash flow, 2017).

Running Head: CORPORATE ACCOUNTING
(Source: Bendigo and Adelaide Bank, 2017)

Running Head: CORPORATE ACCOUNTING
(Source: Bank of Queensaland, 2017)

Running Head: CORPORATE ACCOUNTING
(Source: Westpac Bank, 2017)