Analysis Of Caltex Australia’s Cash Flow And Other Comprehensive Income Statement

Changes in Item of Cash Flow Statement

The purpose of this report is to analyze the annual report of a company that is listed on ASX (Australian Stock Exchange). The company that has been selected in this report is Caltex Australia Limited, which is an Australia-based supplier of transport fuel and convenience retailer organization. This organization has been engaged in business of buying, marketing and distributing its petroleum products as well as operating convenience stores across this nation. This organization has been operating via two segments that involve- Lytton and supply as well as marketing. This enterprise has been listed on Australian Securities Exchange and has been constituent of S&P/ASX 50 index.

The cash flow statement of Caltex Australia Limited mainly consist of three sections that involves cash flow from investing activities, operating activities, financing activities and net cash as well as cash equivalents (Bodnar  and Hopwood 2012). The items that are included in the operating activities involves depreciation, adjustments to net income, liabilities changes, inventory changes, changes in accounts receivable and changes in other operating activities.  It has been seen that the total cash flow of operating activities has declined in the year 2017 to $735,032 from the year 2016 and 2015.

The items that are included in the investment activities are capital expenses, investments and other cash flow from investment activities (Farshadfar and Monem 2013). It has been evident that the total cash used for the investment activities decreased in the year 2016 to $-357,283 from $-411,105 in the year 2015 and then increased to $-800,348 in the year 2017. The increase has occurred mainly due to increase in capital expenditure in the current year.

In this cash flow statement of Caltex, financing activities mainly consists of the paid dividends, net borrowings, purchase as well as sale of stocks and other cash flows from the financing activities (Brigham and Houston 2012). There has been huge decline in total cash used in financing activities in the year 2017 to $-135,020 from the year 2016 and 2015.  Moreover, the change in cash and cash equivalents amounts to $-200,336 in the year 2017, $-18,907 in the year 2016 and $210,642 in the year 2015. This reflects that there has been huge decrease in the amount in the year 2016 from the year 2015 and again increased in the year 2017. The cash flow statement of this company has been shown below:

Cash flow(All numbers in thousands) Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper	2017	2016	2015
Net income	619,085	609,940	521,507
Operating activities, cash flow provided by or used in
Depreciation	211,040	196,294	183,075
Adjustments to net income	-10,922	-9,828	-30,252
Changes in accounts receivable	-183,167	-65,774	117,281
Changes in liabilities	689,284	212,909	-1,316
Changes in inventory	-575,155	-111,035	151,053
Changes in other operating activities	-20,827	-100,177	-105,362
Total cash flow from operating activities	735,032	928,202	884,666
Investment activities, cash flow provided by or used in
Capital expenditure	-362,897	-323,221	-431,518
Investments	–	-17,686	-7,268
Other cash flow from investment activities	–	–	–
Total cash flow from investment activities	-800,348	-357,283	-411,105
Financing activities, cash flow provided by or used in
Dividends paid	-292,107	-319,405	-261,900
Sale purchase of stock	–	–	–
Net borrowings	158,087	-342	-219
Other cash flow from financing activities	-1,000	-1,000	-800
Total cash flow from financing activities	-135,020	-589,826	-262,919
Effect of exchange rate changes	–	–	–
Change in cash and cash equivalents	-200,336	-18,907	210,642

Comparative Analysis of three main cash flow categories of Caltex Australia Ltd including investing activities, financing activities and operating activities

Particular	2017 in $m	2016 in $m	2015 in $m
Net cash flow from operating activities	735,032	928,202	884,666
Net cash flow from investing activities	-800,348	-357,283	-411,105
Net cash flow from financing activities	-135,020	-589,826	-262,919

The table and graph shown above depicts the comparative analysis of three major categories of cash flow that involves operating activities, investment activities and financing activities (Brown 2012). The above chart reflects that the net cash used for operating activities increased to $928,202 in the year 2016 from $884,666 in the year 2015 and again decreased to $735,032 in the year 2017. Moreover, the net cash used from investment activities decreased to $-357,283 in the year 2016 from $-411,105 in the year 2015 and again increased to $-800,348 in the year 2017. On the other hand, net cash flow from financing activities in the year 2015 amounted to $-262,919 which increased to $-589,826 in the year 2016 and again decreased to $-135,020 in the year 2017.

Comparative Analysis of Three Main Cash Flow Categories

The comprehensive income statement of Caltex Australia Ltd consists of net profit which had increased to $620,752m in the year 2017 from $610,480m in the year 2015. The items that are involved in other comprehensive income statement are- foreign operations – foreign currency translation differences, net change in fair value of net investment hedges, fair value change of cash flow hedges (Higgins 2012). It also consists of net income tax on items which have been mainly transferred to the income statement.

The difference in foreign currency translation increased to $29,577 min the year 2017 from $6698m in the year 2016. There has been increase in fair value of other comprehensive income to $45,294m in the year 2017 from $893m in the year 2016. Income tax on the items decreased to $2m in the year 2017 from $89 m in the year 2016. Furthermore, it also reflects that the total of other comprehensive income increased drastically to $25,998m in the year 2017 from $6753m in the year 2016.

It has been opined by Jagannath and Koller (2013) that, comprehensive income statement is mainly used for measurement of change in owner’s interest in the business. It generally incorporates income as well as expenditure which have not yet realized and is utilized for bypassing income statement. In addition to this, other comprehensive income mainly considers items that involve debt security on the unrealized profits and losses, changes in transactions of foreign currency, profit or loss obtained from the derivative instruments and any other pension profits or losses.

The income tax expenditure declined to $242,694 m in the year 2017 from $253,283m in the year 2016 as given in the company’s income statement. This tax was mainly calculated by dividing income tax expenditure to profit before income tax expenses from continued as well as discontinued operations (Henderson et al. 2015).

The amount of income tax has been computed by using tax rates, which have been mainly ratified significantly from the statement of company’s financial position (Kirkham 2013).  The present income tax expenditure amounted to around $253,283m in the year 2016 and $242,694m in the year 2017 as given in the financial statement. This reflects that the income tax amount had decreased considerably in the year 2017. Thus, it cannot be estimated that whether the income tax expenditures figures are same as that of tax rate times this enterprise’s accounting income.

Deferred tax is mainly estimated by the procedure of balance sheet asset that results from primary differences between tax base of the assets as well as liabilities and its total carrying amount as stated in the financial statements. Deferred tax asset refers to the asset given in the enterprise balance sheet which might be utilized for reducing its taxable income. It relates to the circumstances in which a particular business has mainly overpaid taxes or taxes that is paid in advance on balance sheet. Deferred tax assets are generally identified to that extent in which the availability of the taxable profit in future has been probable against basic differences which are deductible. The deferred tax asset increased to around $244,073m in the year 2017 from the year 2016 that recorded to around $238,083m.

Items of Other Comprehensive Income Statement

It has been highlighted in the company’s balance sheet that there is no record of current income tax assets in the year 2017 while in the year 2016, the amount recorded to around $9524 m. The income tax asset refers to the amount which has been estimated based on the standard accounting rules as well as the total amount of tax which has been owed by organization to the tax authorities. In addition to this, income tax payable refers to the total amount which the enterprise owes according to tax based on the tax code rules. It has been opined by () that, until an enterprise makes payment of tax, the total amount of tax payable given on the balance sheet as liability.

The income tax expenditure as shown in income statement is not the same as income tax paid given in the cash flow statement. The income tax paid as shown in the cash flow statement highlights that the amount paid in the year 2017 increased to around $239,389 from $13,595 in the year 2016. Income tax payment involves the effect of income tax of specific profit or loss relating to investment activities. On the contrary, income tax expenditure refers to the total amount which represents cost of income tax. Therefore, the income tax expenditure shown in income statement usually varies with income tax expenses as stated in the cash flow statement (Pham, Suchard and Zein 2012). This is because of the fact that the total tax expenditure that the company accounts for under income tax payable records to the total amount after accounting for several expenses such as- administrative expenditure, operating expenditure, financing charges, selling expenses and other expenses.

From the Caltex Australian Ltd annual report, it can be recognized that the total amount for income tax has been basically made based on the adjusted profits which are generally attributable for non- assessable or disallowed items (Zadek, Evans. and Pruzan 2013). In addition to this, the current income tax has been generally estimated by referencing recoverable amount or the total amount of income tax payable with respect to the taxable profit or tax loss for that specific accounting year. This has been usually estimated by applying tax laws as well as the tax rates, which has been enacted at reporting date. Thus, it can be seen from the above discussion that this enterprise has followed all the basic requirements of the Australian Tax Office (ATO) while estimating different taxes that has been included in the company’s financial statement.

References

Bodnar, G.H. and Hopwood, W.S., 2012. Accounting information systems. Upper Saddle River: Pearson.

Brigham, E.F. and Houston, J.F., 2012. Fundamentals of financial management. Cengage Learning.

Brown, R., 2012. Analysis of investments & management of portfolios.

Farshadfar, S. and Monem, R., 2013. Further evidence on the usefulness of direct method cash flow components for forecasting future cash flows. The international journal of accounting, 48(1), pp.111-133.

Henderson, S., Peirson, G., Herbohn, K. and Howieson, B., 2015. Issues in financial accounting. Pearson Higher Education AU.

Higgins, R.C., 2012. Analysis for financial management. McGraw-Hill/Irwin.

Jagannath, A. and Koller, T., 2013. Building a better income statement. Mckinsey & Company. November.

Kirkham, R., 2012. Liquidity analysis using cash flow ratios and traditional ratios: The telecommunications sector in Australia. The Journal of New Business Ideas & Trends, 10(1), p.1.

Parker, R.H. ed., 2013. Accounting in Australia (RLE Accounting): Historical Essays (Vol. 58). Routledge.

Pham, P.K., Suchard, J.A. and Zein, J., 2012. Corporate governance and the cost of capital: Evidence from Australian companies. Journal of Applied Corporate Finance, 24(3), pp.84-93.

Zadek, S., Evans, R. and Pruzan, P., 2013. Building corporate accountability: Emerging practice in social and ethical accounting and auditing. Routledge.