Analysis Of Boral Limited’s Cash Flows, Other Comprehensive Income Statement, And Tax Treatment

Cash Flow Statement of Boral Limited

In order to analyze the annual report the chosen company listed on the Australian Stock exchange (ASX) is Boral which is the largest supplying manufacturing and building construction materials in Sydney, Australia. It deals with the operations that are extensive in the United States operations and Asia as well. The worth of sales is $4.39 billion in the year 2017, There exists about 16,000 employees in Boral working across 700 operating sites approximately.

The cash flow statement of the chosen company of Boral limited consist of the usual three segments that includes cash flow from operating activities, investing activities, Financing activities and the net cash and cash equivalents of the company.8in the operating activities there are items like the depreciation, income adjustments, changes in the accounts receivables, inventories and liability changes (Warren and Jones 2018). It can be said from the above items that the cash flow of each of the item has been decreased. This is due to more income generation that is cash inflow.

Then comes the investing activities that deals with the capital expenditures, investments and other cash expenses. The net cash outflow from investing activities have been increased from 2016 to 2017 this is due to the increase in the capital expenditures in the present year.

In the cash flow statement of Boral limited the financing activities consists of the dividends that are paid, sale and purchase of stock and net borrowings. There has been a drastic increase in the financing cash inflow due to the net borrowings of amount$1314300 which was -$ 3,800 in the last year of 2016.The cash and cash equivalents have also been reduced as a result of the net borrowings and amounts to -$214300 in 2017 that was -$53700 in 2016.

Comparative analysis of three different categories of cash flow:

As depicted in the above graph and table the comparative analysis of cash flow from operating activities, financing activities and investing activities. Net cash flow from operating activities remained more or less constant in the last three years. However, in 2016 and 2017 the cash flow from investing activities increased drastically from 2015 that was -$ 55,700. There was net cash flow used in financing activities in year 2017 at amount -$31,07,000compared to -$ 251600 in year 2015. On other hand, from investing activities, there was a fall in cash flow to -$ 2,88,400in year 2017 as against -$255,700 in 2015.

The Comprehensive income statement of Boral limited consists of the net profit that has remained more or less constant in both the years of 2016 and 2017. The items that are included are the net exchange difference from transaction of foreign operations taken to equity, the amount of foreign current translation reserve that have been transferred to net profit and fair value adjustment on cash flow hedges(Tschopp and Nastanski 2014). There also exists income tax items that have been transferred to income statement.

Comparative Analysis of Three Different Categories of Cash Flow

  The Net exchange differences from translation of foreign operation taken to equity changed drastically from 2016 which was $7 m in 2016 to $99.4 m. Then comes the foreign currency translation reserve that i8s transferred to net profit on disposal of controlled entities that has taken place on 2017 at $24.5 m. thee has also been a fair value adjustment on cash flow hedges from -$7.7m in 2016 to $2.6m on 2017.the income tax on items was $10.4m in 2016 then reduced to -$1.3m in 2017.The total of comprehensive income amounts to $174.3m in 2017 which was $251.7m in 2016.

Comprehensive income statement is used for the measurement of any change in interest of owners in business. It incorporates the income and expenses that have not been yet realized and it is used for bypassing the income statement (Maas, Schaltegger and Crutzen, 2016). Other comprehensive income takes into account items such as losses and gains from derivative instruments, debt security on unrealized losses and gains, adjustments in foreign currency transactions and retirement plans or any pension losses or gains (Miao, Teoh and Zhu 2016).

The current tax expense in the year 2017 amounted to $76.2m in 2017 as stated in the financial statement. The amount has been increased from $15.5m as on 2016. The tax was calculated as income tax expense divided by profit before income tax expense from discontinued operations and continuing operations (Siew 2015).

Income tax amount is computed using the tax rates that have been enacted considerably by the financial position statement. The current tax expense in the year 2017 amounted to $76.2m in 2017 as stated in the financial statement. The amount has been increased from $15.5m as on 2016. Therefore, it cannot be evaluated whether the figures of income tax expenses are same as the tax rate times the accounting income.

The Deferred tax is accounted by 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 (Sierra?García, Zorio?Grima and García?Benau 2015). Recognition of deferred tax assets are done to the extent that the availability of taxable profit in future is probable against the temporary differences that are deductible (Ijiri 2018). In current year, there has been deferred tax liabilities are -$26.6m in 2017 and $149.4m in 2016.

In Boral the income tax assets amounts to $41.8m m in 2017 and $ 69.4m in 2016. The Income tax expenses 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. Income tax payable is the amount that the company owes in terms of tax based on tax code rules (Grant, 2016). Until the company makes the payment of tax, the amount of income tax payable appears on the balance sheet section as liability.

The income tax expense shown in the income statement is not same as the income tax paid shown in the cash flow statement that amounts to $41.8m m in 2017 and $ 69.4m in 2016 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 (Brooks 2015). On other hand Income tax expense is the amount that represents the recording of income tax costs.

From the annual report analysis of the Australian company of Boral, it has been identified that charge for current income tax is made on the basis of the adjusted profits that are attributable for any disallowed or non-assessable items. In addition to this, the notes to financial statements present the numerical reconciliation of the income tax expense to tax payable prima facie (Reid and Myddelton 2017). Such reconciliation provides users with items involved in the computation of such income tax expense. Therefore, the interesting part in relation to realization of income tax expenses are the reconciliation of temporary differences and any amount of net loss after income tax.

References

Brooks, R., 2015. Financial management: core concepts. Pearson.

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.

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

Sierra?García, L., Zorio?Grima, A. and García?Benau, M.A., 2015. Stakeholder engagement, corporate social responsibility and integrated reporting: an exploratory study. Corporate Social Responsibility and Environmental Management, 22(5), pp.286-304.

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.

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

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