Corporate Accounting Project: JB HI FI & Kathmandu Analysis

This report presents a corporate accounting study comparing JB HI FI and Kathmandu Limited, two Australian retail companies. It examines owner's equity, cash flow statements, other comprehensive income, and corporate income tax accounting. The analysis includes comparative assessments of equity items, debt-equity positions, cash flow statement items, and comprehensive income statement components. Managerial performance and effective tax rates are also evaluated. The report concludes by summarizing the key financial similarities and differences between the two companies based on their annual reports.

Running Head: Corporate Accounting
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Project Report: Corporate Accounting

Corporate Accounting
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Executive summary
In the report, the corporate accounting study has been performed on two Australian
companies, JB HI FI and Kathmandu limited. Both the companies are operating their
business under the Australian retail industry. The corporate accountant mainly checks that
whether the company has followed the proper recording and presentation rules of AASB
while showing the financial statement in the annual report of the business. The study explains
that the recording and presentation position of both the companies are similar and thus it was
easier to conduct the study and compare the position of both the companies.

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Contents
Introduction of report........................................................................................................4
Company’s introduction...................................................................................................4
Owner’s equity..................................................................................................................5
1.Equity items...............................................................................................................5
2.Debt and equity position............................................................................................6
Cash flow statement..........................................................................................................6
3.Cash flow statement items.........................................................................................6
4.Comparative analysis from last year..........................................................................8
5.Comparative analysis among the companies.............................................................9
Other comprehensive income statement...........................................................................9
6.Comprehensive income statement items.................................................................10
7.Profit and loss statement..........................................................................................10
8.Comparative analysis...............................................................................................11
9.Manager’s performance...........................................................................................12
Accounting for corporate income tax.............................................................................12
10.Tax expenses in annual report...............................................................................12
11.Effective tax rate....................................................................................................12
12.Deferred tax assets and liabilities..........................................................................13
13.Changes in Deferred tax assets and liabilities.......................................................13
14.Cash tax amount....................................................................................................14
15.Calculation of cash tax rate....................................................................................14
16.Book tax rate and cash tax rate..............................................................................15
Conclusion......................................................................................................................15

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References.......................................................................................................................16

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Introduction of report:
Corporate accounting is an accounting part which focuses on the annual report of the
business and the other reports which contains the accounting and financial items. The main
operations of corporate accountant is to check that whether the proper recording and
presentation rules of AASB has been followed and applied by the company in order to depict
and present the financial statement in the annual report of the business (Bhasin, 2015). It also
focuses that the proper financial notes about the accounting and financial transaction has been
given in the annual report or not.
The main motto of corporate accounting is to set a similarity among the annual reports
of all the companies so that the shareholder can’t get confuse in the performance and position
of any of the business. The better outcome could be concluded by the shareholders ad other
stakeholders of the business on the basis of the comparison. In the report, JB HI FI and
Kathmandu limited has been taken into the context to perform the corporate accounting
study. Australian retail industry is the industry of the both the firms.
Company’s introduction:
The brief about both the Australian retail firm has been given below:
JB HI FI:
JB HI FI is an Australian retailing company which is operating its business from last
44 years in the Australian market. The main products of the company includes electronic
products, video games, CDs and DVDs, home appliances, hardware product, ultra HB blu
rays etc. the main subsidiary company of JB HI FI is “the good guys” which manages all the
operations and the services of the business (Home, 2018). The company is currently
managing 244 stores and it is horizontally diversifying the product market t improve the
market performance.
KATHMANDU LIMITED:
Kathmandu limited is also an Australian retailing company which is operating its
business from last 31years in the Australian market. It is a transaction chain of retail stores in
the Australian market which offers the travel, adventures and outdoor equipment and the
apparels to its customers. Headquarter of the company is in New Zealand market. The

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company is currently managing 163 stores and it is horizontally diversifying the product
market to improve the market performance (Home, 2018).
Both of these companies have been chosen for the report because of their same
industry so that it becomes easier to identify the similarity in their presentation and the
recording system.
Owner’s equity:
Owner’s equity item represents the investment done by the owner or the shareholders
of the business in the operations of the business. The evaluation on the owner’s equity is
important for the shareholders because it plays crucial role in measuring the financial
performance and the capital structure of the business (Bhasin, 2013).
1. Equity items:
Equity items depict the total owner’s equity of a business. The equity item list of
Kathmandu limited and JB HI FI are as follows:
List of Equity items
JB HI FI Kathmandu Limited
AUD in '000 2017 2016 Changes 2017 2016 Changes
Stockholders' equity
Contributed equity 438700 49300 789.86% 200209 200191 0.01%
Retained earnings 381600 328300 16.24% 149893 136033 10.19%
Reserves 33200 27100 22.51% -23002 -24541 -6.27%
Total stockholder's
equity 853500 404700 110.90% 327100 311683 4.95%
(Annual report, 2017)
The table explains about different equity item list which contributes the total amount
invested by the shareholder and kept by the business for various reasons. The contributed
equity describes the total amount which has been invested by the shareholders in the
company against the shares in the profit of the company. The equity position of JBH and
Kathmandu limited has been improved by 789.86% and 0.01% from 2016.
Further, the retained earnings are the part of profit of the business which has not been
distributed among the shareholders of the business. 16.24% and 1.19% increment has been
seen in the retained earnings of JBH and Kathmandu limited respectively. Further, the

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reserves are the provisions which are maintained by the business against any operational risk
of the business (Fan, Gillan and Yu, 2013). The JBH has improved the reserves amount by
22.51% and Kathmandu limited has reduced the level by -6.27%.
2. Debt and equity position:
The debt and equity position mainly depict about the financial gearing position of the
business and the total cost of capital of the business. Through evaluation on the annual report
(2017) of both the companies, it has been found that the JB HI FI is holding a great debt
amount against the equity level of the business which expresses about higher financial
gearing position and lesser cost of the business. Further, the table describes that the debt
position of Kathmandu limited is just 13.67% of total equity of the business which expresses
about lower financial gearing position and higher cost of the business.
Debt and Equity position
JB HI FI Kathmandu Limited
AUD in '000 2017 2017
Long term debt 713000 44723
Equity 853500 327100
Debt / Equity 83.54% 13.67%
(Annual report, 2017)
Cash flow statement:
Cash flow statement, its items and the figures of cash flow statement represent the
total cash which either has been paid by the business or received in order to manage and run
the business activities. The evaluation on the cash flow statement is important for the
stakeholders because it plays crucial role in identifying the cash management capability and
the cash conversion cycle of the business (Bowen, Rajgopal and Venkatachalam, 2008).
3. Cash flow statement items:
The cash flow statement items depict the cash management position and the reason
behind the changes into the cash level of the business. The cash flow statement item list of
Kathmandu limited and JB HI FI are as follows:

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Figure 1: CFS of JB HI FI
(Annual report, 2017)
Figure 2: CFS of Kathmandu limited
(Annual report, 2017)

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The above images explain about various factors due to which the cash flow position of
both the companies has been changed. On the basis of the evaluation on the cash flow
statement of both the companies, various changes have been seen. Such as the receipts from
the customers, payment to suppliers, income taxes payment, and interest paid and interest
received all the items represent about the operational activities of the business. In the case of
JBH and Kathmandu limited, all the figures have been improved from 2016. Further, the
purchase and sales of PPE, subsidiary purchase etc are the investing activities which describe
about the positive changes in Kathmandu limited and negative changes in the JB HI FI.
Lastly, the purchase of loan, share issue, borrowings etc has been studied in both the annual
report (2017) and recognized that the position of JBH has been improved and the reduction
has been seen in the Kathmandu limited.
4. Comparative analysis from last year:
In terms of evaluation on the cash flow statement of the business, the cash flows of last
3 years of each of the company have been evaluated. The operating activity’s cash flow
represents that the 5.95% increment has taken place in the cash inflow position of the
company. Though, the investing activities of the business describe about higher cash flow of
the business due to payment for business combination. Further, the borrowings have
improved the financial cash flows of the business by 652.22%.
JB HI FI
AUD in '000 2017 2016 2015 Changes
Net cash used for
operating activities 190600 185100 179896 5.95%
Net cash used for
investing activities
-
885500 -52000 -44370 1895.72%
Net cash provided by
(used for) financing
activities 715900
-
130500
-
129640 -652.22%
(Annual report, 2017)
Further, the cash flows of last 3 years of Kathmandu limited have been evaluated. The
operating activity’s cash flow represents that the 127.07% increment has taken place in the
cash inflow position of the company. Though, the investing activities of the business describe
about higher cash flow of the business due to payment for business combination. Further, the
dividend payment has improved the financial cash flows of the business by 285.17%.

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Kathmandu Limited
AUD in '000 2017 2016 2015 Changes
Net cash used for
operating activities 67273 69080 29627 127.07%
Net cash used for
investing activities -13275 -23191
-
19980 -33.56%
Net cash provided by
(used for) financing
activities -57382 -40730
-
14898 285.17%
(Annual report, 2016)
5. Comparative analysis among the companies:
The comparison of both the companies has been done further to measure that whether
the changes in both the companies are similar or the internal factors of the company have
derived the different changes in both the companies. On the basis of the below given table, it
has been recognized that the cash flow from operating activities of JBH and Kathmandu
limited is 2.97% and -2.62% which describes better cash level of JBH. Further, the cash flow
from financing activities of JBH and Kathmandu limited is -1602.88% and 42.76% which
describes better cash management position of Kathmandu limited. Lastly, the study describes
that the outflow of JBH has been controlled and the Kathmandu limited’s expenses have been
improved in the year of 2017.
JB HI FI Kathmandu Limited
AUD in '000 2017 2016 Changes 2017 2016 Changes
Net cash used for operating activities 190600 185100 2.97% 67273 69080 -2.62%
Net cash used for investing activities
-
885500 -52000 1602.88%
-
13275
-
23191 -42.76%
Net cash provided by (used for)
financing activities 715900
-
130500 -648.58%
-
57382
-
40730 40.88%
(Annual report, 2017)
The similarity in recording the cash flow position of both the companies have helped
to compare the cash flow figures of both the companies and evaluate the cash management
level of both the companies.
Other comprehensive income statement:

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Comprehensive income statement item represents the activities and the events which
are not related to the operations of the business. The evaluation on the comprehensive income
statement of the business is important in order to measure that how much the profitability
level of the business has been affected because of it (Chen, Hu and Xiao, 2012).
6. Comprehensive income statement items:
The comprehensive income statement items depict the factors and items which affect
the profit level but have not been represented in the income statement of the business. The
comprehensive income statement item list of Kathmandu limited and JB HI FI are as follows:
Figure 3: Comprehensive income statement of JBH
(Annual report, 2017)
Figure 4: Comprehensive income statement of Kathmandu limited
(Annual report, 2017)
7. Profit and loss statement:

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The annual report (2017) of JBH and Kathmandu limited expresses that the profit and
loss statement and comprehensive income statement has been represented differently by the
companies even though, both the statement represent the profit or loss level of the business.
Chen, Hu and Xiao, (2012) has explained into his study that the profit and loss statement of
an organization represent those figures which are related to the operations of the company
whereas those items which are not related to the activities of the company but still have a
impact on the profit position of the business is shown in the comprehensive income statement
of the business.
The comprehensive income statement is prepared separately in order to make the
clean information to the internal and external stakeholders of the business that how much
profit has been generated by the business and how much affect on the profit position of the
company has taken place due to the external factors such as changes in the foreign exchange
rate.
8. Comparative analysis:
The comprehensive income statements of both the companies represent the changes
into the total comprehensive income from the last year and the impact of the comprehensive
income on the total profitability level of the business. On the basis of the below table it has
been found that the comprehensive income of JBH has been reduced and Kathmandu
limited’s income has been improved from the year of 2016 (Bamber, Jiang Petroni and Wang,
2010).
Further, it has been found that the total profitability level of JBH has been reduced
from $ 1,72,40,000 to $ 1,71,20,000 because of the loss in the comprehensive income
statement of the company. Additionally, on the basis of the annual report (217) of Kathmandu
limited, the total profitability level of company has been improved from $ 33,521,000 to $
11,246,000 because of the profit in the comprehensive income statement of the company.
Comprehensive income statement Items
JB HI FI
Kathmandu
Limited
AUD in '000 2017 2016 2017 2016
Profit for the year 172400 152200 38039 33521
Other comprehensive income
Movement in cash flow hedge reserve -1100 100 209 -15891
Movement in foreign currency translation -100 3900 209 -6384