Cash Flows Statement, Other Comprehensive Income Statement, Accounting For Corporate Income Tax – Qantas Airways

(i) Understanding of each item in the cash flows statement and changes in each item over the past year

The current study intends to carry out detailed analysis of yearly reports with special reference to the operations of the firm Qantas Airways.

i)List of each item reported in the assertion of cash stream

The assertion on the stream of cash of the selected firm Qantas Airways consists of traditionally three different segments such as operating activities, investing activities along with financing activities. The exhaustive list of items takes in changes in the company’s earnings, varied liabilities, and various inventories together with alterations in diverse operational acts. Different items that are included under cash utilized for investing activities takes account of investment for corporation’s plant, property along with equipment (PPE) along with intangibles, income earned from sales of PPE of the firm, income generated from clearance as well as sales of business as well as associates, overall investment carried out in mainly different associates and different joint deal of the business concern. In addition to this, different items that are included under the caption of investing acts contain cash used for the purpose of acquirement of various associates, redemption/investment in distinctively loan notes (Watson 2015).

ii)Analysis of stream of cash of the firm Qantas Airways divulges the fact that the cash generated out of the operational acts of the corporation takes account of AUD 2704 m in the financial year (2017). On the other hand, the same was registered to be AUD 2819 m in the financial year (2016). As a result, it can necessarily be stated that inflow of cash stream from operational activities increased to approximately AUD 2819 m in the financial year 2016 from the point of AUD 2014 m documented in the year 2015.  A downward movement therefore can be observed in the inflow of cash from operational acts in the year 2017. This is on account of augmented receipts of the business concern from their customers, enhancement in interests that are accepted by the corporation and decrease in overall costs borne for the purpose of borrowing and steady reduction in overall disbursements for income tax.

Analysis of cash flow from investing activities of the firm Qantas Airways reveals the fact that the there is outward stream of cash throughout the specified three year period. However, the outward stream of cash is observed to have increased during the three year period from -$944 m in 2015 to -$1923 m in 2016 to -2046 m in 2017. This movement in the stream of cash reveals enhanced outlay of the firm towards plant, property along with equipment, shrinkage in outward movement or else stream of cash for firm’s requirement to acquire subsidiaries. Also, there is also higher inward stream of cash that is generated out of the earnings stemming from sale of business units’ PPE and increased income from sale of majority of businesses together with business associates (Watson 2015).

Critical analysis of the flow of cash from financial acts is said to have enhanced during the year 2016 in comparison to figure that is primarily recognized in the year 2015. Cash flow from financing acts increased from -$1218 m in 2015 to -$1825 m in 2016. However, the same is said to have thereafter further declined in the year 2017 to approximately -$854 m in 2017. Fundamentally, this is chiefly because of enhancement in payments of interests and at the same time capitalised especially on diverse assets and particularly due to shrink in overall proceeds acquired by the firm from sales of the firm (Kravet 2014). Nevertheless, finally, numeral documented in the financial statement of firm represents decline in cash and cash equivalents inflow during the closing of the financial year. Fundamentally, shrink in the figure for cash and cash equivalents presents decrease in inward flow of cash for the company.

(ii) Comparative analysis of Qantas Airways’ three broad categories of cash flows and comparative evaluation for three years

iii)This segment of the financial statement of the firm that is the statement of the comprehensive statement of the earnings of the firm presents specific list of items that reports comprehensive earnings of the company. The specific items that are included in this statement include statutory profit reported during the year, comprehensive income or else loss (Kukah et al. 2016). Various items that are contained in this segment mainly take in overall variances on exchange from different transactions or else dealings of the company concerning their foreign operations. Also, this includes equity, total amount of reserve for diverse foreign translation that are in essence transferred to net profit along with fair value modification on specifically hedging of stream of cash (Kravet 2014).

iv)Overall exchange variation can be observed in effective transformation in fair value hedging of stream of cash that replicates sharp increase in the financial year 2017. Additionally, there is drastic decrease in transfer of specifically reserve of hedge to necessarily consolidated earnings pronouncements. This is recorded to be mere $6 m from the level of $198m in 2016.

v)Rationale behind why these specific items are pronounced in the P/L assertion

Essentially, pronouncement on other comprehensive income also indicated as OCI takes in varied items. This takes in both income as well as expenditure including adjustments that are undertaken for largely reclassification. This is routinely identified in the assertion for profit or else loss mentioned in the P/L account. In essence, accountability of OCI is for the most supports profit otherwise loss (Watson 2015). Again, of its own accord, any kind of gains otherwise loss can be accepted in the assertion of other comprehensive income when this completed other types of comprehensive part of earnings.

vi)The present tax expends of the firm Qantas Airways during the financial year 2017 was noted to be -$328 m in the financial year 2017 as well as -$395 m in 2016. In particular, the income tax expend uses domestic corporate tax rate of roughly 30% and statutory profit before income tax expenditure are modified for non-assessable dividends from specifically controlled entities, diverse non-deductible share of specifically net loss for particularly investments that are taken into account for the system of equity, diverse non-assessable gain on predominantly disposal of plant, property as well as equipment (also indicated as PPE), different non-quantifiable items along with provisions from various period of time (Shapiro 2015).

vii)Total amount of income tax is calculated by using specific tax rates that are necessarily forced noticeably by the financial position announcement. Again, the present expends on tax in the financial year 2017 was registered to be -$328 m in the financial year 2017. On the other hand, the same was recorded to be -$395 million in the financial year 2016 as presented in the pecuniary declaration. Particularly, this reflects that expenditure of the firm on tax has increased by approximately $67 m. Hence, it cannot be hereby evaluated whether numerals are identical as that of the rate of tax times overall accounting income.viii)Deferred tax (for both assets/liabilities) of the corporation Qantas Airways is documented to be -$353 m in the financial year 2017. Conversely, the same is registered to be $39 m in 2026. In essence, this deferred tax is essentially recognized with respect to temporary variances.  Essentially, deferred tax is primarily recognized with respect to temporary variance between principally carrying amounts of mainly carrying amounts of assets else wise liabilities for the most part financial assertion reasons and overall amounts used for the purpose of taxation (Balakrishnan et al. 2016). In essence, deferred tax (indicated as tax assets) are essentially recognized for particularly unutilized loss due to tax, unutilized credits for mainly credit for particularly tax in conjunction with deductible temporary variation to certain extent. This is expected that taxable gains in the forthcoming period against which they can be used.

(iii) Items reported in the other comprehensive income statement

ix)As rightly indicated by (), the income tax outgoings for the financial year 2017 is slated to be -$328 m in 2017 whereas the same is sketched to be -395 m in 2016. Nevertheless, the income tax payable is registered to be -4 m.  Therefore, a reconciliation of expenditure of income tax of the business concern Qantas Airways to essentially income tax payable engages adjustment for particularly temporary variances. Modification for temporary variances includes important adjustment for particularly temporary variations (Uyar 2016). As such, the temporary variation contains adjustments made for firm’s inventories, PPE, different obligation of payables, firm’s revenues that firm accepts in advance, varied liabilities that are essentially interest bearing, diverse financial assets as well as variation of prior period. In itself, temporary variations for the firm are observed to be $167 m in 2017 as compared to -$18 m in the year 2016. Hence, tax payable necessarily is documented to be -$4m.

x)Detailed analysis of financial report of the business concern Qantas Airways divulges that expend of the firm on tax gets represented in the earnings pronouncement. This is not indistinguishable to that of income tax paid represented in the assertion on stream of cash. In essence, disbursements for particularly tax on earnings consists of influence of income tax linked to different financing acts so that stream of cash after imposition of tax is represented in the sub totals of net stream of cash (Warren and Jones 2018). On the contrary, expend of the business concern on the tax is necessarily the total amount that represents costs borne for income tax.

 xi)Founded on annual financial statement of the firm Qantas Airways, it can be identified that charge for mainly current tax on income is based on adjusted profits. This is necessarily attributable for any type of disqualified or else non-assessable item. Moreover, notes provided after pecuniary statements presents the reconciliation of particularly earning tax expend to entire quantity of tax payable. In essence, this sort of reconciliation presents information to particular users concerning computation of this type of income tax (Jefrey 2018). As a consequence, the important part in relation to realization of tax expenses is principally reconciliation of the temporary variation and net loss borne after imposition of tax on income.

References

Balakrishnan, K., Watts, R. and Zuo, L., 2016. The effect of accounting conservatism on corporate investment during the global financial crisis. Journal of Business Finance & Accounting, 43(5-6), pp.513-542.

Jefrey, C. ed., 2018. Research on professional responsibility and ethics in accounting. Emerald Publishing Limited.

Kravet, T.D., 2014. Accounting conservatism and managerial risk-taking: Corporate acquisitions. Journal of Accounting and Economics, 57(2), pp.218-240.

Kukah, M.A., Amidu, M. and Abor, J.Y., 2016. Corporate governance mechanisms and accounting information quality of listed firms in Ghana. African Journal of Accounting, Auditing and Finance, 5(1), pp.38-58.

Shapiro, D.M., 2015. Assessing Corporate Governance in M&As. Journal of Corporate Accounting & Finance, 26(2), pp.35-39.

Uyar, A., 2016. Evolution of corporate reporting and emerging trends. Journal of Corporate Accounting & Finance, 27(4), pp.27-30.

Warren, C.S. and Jones, J., 2018. Corporate financial accounting. Cengage Learning.

Watson, L., 2015. Corporate social responsibility research in accounting. Journal of Accounting Literature, 34, pp.1-16.