Analysis Of Other Comprehensive Income Statement And Tax Treatment In Coca Cola Amatil

Cash Flow Statement Analysis

 The chosen company is Coca Cola Amatil that is listed under the ASX is that deals with the soft drinks and non-alcoholic beverages in Australia. In order to analyze the annual report the chosen organization listed on the Australian Stock exchange (ASX) The Company offers a stable cash flows and comparatively low risks and it facilitates payment to the investors along with the potential long-term growth. It seeks to establish the diversified portfolio with regard to regulated utility infrastructure assets and continuing to be in the lead position under the Australian infrastructure investment fund. Further, the values upon which the company is maintaining its growth are fairness, honesty, maximizing the value of the security holder and maintenance of the high standards for corporate governance.

By the evaluation and analysis of the cash flow statements of the business organizations, it becomes easier to gain an understanding of their inflows as well as outflows. For this paper, Coca Cola Amatil has been chosen and each item of its cash flow statement is analyzed. The cash flow statement mainly consist of three sections that involves cash flow from investing activities, operating activities, financing activities and net cash as well as cash equivalents (Brooks, 2015). 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. The items that are included in the investment activities are capital expenses, investments and other cash flow from investment activities. In this cash flow statement of Coca cola Amatil, 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 (Grant, 2016).

Cash flows from operations:

It has been seen that the total cash flow of operating activities has increased in the year 2017 to $5, 89,200 from the year 2016 and 2015.

Cash flows from investing activities:

It is evident that the total cash used for the investment activities increased in the year 2016 to -1, 89,800 from $ -3, 21,400 in the year 2015 and then again increased to $ -1, 82,600 in the year 2017.

Cash flows from financing activities:

There has been rise in total cash used in the financing activities in the year 2017 to -6, 84,500 from the year 2015 but in comparison to 2106 the cash out flow has been enhanced from $-4, 38,500.

Comprehensive Income Statement Analysis

Moreover, the change in cash and cash equivalents amounts to $-3, 40,700 in the year 2017, $1, 39,600 in the year 2016 and $4, 34,400 in the year 2015.

Particular	2017 in $m	2016 in $m	2015 in $m
Net cash flow from operating activities	5,89,200	7,74,800	6,26,800
Net cash flow from investing activities	-1,82,600	-1,89,800	-3,21,400
Net cash flow from financing activities	-6,84,500	-4,38,500	1,22,400

Various significant items are reported under the comprehensive income statement in the annual report of Coca Cola Amatil in 2017.The Other comprehensive income Items to be reclassified to the income statement in subsequent periods includes the Foreign exchange differences on translation of foreign operations that has been decreased to -$141.4 m in 2107 from the year 2016 which was $ 31.9 m. There is also the Reclassification of foreign exchange differences on disposal of a business that amounts to $ 1.2m in 2017 and was -$1.6m in 2016. The other comprehensive income statement also has Cash flow hedges that amounts at -$34.3m. Income tax effect relating to cash flow hedges  amounts to $ 6.7.There are also other reserve movements and Income tax effect relating to other reserve movements in the other comprehensive income statement of the company of Coca Cola Amatil (Gordon, et al., 2017).

The 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 (Damodaran, 2016). The main purpose of Coca cola Amatil in forming the other comprehensive income statement delivers the users with the essential information in relation to the above-mentioned aspects. Thus, this statement provides an overview of transparent and holistic approach of such items. Such causes are not engaged directly in order to derive income (Kroes & Manikas, 2014).

The Coca Cola Amatil is obliged to conduct its tax accounting in accordance with the norms of the Australian taxation. In the years 2016 and 2017, the tax rate that could be applied to the organization is 30%. Based on the statement of financial performance in 2017, the income tax expense reported has been -$148.6million in 2017 and- $135.8million in 2016. The tax was calculated as expense of income tax divided by profit before income tax expense from discontinued and continuing operations (Hackbarth & Sun, 2015).

The amount of income tax has been computed by using tax rates, which have been mainly ratified significantly from the statement of companies financial.  Based on the statement of financial performance in 2017, the income tax expense reported has been -$148.6million in 2017 and $-135.8million in 2016. The tax was calculated as expense of income tax divided by profit before income tax expense from discontinued and continuing operations. This shows that the income tax amount had decreased considerably in the year 2017. However, it cannot be estimated that whether the income tax expenditures figures are same as that of tax rate times this company’s accounting income (Najmi, Sarraf & Darabi, 2015).

Tax Treatment Analysis

The Deferred tax is accounted using the method of balance sheet liability resulting from temporary differences between the tax bases of liabilities and assets and their carrying amount in the financial statements. The initial recognition of liabilities and assets does not lead to recognition of deferred income tax and this does not have any impact on accounting or taxable loss or profit (Delkhosh et al., 2017). Recognition of deferred tax assets are done to the extent that the availability of future taxable profits is probable against the temporary differences that are deductible. In current year, there has been deferred tax liabilities of Coca Cola Amatil is $ 283.8 m in 2017 and $ 303.2 in 2016.

In the chosen company of Coca Cola Amatil the current tax assets amounts to $5.1 m in 2017 and $ 1.5 m in 2016. There has also been current tax payable identified in the balance sheet that amounts to $27.6 m in 2017 from $42.0 m in the year of 2016.

The Income tax assets is the amount that is calculated based on the standard accounting rules and on the amount of tax that is owed by company to tax authorities (Chen, Feldmann & Tang, 2015). Income tax payable is the amount that the entity owes in terms of tax based on rules of tax code.Until the company makes the payment of tax, the amount of income tax payable appears on the balance sheet liability section.

According to the latest annual report of Coca Cola Amatil, the income tax expense shown in the income statement is not same as the income tax paid shown in the cash flow statement which is -$173.4 m in 2017 that have been reduced from -$145.0 m. The Income tax payments includes the impact of income tax of certain loss or gain relating to financing or investing activities so that after tax cash flow is reflected in the subtotals of net cash flow. On other hand Income tax expense is the amount that represents the recording of income tax costs. Income tax payable is the liability account that helps in recording of the income tax amount that is owed by organization but is yet to be paid (Almamy, Aston & Ngwa 2016).  Income tax expenses on other hand represent the amount that is incurred rather than being paid. In this case, it is worth mentioning that the income tax expense recorded in the income statement is the amount incurred in the current taxation year of the organization and the payment is required to be made in the upcoming year (Scholes, 2015).

On the basis of the analysis of all the disclosed financial information, no surprising or confusing elements could be observed in the tax-related treatment of Coca Cola Amatil. This is because the organization has supplied the needed justifications and clarifications of the taxation treatment as footnotes in the financial report. From the 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 (Reid & Myddelton, 2017). 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 financial statement of the company (Robinson & Sensoy, 2016).

References

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