Cash flows from operating activities:
Cash flow statement: Requirement (i):
The various considerations in the report has been included with the various types of the discussions which are seen to be based on the annual report of Virgin Australia. It is discerned that the company is registered in the “Australian Securities Exchange (ASX)” as “VAH”. Based on the depictions of the cash flow statement the different categories are divided as “finance, operating and investing” activities (Virginaustralia.com, 2018). The main categorization of the items is discussed as follows:
Cash flows from operating activities:
The important items in this parameter has been seen to be inclusion of the various types of the factors which are seen to be related to the payment made to the “staff, finance income recovered and the finance cost” which are paid to the various agencies. In addition to this, the different types of the increase in the operating cash is evident with “$5,567.40 million in 2016 to $5,657.10 million 2017”. This has happened due to tightening of the credit policy. The staff payment and the supplier amounts are further seen to be associated to the various type of the factors which are associated to the items purchased on credit and salaries of the staff.
With particular reference to the company it needs to be discerned that the different factors which are associated to the increasing trend identified with the 2017 additional purchases from the suppliers (Penman & Yehuda, 2015). In addition to this, the depictions based on the finance income is seen to be net outcome of the various types of the factors which are considered with the utilisation of the money for repayment on demand at a specified point of time. This increase is further inferred with the annual report of the 2017 about writing off of the credit sales as uncollectible. The various costs under the finance is seen to be included with the various obligations which are consideration with the decrease in the interest payment on the loans undertaken (DeFusco et al., 2015).
Cash flows from investing activities:
The significant items in terms of the payments has been considered with the proceeding from the “property, plant and equipment” and advances to deposits. In addition to this, the payments considered for the “property, plant and equipment” are the amounts which are necessary to conduct the business operations. On the contrary, the fixed assets are able to provide the different types of the economic benefits which are related to the organization which needs to be considered with the from the proceeds. It needs to be further discerned that the payments associated to the fixed assets are vital for the business operations. It can be clearly discerned that Virgin Australia is seen to be involved in different activities to reduce the investment in the cash from the investing activities. It has also not able to generate sufficient amount of cash flows from selling of items such as PPE. In addition to this, the proceeds and the payments are associated to the financial instrument which specifies total time of repayment along with amount of interest payable. It is further inferred that the deposits in the 2017 is considered due to the higher rate of interest (Campbell, 2015).
Cash flows from investing activities:
Cash flows from financing activities:
The important items considered under this category is seen to be associated to the various types of the parameters associated to the different type of the process taken from the equity distribution, borrowings and several types of the other items. The borrowing have been further able to signify the various types of the factors which are taken into account on behalf of the lenders as per the loan agreement. It needs to be also discerned that the various types of the observations from the annual report of the company has suggested on the proceeds which has decreased in the FY 2017. In the same year an increase in the repayment of the borrowings is evident. The various types of the discussions as per the equity distributions needs to be taken into account with the shareholders of the organization. The total amount of the cash from the financing activities are seen to be based on a declining trend as the main emphasis has been paid on maximising the retained earnings (Robinson et al., 2015).
Requirement (ii):
The main inference from the annual report of the Virgin Australia have shown that the cash flows of the company are persistent with the operating, investing and financing activities. The comparative analysis in the aforementioned categories are identified as the main from of the factors for the evaluation.
The depictions in the figure shown above clearly shows that the cash from the investing activities has reduced in 2016 compared to 2015. This is identified with the significant increase in the observations taken in 2017 pertaining to higher amount of finance income and customer. The net cash used in the investing activities are considered with a declining trend over the period of three years. This has occurred due to reduction in the decreasing investment pertaining to PPE. Moreover, the cash which is earned from the financing activities are due from the net proceeds issuance of shares in 2017. Due to this, the main form of the increase in the cash and cash equivalent units of the company in FY 2017 (Miao, Teoh & Zhu, 2016).
Other comprehensive income statement:
Requirement (iii):
The discourse of the annual report of the company is seen to be considered with the various depiction which is comprising of the cash flow hedges, currency translation reserve and IT benefits or expenditures (Virginaustralia.com, 2018).
Requirement (iv):
Cash flows from financing activities:
The application of the foreign currency is seen to e based on the several types o the factors which are related to the conversion of the outcomes of the subsidiaries taken from the parent firm to the reporting currency. In addition to this, the use of the cash flow hedge reserve has reduced the overall exposure of the firm for the variations pertaining to the risk of the interest rate and floating rate. On the contrary, the IT expense are seen to be based on the significant consideration taken into account with the PBT of the company (Grant, 2016).
Requirement (v):
The elaborated view of the net income has been conducive in stating the various types of the assumptions which are taken into consideration with the other comprehensive income. The airliner is depicted to be providing the necessary information on the values which are seen to be mentioned in the above items. It is also discerned with various type the consideration of the items is seen to be based on the significant nature of the discourse which are related to the various types of the assumptions taken into account with the holistic overview of the cost drivers related to the operations. These are further seen to be excluded from the disclosure in the income statement (Virginaustralia.com, 2018).
Accounting for corporate income tax:
Requirement (vi):
The tax expense is discerned in form of the sources such as “federal, municipal and state governments”. The airliner has not incurred any tax expense, instead procured IT benefit in 2016 and 2017.
Requirement (vii):
The several types of the understanding of the balance sheet have shown the total amount of LBIT in both 2016 and 2017. The annual report has further shown the total tax rate of 30% on the PBIT. However, it not possible to identify the tax expense of the airline as 30% tax rate on PBIT is suggested in the income statement (Virginaustralia.com, 2018).
Requirement (viii):
The items under the differed tax items are seen to be based on the prepayments of the taxes on the financial assets. The deferred tax of Virgin Australia has seen with “$1,017.6 million in 2017, which were $857.9 million in 2016”. The deferred tax liabilities are depicted with “$463.4 million in 2017 compared to $434.4 million in 2016” (Virginaustralia.com, 2018).
Requirement (ix):
The main depiction on this category from the annual repot of the company is able to evaluate the current tax assets which comprises of the expected tax payables or receivable over the IT loss or gain over a certain period of time. Virgin Australia has earned IT benefit of “$201.9 million 2016” and “$103.8 million in 2017”. These items are duly included in the representation of the financial information in the “reconciliation of net loss to net cash from operations” (Virginaustralia.com, 2018).
Requirement (x):
The significant depictions of the information from the annual report it has been able to state that the organization has not sustained any IT expense in 2016 and 2017. The earned IT benefit is main rationale for company’s non-payment of IT included in the cash flow statement (Virginaustralia.com, 2018).
Requirement (xi):
The vital assertions of the tax treatment for Virgin Australia is seen as a surprising element which have showed that the company suffered significant amount of loss before IT expense in both 2016 and 2016. Due to this, the company has earned IT benefit. It is further difficult for the company to relate the real IT expense paid with the prevailing tax rate of the nation. Moreover, there is not mention of the IT paid in the cash flow statement of the annual report (Virginaustralia.com, 2018).
References
Campbell, J. L. (2015). The fair value of cash flow hedges, future profitability, and stock returns. Contemporary Accounting Research, 32(1), 243-279.
DeFusco, R. A., McLeavey, D. W., Pinto, J. E., Anson, M. J., & Runkle, D. E. (2015). Quantitative investment analysis. John Wiley & Sons.
Grant, R. M. (2016). Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.
Miao, B., Teoh, S. H., & Zhu, Z. (2016). Limited attention, statement of cash flow disclosure, and the valuation of accruals. Review of Accounting Studies, 21(2), 473-515.
Penman, S. H., & Yehuda, N. (2015). A matter of principle: Accounting reports convey both cash-flow news and discount-rate news.
Robinson, T. R., Henry, E., Pirie, W. L., & Broihahn, M. A. (2015). International financial statement analysis. John Wiley & Sons.
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