Analysis Of Equity And Liabilities For Three Australian Public Limited Companies

Overview of the companies

Corporate Accounting is a special branch of accounting which deals with the accounting of companies by preparing the final statement. It also analyse the financial results of the companies and accounting for the specific events like amalgamation, absorption, preparation of consolidated balance sheet. It is a process of accounting that calculates the operations of a single company. The company uses this process in order to evaluate the value of assets and liabilities. It is also use to identify the financial position of the company in the terms of finance. There are many activities which are involved in the process of Corporate Accounting such as creation and maintenance of a company accounting system, special expense management, managing accounts payable, managing accounts receivable and many others. It is necessary for the company to maintain and analyse the financial statements to evaluate the financial position. In this report, three companies have been taken into consideration to analyse the financial position and stability. AGL Energy Limited, Santos, and Oil search are the companies taken to analyse the financial statements.

The report is classified into four parts to analyse the financial position of the companies. In the first section of the report, Equity and liabilities of the companies has been analysed in order to evaluate the debts position. After that, Items of cash flow statement have been evaluated in order to analyse the financial position of the companies in the market. The third section is based on the comprehensive income statement of the companies. The last section of the report will base on the corporate tax.

Overview of the companies

AGL Energy is an Australian listed company which is retailing in electricity and gas for the residential and commercial use. AGL generates the energy from power station that uses the thermal power, natural gas, wind power, and Coal seams gas source.

Santos Limited is an Australian energy company which large overseas investors and shareholders. It is the second largest company in oil and gas producer in the country.

Oil Search Limited is the largest oil and gas exploration and development company which are publically listed on the Australian stock exchange.

Equity component	2017 ($m)	2016 ($m)	2015 ($m)
Issued  capital	9034	8883	8119
Reserves	51	(510)	(699)
Accumulated Losses	(1934)	(1293)	1
Total Equity	7151	7080	7421

From the above table, it has been seen that the equity component includes the issued capital, reserves, and accumulated losses. Share Capital has been issued to shareholder is called Issued Capital. The issued capital of the company is increases in the year 2017 as compare to 2016 and 2015.  Reserves are always a credit balance of the company and part of shareholders. Reserves of the company is increases in the year 2018 but it has been seen that the company has the negative value in the past year such as 699 and 510 in 2015, and 2016 respectively. Accumulated Losses is the opposite of accumulating gain which means the business debts are greater than the earnings. As per the financial position of the company, the company accumulated losses is reduces.

Task 1- Equity and Liabilities

Oil Search

Equity component	2017 ($m)	2016 ($m)	2015 ($m)
Share Capital	3152.4	3147.3	3147.3
Reserves	(6.4)	(10.7)	(12.97)
Retained earnings/(losses)	1,791. 7	1588.7	1574.995
Total  equity	4,937. 7	4725.3	4709.36

As per the above table, it has been seen that the company report the share capital, reserves, retained earnings in its equity. The share capital of the company is increases in the year 2017 as compare to the other years such as 2015 and 2016. Reserves amount of the company states that the company reserve more and invest less in the year 2017 as compare to the year 2016. Retained Earnings is the accumulated income that is retained by the corporation at a particular point of time. Retained earnings are increases in the year 2017 with the amount of 1791.7 and in the year of 2016 the amount of the earning is 1588.7 which reflect the increasing earnings of the company (Oil Search, 2015).

AGL Energy

Equity component	2017 ($m)	2016 ($m)	2015 ($m)
Issued capital	6223	6696	6696
Reserves	16	(24)	(65)
Retained earnings/(losses)	1335	1234	2175
Total equity attributable to owners of AGL Energy Limited	7574	7915	8806
Non-Controlling Interest	–	11	9
Total  equity	7574	7926	8815

As per the above table, it has been evaluated that the issued capital of the company is decreases in the year 2017 but in the year 2016 and 2015 the amount remains same. It states that the company did not invest due to fewer funds. Non-controlling interest is decreases in the year of 2017 which is beneficial for the company because it is also known as minority interest (AGL, 2017).

II Liabilities of Santos

Total Liabilities	2017 ($m)	2016 ($m)	2015 ($m)
Current Liabilities
Trade and Other Payables	495	520	618
Deferred income	8	23	7
Interest-bearing loans and borrowings	207	420	152
Current tax liabilities	17	3	8
Provisions	142	121	125
Other financial liabilities	82	366	2
Liabilities directly associated with assets held for sale	–	103	14
Total Current Liabilities	951	1556	926
Non-current liabilities
Deferred income	114	99	158
Interest-bearing loans and borrowings	3736	4819	5246
Deferred tax liabilities	240	221	153
Provisions	1494	1464	1736
Other financial liabilities	20	23	309
Total non-current liabilities	5604	6626	7602
Total liabilities	6555	8182	8528

The company contain all the items in the liabilities which are included in the above table. Deferred income refers the unearned revenue which is not earned by the company. These are not affected the net profit or loss of the company. The amount of deferred income is fluctuated. Provision of the company is an amount of cash which is put aside in the accounts to cover a future liability. Provision of Non-current liabilities of the company is increases in the year but it remains same in the year 2017 and 2016.

Liabilities of AGL Energy

Total Liabilities	2017 ($m)	2016 ($m)	2015 ($m)
Current Liabilities
Trade and other payables	1507	1519	1377
Borrowings	173	22	443
Provisions	201	226	191
Current tax liabilities	13	102	86
Other financial liabilities	827	460	269
Other liabilities	10	–	7
Liabilities directly associated with assets classified as held for sale	–	224	–
Total current liabilities	2731	2553	2373
Non-current liabilities
Borrowings	3173	3086	3439
Provisions	520	487	456
Other financial liabilities	293	301	387
Other Liabilities	167	251	363
Total non-current liabilities	4153	4125	4645
Total liabilities	6884	6678	7018

As per the table, the company reported the above items in their liabilities. Borrowings are the total amount of collateral against which a lender lends funds to a business. The amount of borrowing is decreases as per the passing years which reflect that the debts are decreases. The company also reported the other liabilities. Other liabilities include the small transaction of the company which affects the net profit (Kennon, 2018). As per the annual report, it has been seen that other liabilities under the non-current liabilities is fluctuated with the increasing and decreasing amount.

Liabilities of Oil search

Total Liabilities	2017 ($m)	2016 ($m)	2015 ($m)
Current Liabilities
Payables	199.15	161.64	214.58
Provisions	290.33	179.12	15.98
Borrowings	334.13	315.87	290.3
Current tax payable	644.59	564.03	55.65
Total current liabilities	626.77	551.83	576.5
Non-Current Liabilities
Payables	24787	19717	186.7
Provisions	584.72	384.299	394.7
Borrowings	3424.77	3758.9	4012.2
Deferred tax liabilities	913.6	686.05	631.1
Total Non-Current Liabilities	4947.9	4848.97	5056.87
Total Liabilities	5574.74	5400.81	5633.47

The above items in the table are reported by the company in their liabilities. As per the above table, it has been seen that the amount of borrowings is increases as compare to the other years. Deferred tax liabilities are the liability which is due for the current period but yet has not been paid (Oil Search, 2015). The amount of deferred tax is increases in the year 2017 which reflects that the company has to pay more in future on tax.

Financial Analysis of 2017
		Santos	Oil Search	AGL
Debt Equity Ratio	Total Liabilities	6555	5574.7	6884
	Total shareholder equity	7151	4937.7	7574
		0.92	1.13	0.90

Equity component

Debt equity ratio is to evaluate the financial leverage of the company. The formula of Debt equity ratio is total assets over total share liabilities. As per the above table, it has been evaluated that the Santos has the debt ratio is 0.92, Oil search has 1.13 and AGL has 0.90 (AGL, 2017). It states that Oil search has high debt equity ratio as compare to the other companies. Increasing debt ration reflect the issue for the company in generating the cash.

Dividend received is the earning which is received by the company from the shareholders based on a specific percentage of the company earnings. AGL and Santos reported the amount of dividend received in its cash flow statement. But the Oil Search did not report in its cash flow statement. AGL and Santos has high amount of dividend received with the amount of 22 and 12 in millions (AGL, 2017).

Income Taxes Paid

Income tax paid is the item which is contain in the operating activities of the company. The company had to pay the tax on it profit. In the year 2017, AGL has 292 reported as the income tax paid. Santos and Oil search has to pay the 28 and 59.74 in million which states the tax is increasing as compare to the others (Santos, 2017).

Cash Flow from Investing Activities

Payments for exploration and evaluation asset

Payments for exploration and evaluation is the another item which is reported in the operating activities of cash flow statement. The amount of payment for exploration and evaluation asset is not reported by the AGL in their cash flow statement. The amount of payment of exploration and evaluation is increases as reflected from the previous year with the amount of 128 in the cash flow statement of Santos (Santos, 2015). The amount of Oil search of the company is increases which reflects that the company has investing more in the evaluation of asset (Oil Search, 2017).

Payments for acquisition

Payment of Acquisition refers that the company buy the other company (Accounting Tools, 2018). The amount of acquisition is constant in the year 2017 and 2016 in the AGL Company. The amount of acquisition is increases with the higher amount which reflects that Santos invest high amount in acquisition. As per the cash flow statement of Oil search, it has been states that the company does not invest in acquisition.

Liabilities component

Repayment of borrowings

Repayment of borrowings is an item which is included in the financial activities of the cash flow statement of the company. It refers the amount which is paid by the company in the exchange of borrowings (Peerform, 2018). AGL has to pay the borrowing amount more as compare to the 2016. The amount of repaying borrowing is increase which states that the company generated less cash. The repayment borrowing amount of Santos is also increases but with the higher amount which states that the company borrow large amount in 2017 as compare to 2016 and 2015. Oil search also has to repay the large amount in 2017 as compare to 2016.

Dividend Payment

Dividend payment refers the amount which is paid by the company to the shareholders. The amount of dividend payment is increases in the 2017 from 2016 in the case of Oil search which reflects that the company has large number of equity shareholders. In the year 2017, Santos did not report the amount of dividend payment which states that the company does not have shareholders. In the case of AGL, it is reflected that the dividend payment is increases in 2017 from 2016 with the amount of 517(AGL, 2016).

V – Comparative Analysis

	AGL	Oil Search	Santos
	2017	2016	2015	2017	2016	2015	2017	2016	2015
Net Cash Provided by Operating Activities	891	1,186	1,044	843.5	-374	952.7	1,248	840	811
Net cash used in Investing Activities	-302	81	-2175	-267	-229	-536	-534	-205	-1,592
Net cash used in Financing Activities	-687	-1,274	924	-424	-374	-467	-1,518	543	1,055

AGL

It has been seen that the company investment activities of the company is increases in the year 2016 as compare to the 2015. It reflects that the company earn more amounts by selling the asset. The operating activities of the company is increases which reflects that the company generate the less cash but in the year 2017 as compare to 2016 and 2015. The Financing activities of the company are decreases with the negative amount which states that the company generate less cash.

Oil Search

The investment activities of the company are reduces which states that the company stop investing in shares and assets. In operating activities of the company is fluctuated with the increasing and decreasing amount. In 2016, the amount of operating activities is reduces which states that the company generated less cash and paid more.  

Santos

The investment amount of the company is reduces which reflects that the company have less capital due to which it invest low amount. But in 2017, the company again invest in acquisition due to which the cash is reduces. The operating activities of the company are increases which states that the company generates the cash and paid less amount. In 2017, the amount of financing activities is reduces which states that the company paid the large amount as compare to 2016 and 2015 (Santos, 2015).

Task 2 – Cash Flow Statement

VI

By comparing the cash flow activities of the companies, Santos has high value of operating activities as compare to AGL and Oil Search. In the 2017, the company has $1248 million which is the higher amount as compare to the others. The companies invest large amount in assets, shares and acquisition in order to earn profit. The amount of investment of companies is in negative but in the year 2016, AGL has the positive amount in the investing activities. The investing activities of the company states that the company sale the asset in the market. The financing activity of the company reflects that the Oil Search is in the position of risk because the company has large amount of borrowings (Oil Search, 2016). Santos has positive amount in 2015 but after that the amount of financing activity is reduces. In 2017, Oil Search paid fewer amounts as compare to the other companies.

Comprehensive income statement contains the different items such as reclassified subsequently to profit and loss, not be reclassified subsequently to profit or loss, and other comprehensive income. Oil Search company reported the items such as gross profit, operating activities, profit before income tax and net profit after tax.

The comprehensive income is an advance statement as compare to the normal income statement. It has been seen that the amount of different income and expenses bring together in the comprehensive income statement in order to calculate their sum separately. Items of comprehensive income statement are not recorded in the normal income statement. These items affect the amount of net profit of the company.

The different comprehensive income statement is prepared for the calculation of different income and expense. In 2017, the AGL, Santos and Oil Search have 654,279,302 million comprehensive incomes.

By comparing the comprehensive statement of the companies, it has been seen that the company adjust the gain amount in the books. It is observed that the amount of adjustment of gain is decreases in the 2017 in the books of AGL, and Santo. Oil Search dis not reported the amount of gain adjustment which states the non-adjustment of profits by the company.

The items of comprehensive income were not included in the income statement because it affects the net profit of the company. It is reported that the amount of tax is charge on the net profit that is why the amount of net profit is not to be affected. The profit amount of the company is share between the shareholders but the items recorded in comprehensive statement are not the core items of the company that is why it is not distributed between shareholders. If these items are included in the income statement then the amount of profit of shareholder would be affected.

Operating activities:

No, the other comprehensive income is not included in the evaluation of performance of manager. The evaluation of performance of manager is evaluated on the basis of his work and his capacity. Assessment of the performance of manager is a risk for the company due to include the evaluation of manager performance in the other comprehensive income statement.

		AGL	Oil Search	Santos
Effective Tax Rate=	INCOME TAX Expenses	225	138.7	-211
	EARNING BEFORE TAX	764	440.9	-585
Rate		29%	31%	36%

Deferred Tax is the difference between the accounting income and the taxable income. The value of accounting income is calculated as per the Companies Act and the calculation of taxable income is calculated as per the Income Tax Act. Deferred Tax is classified in the two parts and these are deferred tax asset and deferred tax liability. Deferred tax liability is recorded on the liability side and deferred tax asset is recorded on the Asset side of the company. Deferred Tax Asset means reduction in tax income and deferred tax liability means the amount of tax which is pay by the company in future.

As per the financial statement of AGL, it has been seen that the company does not reported the amount of deferred tax liability. 792 are reported as the amount of deferred tax asset which states that the company save more in the future from tax payments. Santos reported the both amount in their balance sheet with the amount of 1419 as deferred tax asset and 240 as deferred tax liability. It states that the company save more from tax payment and pay less in taxes. The financial statement of the company states the current position of deferred tax liability and deferred tax asset. The company reported 678.14 as deferred tax asset and 913.68 as deferred tax liability which is higher amount as compare to the other companies (AGL, 2015).

Calculation of Cash Tax Rate
Cash tax 2018	AGL	Oil Search	Santos
	2017	2017	2017
Opening balance provision of tax	102	56.4	3
Add: Current tax 2018	225	18.12	0
Less: Deferred tax 2018	792	678.1	1419
Add: Deferred liability 2018	0	913.68	240
Less: Closing balance provision of tax	13	64.4	17
Cash tax	-478	245.7	-1193
Cash tax rate
Cash tax	-478	245.7	-1193
Net profit before tax	1140	440.8	-585
	-41.93%	56%	203.93%
Note : It is assumed that Santos has not current tax expenses and the company faced loss in the year
AGL Energy has not deferred tax liability that is why the cash rate of the company is negative.

Oil Search has high Cash Tax Rate as compare to the AGL and Santos with the percentage of 41.93%.

Cash Tax Rate states the accurate tax rate as per the activities of the companies in a year. Book tax rate refers the 30% rate which states that the company has to pay the tax as per the rate of 30%. Cash tax rate is different from the book tax rate because in book tax rate it is restricted to be pay 30% but in cash tax rate the actual amount of tax will pay by the company (Collins, 2018).

Conclusion

From the above discussion, it has been concluded the companies have the high leverage in the context of equity and liability which raise the issues. In the report, cash flow statement, comprehensive income statement and corporate tax have been analysed in order to analyse the financial position of the companies. The data of three years have been analysed in order to evaluate the changes of the company.

References

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Collins, J. (2018). How to Compute Cash Taxes. [online] Available From: https://www.sapling.com/8007127/compute-cash-taxes [Accessed 1/2/19].

Kennon, J. (2018). Assets, Liabilities, and Shareholder Equity on the Balance Sheet. [online] Available From: https://www.thebalance.com/assets-liabilities-shareholder-equity-explained-357267 [Accessed 1/2/19].

Oil Search. (2015) Annual Report2015. [online] Available From: https://www.oilsearch.com/__data/assets/pdf_file/0018/1566/OSH_AR16-a3d8b18e-1b65-4a66-a4a0-34826fa5db87-2.PDF[Accessed 1/2/19].

Oil Search. (2016) Annual Report 2016. [online] Available From: https://www.oilsearch.com/__data/assets/pdf_file/0003/7788/170407-OSH-2016-Annual-Report.pdf [Accessed 1/2/19].

Oil Search. (2017) Annual Report 2017. [online] Available From: https://www.oilsearch.com/__data/assets/pdf_file/0009/19737/HC_OS_AR17_final.pdf [Accessed 1/2/19].

Peerform. (2018) Loan Repayment Process. [online] Available From: https://www.peerform.com/how-it-works/repayment-process/ [Accessed 1/2/19].

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Santos. (2016) Annual Report 2016. [online] Available From: https://www.annualreports.com/HostedData/AnnualReportArchive/S/ASX_STO_2016.pdf [Accessed 1/2/19].

Santos. (2017) Transform Build Grow. [online] Available From:  https://www.santos.com/media/4319/2017-annual-report.pdf [Accessed 1/2/19].