Classification Of Deferred Tax Assets And Deferred Tax

Company Overview

Discuss About The Classification Of Deferred Tax Assets And Deferred Tax. 

Corporate accounting is an accounting branch which deals with the company’s accounting process, preparation of final statement of the company and records all the financial data of the company in proper way. In this report, accounting process of the Qantas limited has been evaluated to measure the performance and the position of the company. The main focus of the report is on the income statement, cash flow statement and the tax treatment of the company. It identifies and measures the various values of the taxation in the annual report of the comapny and identifies the tax recording process and the accounting standards of the company.

 Qantas limited is largest airline company in the Australian market. The company is operating the activities through various subsidiaries companies such as Jetstar, Qantas domestic airlines, Qantas international airlines etc. the company offers different deals and the different services through its various subsidiary company. The company has diversified its market at international level and currently, it is managing its business at around 65 destinations at international level (Our Company, 2018). The annual report (2017) of the company explains that the company has followed AASB rules to record and perform the accounting activities and process of the company.

1. Cash flow statement analysis:

Cash flow statement is a financial statement which explains about the changes into the cash flow of the company in a specific time period. It evaluates the changes in the cash position of the comapny and explains about the liquidity position of the company to the stakeholders of the company.

Annual report (2017) of the company explains that the cash flow position of the company has been changed from 2016 to 2017. Firstly, it has been found that the revenues and the non cash items of the company have affected the operating activities cash position of the company. It explains that the cash position has been lowered due to higher cost of revenue of the company (Tran, 2015).

In addition, the changes have been identified in the property, plant and equipment of the company. The investment has been lowered by the company and due to it; the investment position of the company has been improved.  Further, the company has also lowered the investment purchase of the company because of industry performance.

The debt payment amount of the company has been improved by the company and the company has repurchased the t stock from the market which has lead to the company towards the huge cash outflow.

Cash Flow Statement

(Annual report, 2017)

It explains that various factors have affected the cash position of the company from last year and due to it, the net cash flow of the company has also been lowered.

1. Comparative analysis on cash flow statement:

The cash flow position of the company has been compared with the cash flow position of last 2 years of the company to measure the performance of the company. the operating activities has been evaluated firstly and it has been recognized that the cash flow position of the company has been enhanced from 2015 but lowered from 2016 due to changes into the revenue position of the company.

In addition, the cash flow from investment activities of the company has been lowered by a great level due to the huge investment in the property, plant and equipment by the company (Brigham and Ehrhardt, 2013). The financing activities cash flow further explains about the increment cash inflow position of the company. It explains that the company has not repurchased the T bills more in current year and due to it, the financing position has been better from the last year.

It further explains that due to total changes in all the activities of the cash flow statement of the company, net changes in the cash flow have been improved.

1. Comprehensive income statement analysis:

Those profitability items which cannot be added into the income statement of an organization because of some accounting policies are recorded in other income statement which is called comprehensive income statement. According to the annual report (2017), it has been found that the comprehensive items of the company have been enhanced the total profit of the company by $ 180 million in 2017 whereas the comprehensive profit of last year was $ -179 million. It explains that the total comprehensive income statement of the company has been improved from the last year and explains about the better position of the company.

1. Comprehensive income statement items:

The main items of comprehensive income statement of the company is changes in the fair value, net changes  in the cash flow hedges, exchange rates, foreign currency investment, loss of investment, taxation value etc. all of these factors are not related with the daily activities and the operations of the company (Watson, 2017). These all factors are fluctuated and cannot be recorded by the company in its annual reports because of some accounting policies and the income statement preparation method.

1. Reasons:

On the basis of the study on comprehensive income statement and the items of comprehensive income statement, it has been found that those profitability items which cannot be added into the income statement of an organization because of materiality policies and fair accounting policies are recorded in other income statement which is called comprehensive income statement (Morris, 2017). The main reason behind not adding the items in the income statement of the company is that these factors are not related to the operating and non operating activities of the company and have been generated due to market factors. Thus, it could affect the profitability level and manipulate the stakeholders of the company.

1. Tax expenses of the company:

Comprehensive Income Statement

Tax expenses of the company have been evaluated further. Annual report (2017) explains that the total tax expense of the company have been lowered from last year in 2017. Tax expense explains about the total amount which has to pay from the accounting profit of the company to the Australian government (Larson et al, 2017).

Annual report (2017) explains that the total tax expense of the company are $ 328 million which has been lowered because of less revenue of the company as well as the better policies of tax planning of the company.

1. Similarity in tax expenses:

The tax amount is calculated on the basis of the accounting profit of the company. But the annual report (2017) explains that the total accounting profit and the taxation amount of the company is different from the tax amount which has been changed by the company in the annual report.

The accounting profit of the company is $ 8520 million. Thus, the taxation amount should be $ 255.6 million (852*30% = $ 255.6). But the taxation amount of the company is $ 328 million (Kim, 2017).

The reason behind such difference among the taxation amount and accounting taxation amount of the company is various other taxation policy of the company due to which the company is not required to pay $ 328 million. The tax amount has also been enhanced by the company due to current tax liability and the deferred tax liabilities of the company.

1. Deferred tax amount:

Deferred tax amount of the company has identified further in the annual report. The deferred tax amount is the difference among the tax amount paid and the actual tax amount which has to be paid by the company. On the basis of the annual report, it has been found that the deferred tax revenue and the assets of the company in the balance sheet of the company has been improved in 2017 from last 3 years and it briefs that the company has paid extra amount as taxation to the government (Landoni and Zeldes, 2017).

It also explains that the deferred tax liabilities have also taken place in the year of 2017 which explains about the liabilities about the company in case of taxation. It explains that the company has to pay extra $ 353 million as tax amount to the Australian government.

1. Current payable or receivable tax:

Current tax liabilities and assets brief about the taxation amount which has to be paid or had paid by the company in advance. The annual report (2017) explains that the current income tax liabilities of the company is $ 4 million and the assets of the company is zero which explains that the company would pay $ 4 million amount to the government in the next year (Ho, 2017).

Tax Expenses

The income tax payable amount is not same as the income tax amount in the income statement of the company because the company has paid some of the taxation amount in the current year already and which has lead to the balance $ 4 million of taxation amount to the company.

On the basis of the evaluation on the balance sheet of the company, it has been found that only these amount which has not been paid by the company in the current year or which is still outstanding from the last year is shown in the balance sheet of the company. Rest amount is shown by the company in its cash flow statement to show that how much amount has been paid by the company as tax amount in current year.

1. Differences in tax amount:

The income statement explains that the total tax amount of the company in the current year is $ 328 million and the cash flow statement briefs that only $ 4 million has been paid by the company in the current year as tax amount. It explains that there is huge difference among the actual tax expense and the tax amount paid b the company (Gorry et al, 2017).

These changes have taken place due to various internal reasons of the company such as company has already paid extra amount to the government of the country and it is recoded as deferred tax assets in the annual report of the company (Bardley, 2017). So, the company has paid only $ 4 million in the current year.

1. Tax treatment:

The annual report explains that the treatment of the tax has been done in a better way by the company. The tax treatment of the company explains that the company has followed the ASSB 112 rules to record the taxation amount in the annual report of the company.

The above study was quite interesting due to the various taxation figures and their different recording system. Every taxation figures have a note attached to it about it’s derive and the reasons behind the figures,

The story was quite interesting because of various surprising elements. Various new things have been learnt in the report and it has been found that how the different amount of the taxation could is recorded in the annual report of the company.

Further, the main confusing point in the report was the deferred tax liabilities and the current tax payable figures and the main difference among both the factors.

Conclusion:

To conclude, the Qantas limited has followed the international accounting rules and AASB rules to measure the performance and the position of the company. It explains that the company has performed a better process in recording and presenting the accounting and financial transactions of the company in the annual report.

References:

Annual report. 2017. Qantas Airways limited. (Online). Available at: https://investor.qantas.com/FormBuilder/_Resource/_module/AH_NGR9NxUaXc0W8Qv3Kfg/docs/QantasAnnualReport2017.pdf (accessed 24/5/18).

Bradley, S., 2017. Inattention to Deferred Increases in Tax Bases: How Michigan Home Buyers Are Paying for Assessment Limits. Review of Economics and Statistics, 99(1), pp.53-66.

Brigham, E.F. and Ehrhardt, M.C., 2013. Financial management: Theory & practice. Cengage Learning.

Gorry, A., Hassett, K.A., Hubbard, R.G. and Mathur, A., 2017. The response of deferred executive compensation to changes in tax rates. Journal of Public Economics, 151, pp.28-40.

Ho, A.T., 2017. Tax-deferred saving accounts: Heterogeneity and policy reforms. European Economic Review, 97, pp.26-41.

Kim, J.H., 2017. What Really Determines the Information Content of Tax Expense and Deferred Tax?. ?????, 42(2), pp.1-44.

Landoni, M. and Zeldes, S.P., 2017. Should the government be paying investment fees on $3 trillion of tax-deferred retirement assets?

Larson, M.P., Lewis, T.K. and Spilker, B.C., 2017. A Case Integrating Financial and Tax Accounting Using the Balance Sheet Approach to Account for Income Taxes. Issues in Accounting Education, 32(4), pp.41-49.

Morris, J.L., 2017. Classification of Deferred Tax Assets and Deferred Tax Liabilities: An Evaluation of FASB’s Attempt at Standards Simplication. Journal of Accounting and Finance, 17(8), pp.198-208.

Our company. 2017. Qantas Airways limited. (online). Available at: https://www.qantas.com/travel/airlines/company/global/en (accessed 24/5/18).

Tran, A., 2015. Can taxable income be estimated from financial reports of listed companies in Australia?. Browser Download This Paper.

Watson, L. 2017. Discussion of’Does the Deferred Tax Asset Valuation Allowance Signal Firm Creditworthiness?’.

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