Understanding Other Comprehensive Income Statement And Tax Treatment In Financial Statements

Other Comprehensive Statement of Income: Items Reported

The statement of flow of cash of the selected corporation Qantas Airways comprises of usual three sections namely flow of cash from operating, investing as well as financing activities. Essentially, this reflects the net cash and equivalents of cash. Particularly, items that are mentioned under the operating activities include depreciation, adjustments in income, alterations in the accounts receivables, changes in inventory as well as transformations in liability. Essentially, it can be hereby mentioned that the flow of cash of each one of the item has declined. In essence, this is owing to higher generation of earnings that is specifically inflow of cash (Tschopp & Nastanski, 2014).

Thereafter, investing actions handle capital expends, investments as well as cash expenditures. In essence, flows of cash from particularly investing actions include payments for specifically property, plant as well as equipment (PPE) and intangible assets, interest disbursements and at the same time capitalised on qualifying assets (Sierra?García et al., 2015). The investing actions include disbursements for acquisitions of particularly controlled entities as well as net of cash attained and disbursements for particularly investments under equity methods. Again, net receipts are acquired for aircraft that is assigned to investment mentioned under equity method. Again, inflow of cash can be observed from proceeds acquired from disposal of particularly plant, property as well as equipment (Siew, 2015).  Further, inflow of cash can also be acquired from disposal of controlled entities, net loan repayment from specifically investments under equity method and refinancing of operating lease of aircraft. However, cash derived from operations include cash receipts from customers and cash payments to different suppliers as well as employees (Schaltegger & Burritt, 2017). Moreover, cash flows generated from financing activities include disbursements for particularly capital return, share buy-back and treasury shares and receipts for proceeds from particularly borrowing, proceeds from specifically sale, finance leaseback of different non-current assets (Saeidi et al., 2015).

Essentially, net flow of cash from mainly operating actions has decreased to $2704 million in 2017 from $2819 million in 2016. This is mainly due to decrease in interest payment, further increase in payments of cash and decrease in payment for cash for redundancies as well associated costs. Again, the net cash that is used in investing activities include shows a negative figure replicating cash outflow. The net cash outflow for investing actions has increased from ($1923 million) to around ($2046 million). This is mainly due to increase in interest paid as well as capitalised on different qualifying assets and specifically decrease in proceeds from particularly disposal of particularly plant, property as well as equipment (Reid & Myddelton, 2017). In case of financing activities, figure for net cash used is a negative figure that is ($854 million), replicating a cash outflow. However, the cash outflow has declined to ($854 million) from ($1825 million) due to decrease in payments for payments of share buy backs and repayments for borrowings. However, at the end, the figure registered for cash as well as cash equivalents stand at $1775 million in comparison to $1980 million. This shows decrease in cash and cash equivalents at the ending of the year reflecting decrease in cash inflow.

Reason Why these Items are Reported in P/L Statement

The above graph and table above presents the comparative evaluation of flow of cash from particularly flow of cash from operating activities, financing activities and investing activities. In essence, net cash inflow from specifically operating activities was recorded to increase in 2016 to $2819 million in comparison to $2048 million in 2015. However, the same declined to $2704 million during 2017. Again, net cash outflow of the firm for investing activities increased to $1923 million as compared to $944 million. Again, the same also further increased to $2046 million. Nonetheless, the net cash outflow for financing activities increased during the year 2016 in comparison to 2015. However, cash outflow for this activity was observed to decline during 2017 as compared to the year ago period.

Other comprehensive statement of income: Items reported in other comprehensive statement of income

The comprehensive statement of earning of the firm Qantas Airways highlights other comprehensive earning/loss for the particular year. This statement presents the statutory profit for the financial year 2017 and 2016. Other comprehensive earning or else loss states that Qantas Airways registered comprehensive income of $180 million, while company registered other comprehensive loss of -$179 million. This statement also replicates total comprehensive income of $1033 million in the year 2017 while the same was recorded to be $850 million. The items that are essentially included in this section are the net exchange variances from transactions of necessarily foreign operations that are taken under equity, overall amount of reserve for foreign translations that are essentially transferred to net profit as well as fair value adjustment on particularly hedging of cash flow (Miglani et al., 2015).

The net exchange variances can be witnessed in effectual alterations in fair value of hedging of cash flow that reflects drastic increase during the year 2017. Again, there is drastic decline in the transfer of particularly hedge reserve to essentially consolidated income statement to -$6 million from $198 million.

Reason why these items are reported in P/L statement

In essence, comprehensive income statement is necessarily utilized for the purpose of enumeration of any kind of alteration in primarily interests of varied owners. In essence, this takes into consideration the income along with expends that are not realised and is utilized for the purpose of sidestepping the earnings statement (Miao et al., 2016). In particular, other comprehensive statement of earning considers certain items namely gain/loss from different derivative instruments, effectual portion of alterations in specifically fair value of hedging of flow of cash (that is net of taxes), transfer of reserve of hedge to mainly consolidated income statement (that is net of taxes), identification of effectual hedge of cash flow on particularly capitalised assets (that is net of taxes) (Kushnirenko, 2017). Also, this statement replicates net alterations in reserve of hedge for particularly time value of specific options (that is net of taxes). Furthermore, this statement includes foreign currency translation of varied controlled entities, translation of foreign currency of necessarily investments that is accounted for mainly under the equity mechanism and shares of diverse other comprehensive earning or else loss of investments accounted under the equity method.

Amount of Income Tax Expenditure and Treatment

The amount of income tax expenditure was registered to be -$328 million in 2017 and -$395 million. In essence, the income tax expenditure utilizes the domestic corporate rate tax of approximately 30% and statutory profit before income tax expends are adjusted for non-assessable dividends from particularly controlled entities, different non-deductible share of particularly net loss for specifically investments accounted under equity system, varied non-deductible losses essentially for foreign branches as well as controlled entity losses (Warren & Jones, 2018). Adjustments also include usage of previously unrecognized losses of capital, non-assessable gain on particularly disposal of PPE, other non-assessable items as well as provisions from previous periods (Ijiri, 2018). 

Amount of income tax is enumerated utilizing rates of tax that are imposed significantly by the financial position assertion. The current expenditure on tax during the year 2017 was recorded to be ($328 million) during the financial year 2017 while the same was registered to be ($395 million) in 2016 as mentioned in the financial pronouncement. In essence, this shows that the tax expenditure has escalated by around $67 million. Thus, it cannot be hereby analysed whether figures for income tax expenditure are identical as that of the tax rate times the total accounting earnings (Heese et al., 2015).

The deferred tax (liabilities) or assets of the firm Qantas Airways stands at ($353 million during the year 2017 whereas the same stands at $39 million. Essentially, deferred tax is necessarily identified with regard to temporary variances between particularly carrying amounts of specifically the carrying amounts of assets/liabilities for mainly pecuniary reporting reasons and the total amounts utilized for taxation. Particularly, deferred tax assets are necessarily identified for specifically unused losses for tax, unused credits for tax along with deductible temporary variances to the particular extent that it is likely that taxable profits in the upcoming period against which they can be utilized (Chaibi et al., 2014).

The income tax expends for the financial year 2017 is recorded to be ($328 million) while the same was recorded to be ($395 million). However, the income tax payable stands at ($4 million). A reconciliation of income tax expense of the firm Qantas Airways to particularly income tax payable involves adjustments for mainly temporary variances. Adjustment for temporary variances include adjustments for inventories, plant, property as well as equipment, payables, revenue that is received/accepted in advance, diverse interest bearing liabilities, different financial assets, provisions, diverse other items and previous period variances (Carnegie, 2014). Essentially, the temporary variances stand at $167 million in 2017 as against ($ 18 million). Therefore, the tax payable stands at ($4 million).

Statement of Cash Flows of Qantas Airways

Analysis of the yearly financial pronouncements of the firm Qantas Airways reveals the fact that the income tax expenditure reflected in the income assertion is not identical to that of the income tax paid replicated in the statement on flow of cash. Essentially, payments for income tax comprises of the influence of income tax of specific losses or else gains associated to financing activities so that the after tax flow of cash is replicated in the subtotals of net flow of cash. However, contrarily, expenditure of the company on the income tax is essentially the amount that replicates recording of costs of income tax (Beekes et al., 2015).

Based on the yearly report analysis of the firm Qantas Airways, it can be recognized that charge for particularly current tax on earnings is made founded on adjusted profits that are necessarily attributable for any disallowed else wise non-assessable item. Further, the notes to the financial assertions deliver the numerical reconciliation of necessarily income tax expenditure to amount of tax payable. This kind of reconciliation delivers information to different users regarding the computation of this kind of income tax expenditure (Balakrishnan et al., 2016). Thus, the striking part in association to realization of income tax expenditures is necessarily reconciliation of temporary variance and any kind of amount of net loss incurred after tax on earnings.

References

Balakrishnan, K., Watts, R., & Zuo, L. (2016). The effect of accounting conservatism on corporate investment during the global financial crisis. Journal of Business Finance & Accounting, 43(5-6), 513-542.

Beekes, W., Brown, P., & Zhang, Q. (2015). Corporate governance and the informativeness of disclosures in Australia: A re?examination. Accounting & Finance, 55(4), 931-963.

Carnegie, G. (2014). Pastoral accounting in colonial Australia: a case study of unregulated accounting. Routledge.

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Heese, J., Khan, M., & Ramanna, K. (2015). Political Standards: Corporate Interest, Ideology, and Leadership in the Shaping of Accounting Rules for the Market Economy. Journal of Accounting & Economics, 64(20), 2-3.

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

Kushnirenko, O. (2017). Tax-Based Calculations Applied by Agricultural Enterprises as Object of Accounting and Control. Accounting and Finance, (2), 27-35.

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), pp.473-515.

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

Reid, W. & 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., & 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., & Burritt, R. (2017). Contemporary environmental accounting: issues, concepts and practice. Routledge.

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Sierra?García, L., Zorio?Grima, A. & 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.

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Warren, C. S., & Jones, J. (2018). Corporate financial accounting. Cengage Learning.

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