Analysis Of Cash Flow Statement And Other Comprehensive Income Of Qantas Airways

Introduction to Qantas Airways

The company chosen for the current study is Qantas Airways. Qantas Airways is largest airline in Australia in terms of size of fleet, intercontinental flights and global destinations and is regarded as the flag carrier of the nation Australia. This is a publicly traded company and is listed in the Australian Stock Exchange.

The items that are included in the cash flow statement of the firm can be categorised under three different heads namely, financing, investing as well as operating activities. The list of items that are mentioned under the heading of “cash flow for the purpose of operating activities comprises of depreciation, specific adjustments in earnings, changes in accounts receivables, inventory along with changes in the company’s liability (Siew 2015). As per the annual report of the firm, the flows of cash from operating activities include receipts of cash from particularly customers, disbursements of cash to different suppliers as well as employees. In addition to this, there are payments of cash to different employees for various redundancies as well as associated costs, payments of cash to firm’s employees for particularly Wage Freeze Bonus as well as Record Results Bonus. Also, flow of cash from operations also includes interests received and paid, dividends received for investments as well as payments of income taxes. Thereafter, the items included under Qantas’s investing activities include disbursements for particularly plant, property along with equipments (also known as PPE), disbursements for interests and capitalised on specific assets, disbursements for investments (considered under method of equity), earnings generated from sale of PPE and net repayment of company’s loans. Furthermore, the list of items under the financing actions of the firm Qantas Airways include payments for particularly buy back of shares, disbursements for return of capital, treasury shares and pay offs of different borrowings. Also, proceeds generated from the borrowings are also included under this head. Further, this section includes net receipts for varied aircraft security deposits as well as hedges associated to debt, dividend payments to firm’s shareholders as well as non-controlling interests.

It can also be hereby mentioned that the net cash used for the three different kinds of activities of the firm are also included in this assertion along with cash as well as cash equivalents registered at the closing of the year (Miao et al. 2016).

Analysis of the cash flow statement reveals that the cash flow used in operating actions is registered to be AUD2704 million in 2017 in comparison to AUD 2819 million in 2016, replicating a decline in the inflow of cash from operating activities. This is mainly due to decrease in receipts of cash from customers, decline in receipt of interests along with increase in payments of cash to firm’s employees for wage freeze bonus and increase in tax paid. Again , cash flow from particularly investing activities shows increase in cash outflow of the firm from (AUD 1923 million) to (AUD 2046 million). This is mainly due to sharp decline in the proceeds of the firm from the disposal of its PPE. Again, evaluation of the assertion replicates decrease in cash outflow for financing actions in the year 2017 to (AUD 854 million) as compared to the year ago figure of (AUD 1825 million). As such, this is primarily owing to decline in the payments for the buyback of shares as well as repayment of borrowings (Miao et al. 2016). Finally, the cash as well as cash equivalents of the firm Qantas Airways recorded at the closing of the year is registered to be AUD 1775 million in 2017 as compared to AUD 1980 million registered in the year 2016.

Cash Flow Statement of Qantas Airways

Graphical and tabular presentation of the cash flow of the firm Qantas Airways for the past three years are presented below. The net inflow of the company’s cash for operating activities can be observed to have escalated during the period 2016 as compared to the year ago period, while the same reflects a sharp decline in the following year that is during the year 2017. However, outflow of cash has been registered for the investing activities. However, it can be hereby witnessed that the cash outflow of for investing actions has increased steadily throughout the specified period of time. Again, outflow of cash can be observed for the financing activities of the firm (Miao et al. 2016). However, cash outflow for financing activities is said to have enhanced during the period 2016 in comparison to the figure of 2016, whereas the same again dipped down in the subsequent year.

The assertion for other comprehensive income mentions the statutory profit of the company for the financial year. Thereafter, this statement includes the definite items that are or else might perhaps be re-categorised consequently to particularly profit or else loss (Warren and Jones 2018). In addition to this, this statement also states the items that shall not be re-classified to firm’s profit or else loss. Thereafter, this assertion mentions the other comprehensive earning/loss for the particular year and the total figure for the same (Warren and Jones 2018). However, the items that are included in the items that might be reclassified include effectual fraction of changes in particularly fair value of mainly hedges of flow of cash, transfer of reserve of hedges, recognition of particularly effectual hedge of cash flow, translation of foreign currency of different controlled entities and translation  of specific investments that is mainly accounted under equity method along with share of various other comprehensive income else loss of definite investments considered under equity mechanism. The total comprehensive income of the firm Qantas Airways is recorded to be AUD 1033 in the financial year 2017 and AUD 850 million in 2016, replicating an increase in the same.

Statutory profit for the current year is observed to decrease to AUD 853 million in the year 2017 while the same is recorded to be AUD 1029 million in 2016. The exchange differences can be observed from the effective changes in fair value of hedges of flow of cash. In this segment there is an outflow amounting to (AUD 187 million) in 2016 that turned to inflow amounting to AUD 46 million.

Categorization of Cash Flow

Fundamentally, comprehensive statement of earnings is chiefly used for enumerating all the changes and transformations in interests of different owners (Ijiri 2018). As such, this considers income together with expenditure of the firm that are necessarily not realised and is chiefly used for varied derivative instruments, effective changes in mainly fair value of hedging of flow of cash (considered net of amount of tax), transfer of reserve of hedge to chiefly consolidated earning statement (considered net of amount of tax). Also, this statement takes in recognition of effective hedging of flow of cash on specified capitalised asset (that is again net of amount of tax). In addition to this, this assertion of comprehensive earning also reveals net transformation in company’s reserve of essentially hedge for specifically time value of definite options (also considered net of amount of tax) (Maas et al. 2016). Additionally, this pronouncement also comprises of details of translation of foreign currency, translation of foreign currency of essentially investment that is taken in under specifically equity method as well as shares of different other comprehensive gains otherwise losses for investment enumerated under the equity method.

The tax expenditure of the company Qantas Airways is recorded to be (AUD328 million in 2017 and (AUD 395 million). Particularly, expenditure for income tax uses domestic rate of corporate tax of roughly 30%. Together with this, statutory profit before income tax are essentially adjusted for mainly non-assessable dividends, diverse non-deductible shares of chiefly net loss for necessarily investments under system of equity, different non-deductible losses necessarily for foreign branches together with controlled entity losses (Miao et al. 2016). In addition to this, adjustments also take account of utilization of previously unrecognized capital losses, diverse non-assessable profits on specifically sale of PPE along with other non-assessable items together with provisions from earlier period.

The income tax for the firm Qantas Airways is necessarily calculated by using specified tax rate that are necessarily enforced considerably by the declaration on financial position. Thorough study of the yearly report of then firm reveals that the present expenditure of the firm on particularly tax in the year 2017 was registered to be (AUD 328 million) while the same was recorded to be (AUD 395 million) in the year 2016. Therefore, it cannot be evaluated whether numerals for income tax expenses are similar to that rate of tax times overall earnings (Siew 2015).

It can be hereby observed from the annual report of the firm Qantas Airways that the deferred tax (assets/liabilities) stands at (AUD 353 million) in the year 2017 whereas the same is recorded to be AUD 39 million. In essence, deferred tax is mainly recognized with regard to temporary differences between carrying amounts of assets else wise liabilities for particularly financial reporting cause and the overall amount used for the purpose of taxation (Miao et al. 2016). In particular, deferred tax assets are essentially recognized for particularly unused tax losses; credit for necessarily tax together with temporary differences to the specific point that it becomes plausible that taxable earning in the future period against which they can be used (Miglani et al. 2015).

Analysis of Cash Flow Statement

Expenditure for income tax for period 2017 as documented in the financial statement of the firm stands at (AUD 328 million) and income tax expenditure was observed to be (AUD 395 million) during the period 2016.  Nonetheless, the figure for the firm’s income tax payable is recorded to be (AUD 4 million). Essentially, this replicates a reconciliation of particularly income tax expenditure of the corporation Qantas Airways to income tax payable. This process of reconciliation includes adjustments for chiefly temporary differences. Essentially, adjustments carried out for temporary differences take in adjustments for particularly inventories, PPE, revenue earned by the firm in advance period along with payables (Reid and Myddelton 2017). Also, there is adjustments regarding firm’s interests bearing liabilities, diverse financial assets, varied provisions, varied other items along with previous period differences. In essence, temporary differences is documented to be AUD 167 million in the period 2017 as compared to the previous period’s (AUD 18 million). Finally, after the adjustments the tax payable is enumerated to be (AUD 4 million).

Critical evaluation of annual financial assertion of the firm Qantas Airways reflects that income tax expenses presented in the income statement is not similar to that of payment of income tax reflected in the declaration on flow of cash. In essence, disbursements for income tax necessarily take in impact of income tax of particular losses otherwise gains related to financing actions so that cash flow enumerated after tax is reflected in the sub totals of net cash flow (Saeidi et al. 2015). Again, conversely, expenses of the firm on particularly taxation are necessarily the particular amount that represents costs for tax.

Founded on thorough analysis of annual report, it can be hereby identified that for the firm Qantas Airways there is essentially a charge for current taxation on firm’s earnings. In essence, this is primarily based on company’s adjusted profits that are primarily attributable for any kind of disapproved otherwise non-assessable item. In addition to this, there also exist notes for the financial declarations presented by the firm that help in comprehending reconciliation of expenses on income tax to payable tax. Fundamentally, this sort of reconciliation presents specific information to varied users as regards enumeration of this sort of income tax expenses (Schaltegger and Burritt2017). Therefore, the most remarkable part in relation to realisation of expenses of income tax is basically reconciliation of numerous temporary differences and ny sort of net loss that is borne particularly after tax on firm’s earnings. 

References

Ijiri, Y., 2018. An Introduction to Corporate Accounting Standards: A Review. Accounting, Economics, and Law: A Convivium, 8(1).

Maas, K., Schaltegger, S. and Crutzen, N., 2016. Integrating corporate sustainability assessment, management accounting, control, and reporting. Journal of Cleaner Production, 136, pp.237-248.

Miao, B., Teoh, S.H. and Zhu, Z., 2016. Limited attention, statement of cash flow disclosure, and the valuation of accruals. Review of Accounting Studies, 21(2), pp.473-515.

Miglani, S., Ahmed, K., and Henry, D. 2015. Voluntary corporate governance structure and financial distress: evidence from Australia. Journal of Contemporary Accounting & Economics, 11(1), 18-30.

Reid, W. and Myddelton, D.R., 2017. Cash flow statement. In The Meaning of Company Accounts (pp. 16-16). Routledge.

Saeidi, S. P., Sofian, S., Saeidi, P., Saeidi, S. P., and Saaeidi, S. A. 2015. How does corporate social responsibility contribute to firm financial performance? The mediating role of competitive advantage, reputation, and customer satisfaction. Journal of Business Research, 68(2), 341-350.

Schaltegger, S., and Burritt, R. 2017. Contemporary environmental accounting: issues, concepts and practice. Routledge.

Siew, R.Y., 2015. A review of corporate sustainability reporting tools (SRTs). Journal of environmental management, 164, pp.180-195.

Tschopp, D. and Nastanski, M., 2014. The harmonization and convergence of corporate social responsibility reporting standards. Journal of Business Ethics, 125(1), pp.147-162.

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

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