There are some important lists of items which have been seen from the cash flow statement of the Airways Company. From the operating activities, cash payment payments have been made to the employees, interest has been paid, dividends have been received and income tax has been paid. Payments made to the employees are payments for their contribution to the company’s goals, interests have been paid for some loans taken by the company, and the company has also received certain dividends from the companies whose shares it has purchased (Liu, Derudder and García. 2013). From the investing activities, some plants and properties have been purchased, payments have been made for investments, some loans have been processes and interests have been paid and capitalised on qualifying assets. Buying of plants and properties, interests have been paid for qualifying assets, which relatively take a longer amount of time for getting ready for sale. are an important investment for the company, because it helps in producing and assembling of the final goods, In the case of the financing activities, payments have been made for the buying back of shares, payments have been made for capital return, payment for capital returns have been made, payments for borrowings have been made, dividend have been paid to the shareholders as well as dividends have been paid to the non-controlling interests. Buying back of shares refers to the buying back of the distributed ownership of the company back into the company from the shareholders of the company. It is done to protect the financial and controlling interests of the company, similarly return of capital means return of the principle payments back to the capital owners, which have exceeded the growth of the company.
There have been some significant amount of changes in the cash from the operating activities, the cash payment to employees for redundancies and related costs have drastically decreased from $251 million to $50 million in 2017. The cash payments made to the employees for wage free bonuses have also increased form nothing in 2015 to at least $87 million in the year 2017. Similarly, in the case of interest, the received amount has decreased from $85 million in 2015 to $37 million in 2017. In the case of investing activities, some good amount of changes has been seen in the respect of payments made for purchase of property and plants from $1618 in 2016 to $1368 million in 2017 (Qantas.com, 2018). Repayment for borrowings has also decreased from $807 to $453 million in 2017. Some dividends payments have also been paid from $62 million in 2015 to $261 million in 2017.
The company has performed exceptionally well in the case of operating department, showing that the company has been very active in the operating wing. The company has maintained an average cash flow of $4500 in the case of the operating activities. In the case of financing activities, the company has performed not so quiet like the operating activity. It has continued to decline from $1825 to $854 in the year 2017. In the case of the financing activities, the company has performed miserably. It has continued to shell out money in different genres of activities and as a result of which, the company has seen a wide amount of cash leaving its cash coffers, as seen here from $1923 in 2016 to $2046 million in 2017.
On analysis of the financial income statement of the company, the income tax expense for the years 2017 and as well as 2016 have been found. The income tax expense for the year 2017 was $ 328 million, which was $395 million in the year 2016. Thus it could be seen that the there was a drop in the income tax expense for the year 2017. This could have happened because of the drop in the income statement of the company, which is evident from the company’s fall in the revenue from $13,961 in 2016 to $13,857 in 2017 (Qantas.com, 2018).
In case of the company tax rate times, the amount of income tax is calculated as follows. The income tax rate in case of Australian companies is 30%. The income for the year 2017 was $16,057 and the tax expense is (16,057*30%= 4817 for 2017) and for the year 2016 the income was $16200 and the tax expense is (16200*30%= 4860). The income tax expense as shown in the income statement is different from the income tax expense as seen here, there is as deficit of $4489 in 2017 and $4465 million for the year 2016. There are various for this strange phenomenon. Initially, this could happen because of the operating losses, which have occurred due to the recording of the impairments. Another significant reason because of this drastic short fall is the recording of fewer items or events which have occurred after the preparation of all the financial statements of the company. These items are not recorded in the main financial statements of the company. The examples of these kinds of items are the deferred financial statements of the company. The financial statements of the company also do not take into account various kinds of items due to the adherence to the realisation principle. The realisation principle is one of the most important GAAP accounting principles, which states that an item could only be recorded in the main financial statements of any company; the statement of income or loss of any company, only and only when they have been realised in the current accounting period. This is one of the most important causes which leads to the wider kinds of disparities in the income expenses of the company.
The deferred tax liabilities of the company for the year 2017 was $389 million and it was abo in the year 2016. In the same way, the deferred tax asset of the company for the year 2017, was nil and for the year 2016, it stood at $39 million. The deferred tax assets and liabilities arises due to the difference in the timings of the income tax of the company as per the income tax act and the income as per the books of accounts of the company. The deferred tax assets are those kinds of assets which arises when the company has overpaid its income tax obligations and have paid the taxes in advance as per the balance sheet of the company. These over paid taxes are returned to the company in way or the other in the form of tax relief and as a result of which, these taxes help in reducing the tax liabilities of the company. In the same way, deferred tax liabilities increase when the company or the business entity has under paid its tax obligations. This on the other hand, leads to the creation of excessive tax burden on the company. The company tries its best to address these issues. These are known to create an unhealthy impact on the stakeholders of the company, as normally any stakeholder would never want to invest in any company, where the taxes are postponed to a future time period of the company.
Qantas Airways have recorded a current tax assets of $395 million for the financial year of 2017. The company also reported income tax payable of $328 US$M for the financial year of 2017 (Qantas Airways, 2018). The income tax which is payable for the year 2017, is not the same as per the income tax expense as has been shown in the income statement of the airways company. This is primarily because of the fact that the company tax procedures and the tax calculation procedures are based on the standard accounting rules and regulations as have been prescribed by the accounting standards board. These rules are the framework of the entire taxing structure which must be strictly followed by the companies and the different business entities (Lombrano and Zanin, 2013). Whereas, the gap arises because of the difference between the income tax calculated as per the rules of the accounting bodies and the differences in the treatment of the assets and the incomes due to the changes in the accounting periods and accounting treatments because of the presence of special items like depreciation methods, deferred tax assets and deferred tax liabilities (Gao et al., 2015).
An interesting point has been noted while observing the cash flow statement of the airways company that there was no mention of the income tax which had been paid domestically, whereas there was mention of the different income taxes paid in aggregate in case of the foreign countries, where the company has worked or is currently operating and working. The foreign income tax of the company for the year 2017 was $4 million and for the year 2016 was $2 million. This as is pretty evident from the income taxes which have been mentioned in the income taxes of the company for both the years 2016 and 2017. The income tax as mentioned in the income statement of the company for the year 2017 was $328 and which was $395 million for the year 2016. A huge gap is pretty evident from this. This arises mainly because of the presence of the some debateable items which cause huge disruption in the financial statements of the company. These items are depreciation, mainly the method of depreciation which is adopted for depreciating the items. The method which is chosen out of the written value method or the straight line method is very important and exercises a huge influence on the amount of income taxes written in the income statement of the company. Similarly deferred income tax assets and liabilities play a vital role in influencing the income taxes and the amount of assets and liabilities in the balance sheet of the company. These assets or liabilities, as the case may be are adjusted to the accounting and financial statements, which causes huge changes in the amount of taxes paid by the company and the amount which is reflected in the income statement of the company.
When the aggregate financial statement analysis has been done in a comprehensive manner, some important aspects of the financial statements could be seen. The taxes which have been paid, the method of depreciation adopted, the cash flow statements of the company, every single aspect of the company seemed flawless. Only one exception is present in the case of income statement of the company. The absence of the domestic income tax which has been paid by the income is a serious issue and must be resolved at the earliest. It is pretty obvious, that a company cannot be operate unless it duly clears all its income tax obligations and the various other financial obligations. Qantas airways, have been one of the pioneers in the field of aviation in the Australian aviation market and has always tried to lead the aviation by example (Bamber et al., 2013). Otherwise, apart from this, no other issues have been seen or observed in the income statement of the company. AS has been seen and observed from the analysis of the 2016 and as well as the 2015 annual reports of the company, no such abnormality exists. It has also been observed that being one of the primary aviation players in the Australian market of aviation, it has always ensured that the company has prepared all its reports and financial statements in accordance with the standards set by the ASIC and as well as by the AASB.
References:
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