Essentially, there are three different items presented in the balance sheet statement of the corporations and one of the important financial items is necessarily equity. There is not an exception in case of the selected company BSA limited company. As per the balance sheet of the company declared during the year 2016, there are necessarily three different items under the segment equity and these include issued capital, retained earnings as well as reserves. In actual fact, issued capital can be referred to as the business equity (Bhasin, 2015). Essentially, business corporations mainly draw a specific proportion of the capital necessary for the business concern. However, the enumeration of the issued capital is carried out by multiplying total number of shares of chiefly stock outstanding by the par values of mainly shares. As per the annual declaration of the company BSA limited, issued capital can be observed to be $97592000 in 2016 as compared to the figure of 2015 that is $97592000. Essentially, the key items under issued capital are necessarily issues of particularly ordinary shares, costs associated to share issue as well as income tax associated to the share issue. The following financial item under the section of equity includes reserves. In essence, under the themes of financial accounting, reserve can be regarded as an element of the equity of the company BSA limited company. As such, this can be referred to as the additional amount apart from basic capital share. As per the annual declaration of the corporation presented in the year 2016, there subsists an $1410000 in reserves in the year 2016 when compared to the figure recorded in the year ago period, that is $1410000. In the company BSA limited company, there exist three different elements of equity reserves that include reserve for equity settled advantage, reserve for foreign currency translation together with research for hedging. The subsequent item mentioned under the section equity of the firm BSA limited is necessarily retained earnings. This stands for the total profit as well as losses of the corporation particularly calculated from the time of formation lessened by any dividend disbursement to shareholders (Ramanna, 2014).
Diverse types of expenses are incurred by business concerns that include selling expenditures and administrative expenditures among many others. Essentially, one of such kind of expends also include tax expenditure. Additionally, tax expenditure can be regarded as a major accountability of the firm due to the federal, state as well as municipal governments of the nation (Gitman et al., 2015). The enumeration of the tax expenditure is carried out by multiplying the apt tax of the company by the earnings before taxes after factoring certain key elements such as non-deductible items, tax assets/resources as well as liabilities (Mats Andersson et al., 2016). As such, there exists no exception in case of the corporation BSA Limited as the corporation also has tax expends. As per the annual declaration of the corporation BSA Limited, the company has registered loss of $(3014000) from mainly continuing operations specifically from income tax. In accordance with the directives of the Australian taxation law, the rate of corporate tax for particularly Australian firm is 30%. Founded on the rate of tax of 30%, the total tax expends of the firm BSA limited is $795000 in 2016 and $1564000. Essentially, this can be considered to be primary tax expends of the corporation for the financial year 2016. Nevertheless, it can be hereby witnessed that there has been decrease in the overall tax expenditure of the firm owing to the decrease in overall earnings of the business corporation in the financial year 2016 as compared to the year 2015.
Based on the above discussion it can be hereby mentioned that the business entity BSA Limited has registered a loss of $3014000 in the FY 2016. However, the profit was recorded to be $ 5449000 in the FY 2015.
Furthermore, the annual report of the business concern mentions that the income tax expends of the firm enumerated at the rate of 30% in the FY 2016. With the rate of 30%, the total income tax expends of the corporation BSA Limited need to be ($904000) in the FY 2016 and $1632 in the FY 2015.
Essentially, the total benefit for the specific years that can be reconciled shows that loss/profit of the firm from the continuing operations stands at ($3014000) in the FY 2016 as compared to ($5439000). Essentially, the income tax enumerated at the rate of 30% stands at ($904000) in the FY 2016 as compared to the year ago figure of $1632000. Moreover, a distinct variance in the tax expenditure of the corporation BSA Limited can be observed in the financial declaration of the corporation. Particularly, in case of BSA Limited, there are certain financial items that can be either included or else excluded from the preliminary total tax expenditure. Essentially, these financial items can be regarded as the reasons for the variances in the total amount of tax expenditure (Schaltegger et al., 2017). Specifically in case of BSA Limited, there is different financial items that have additional impacts on the entire tax expends of the corporation. As per the annual financial declaration of the corporation, the first and foremost item in this regard is the non-deductible expenditure that can be analysed for the purpose of determination of taxable gains. The item that need to be adjusted for include the allowances for research and development (Warren & Jones, 2017). Also, adjustments are recognized in the present year in association to the current tax of prior years and other and this amounts to ($29000) in the FY 2016 and ($18000) in the FY2015. Analysis of the financial statements of the firm therefore replicates the total income tax or expends acknowledged in the present year associated to continuing operations stands at ($766000), while the same is $1546000 in the FY 2015.
Deferred tax assets as well as liabilities can be referred to as two major notions of the tax operation of business entities. As rightly indicated by Vishny & Zingales (2017), deferred tax assets indicates towards a specific state of affairs in which the companies disburses taxes in advance enumerated on particular financial assets/resources. Again, on the other hand, deferred earning tax liabilities reflect a specific situation where variances can be observed in particularly profit as well as tax carrying value of the corporation. However, in case of the business entity BSA Limited, it can be observed that the company has $7795000 as deferred tax assets during the year 2016. However, the deferred tax liabilities are detected for particularly taxable variances related to investments in specifically subsidiaries as well as associates along with the interests that are in joint ventures. Taking into account specific directives of accounting and rules of deferred tax liabilities or assets, it can be said that there are specific reasons for the increase of deferred tax assets as well as liabilities (Robinson et al., 2015). However, particularly in case of deferred tax assets, the reason might be the surplus payment for depreciation by the corporation owing to the variances in the depreciation and taxable rate of depreciation. As a result of surplus disbursement for depreciation, the business entity BSA Limited will not have to make payments for additional tax in subsequent year, thereby, it can be regarded as an asset. Essentially, for deferred tax assets, the reason might ne the excess disbursement of depreciation by the corporation owing to the variances in depreciation and taxable rate of depreciation. Owing to deferred tax liabilities, it might have happened that because of temporary variances in profits of the corporation, the corporation had to make comparatively less payments for taxes in the present year (Tazik & Mohamed, 2014). Therefore, it is necessary for the corporation to pay the amount in the subsequent years.
Current tax assets/resources or income tax that is payable can be regarded as an important feature for the business corporation. As mentioned in the annual declaration of the business concern BSA Limited, the corporation has illustrated about the current tax assets. As per the financial statements of the firm BSA Limited, it can be seen that BSA Limited has not declared about any amount for particularly present tax assets during the financial year 2016. Nevertheless, during the year 2016, the corporation recorded $795000 as firm’s deferred tax in 2016 and $1546000 in 2015.
In business entities, it can be observed that there exists a basic variance between income tax expends and income tax that is payable and certain specific causes can be held accountable for this gap. The first reason is the existence of deferred tax assets. Essentially, there are several instances where corporation disburses additional tax assets in comparison to deferred tax assets that generate the variance. The following reason is the distinction between the regulations of financial accounting and the regulations of tax accounting. In this regard, the instance of depreciation can be stated (Maynard, 2017). Variances for depreciation can be observed under the financial accounting in addition to tax accounting for varied depreciation rate. Therefore, the total amount of depreciation payable can either be enhanced or lessened. Therefore, these are the primary causes behind the variances between income tax payable and income tax expends.
Analysis of financial statements of the firm BSA Limited reveals the fact that the company incurs tax expends, as mentioned in the income statement as well as statement of flow of cash. As per the income statement, the corporation reflects the entire amount of tax expends using the tax rate of particularly 30% on the earned profit from diverse continuing operations before tax. Essentially, the income tax expenditure reflects the total sum of the payable current tax as well as the deferred tax. Essentially, the current tax payable is mainly founded on the overall taxable profit for the particular year. Essentially, the taxable profit varies from the profit that is reflected in the consolidated statement of both profit and loss as well as other comprehensive earnings statement. This is owing to different items of earnings plus expenditures that are necessarily taxable or in other terms deductible in different other years along with items that are never taxable or else deductible (Sunder, 2016). In this perspective, it hereby needs to be stated that the tax expends come under the flow of cash from operating actions. Under this specific segment of cash flow statement, certain items of corporation’s income statements are treated differently. This implies that certain changes occur in the current assets as well as current liabilities of the firm. In the present case of BSA Limited, disbursements for income tax can be regarded as a current asset. As mentioned in the company’s statement of flow of cash, certain reductions in the elements of tax expends has been mentioned that refers to the usage of cash. This implies that certain components of tax expends have been stopped before taking into consideration consolidated statement. Because of these reasons, the variances on tax expends can be observed in the statement of income and statement of flow of cash (Weygandt et al., 2015). There are certain particular reasons for this difference in the total amounts of income tax expends (Lisowsky et al., 2017).
After observation of tax treatment in the financial assertions of BSA Limited, it can be stated that there exists no element of doubt and confusion in the process of treatment of tax. BSA has carried out by adhering to the directives as well as stipulations of the Australian Taxation Law. Also, BSA has presented all the requisite illustrations as well rationalization of different taxation matters such as rate of tax, diverse deferred tax assets as well as liabilities and currant taxation liabilities among many others. Nonetheless, there are certain striking factors in the treatment of taxation of the reporting entity BSA. The significant accounting policies illustrated in the annual report of the corporation shows that tax assets as well as liabilities (deferred) are associated to employee benefit arrangements and are recognized and enumerated as per AASB 112 (for income taxes) and AASB 119 (for Employee Benefits) (Tran, 2015). As per the annual report of the firm BSA, income tax expenditures reflect the total sum of the payable tax in the current period plus the deferred tax. For the current tax that is payable by the firm is mainly founded on the calculated taxable profit for a particular year (Hanlon et al., 2014). However, the taxable profit differs as presented in the reporting entity’s consolidated statement of particularly profit or else loss as well as other comprehensive income owing to different income items and expends that are necessarily taxable else wise deductible. Fundamentally, the deferred tax is primarily recognized on the temporary variances that exist between the carrying amounts of particularly assets as well as liabilities presented in the consolidated pecuniary statements.
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