Questions: 1. From your firms, financial statement, list each item of equity and write your understanding of each item. Discuss any changes in each item of equity for your firm over the past year articulating the reasons for the change. 2. What is your firms' tax expense in its latest financial statements? 3. Is this figure the same as the company tax rate times your firms accounting income? Explain why this is, or is not, the case for your firm. 4. Comment on deferred tax assets/liabilities that is reported in the balance sheet articulating the possible reasons why they have been recorded. 5. Is there any current tax assets or income tax payable recorded by your company? Why is the income tax payable not the same as income tax expense? 6. Is the income tax expense shown in the income statement same as the income tax paid shown in the cash flow statement? If not why is the difference? 7. What do you find interesting, confusing, surprising or difficult to understand about the treatment of tax in your firms financial statements? What new insights, if any, have you gained about how companies account for income tax as a result of examining your firms tax expense in its accounts?
Answers: Answer 1: As evident from the annual report of Nextdc Limited it is found that under the heads of Equity the company reported a contributed equity of 524,458 for the year ended 30 June 2017 while in the following year of 2016 the company reported an equity of 375,507. Under the heads of equity, the company reported reserves of 4,990 for the year 2017 in respect to the figures of 3,534 for the year 2016. The company also reported an accumulated loss of (22,917) for the year ended 2017 whereas the previous year figures stood (45,913). The ordinary shares remain entitled to the shareholder so that can participate in the dividends together with the earnings on closure of the business in respect to the number of and values that is paid on the shares that is held (Smith 2014). Answer 2: The income tax expenses that is reported by the company for the year ended 2017 stood 10,172. Answer 3: The income tax expenditure that is reported during the accounting year is the tax that is payable on the present period of assessable revenue. This is depending upon the applicable amount of the income tax rate in Australia together with the accustomed alterations in the deferred tax assets and deferred tax liabilities that is attributable to the provisional differences and the idle tax losses (Zadek, Evans and Pruzan 2013). The current amount of tax that is charged is computed based on the laws of tax that is incorporated or practically endorsed during the conclusion of the accounting period. The management of the corporation intermittently assess the position that is taken in the tax returns concerning the situations that is applicable in the tax regulations that is subjected to regulations. The tax rate reported by the company in respect to the accounting income stood at a rate of 30% with no change in the percentage of tax for the company. Answer 4: The deferred tax assets that is reported by the firm on the end of the accounting year 30 June 2017 stood 15,030 while in the year 2016 the total amount of deferred tax assets that is reported by the company stood 5,471. On the other hand, the total amount of deferred tax liabilities that has been reported by the corporation on the end of the accounting year 30 June 2017 stood 2,429 while in the previous year of 2,657. The deferred tax assets that is identified for deductible provisional differences and idle amount of tax losses given that it is likely that the forthcoming amount tax would be obtainable to use the provisional differences and losses (Lys, Naughton and Wang 2015). The deferred amount of tax assets and liabilities is usually offset when there is lawfully enforceable right in order to offset the present tax assets along with the liabilities and when the deferred balance is associated with the identical taxation authority (Christensen 2015). Additionally, the current tax assets and the current tax liabilities that is reported by the company is offset when the company has lawfully enforceable right to offset and would intend to either one of the net base or with the objective of realising the asset and resolve the liability concurrently. Answer 5: The current amount of tax that is payable on the profit generated by the company on the end of the accounting year 30 June 2017 stood $4,424. The income tax payable is not as same as the income tax expenses because the current tax payable is identified in the profit and loss, excluding the extent to which it is associated with the items that is identified in the other comprehensive income or it is directly in equity (Busco et al. 2013). In this case, the current amount of tax payable is identified in the other comprehensive income or unswervingly under the equity correspondingly. Answer 6: The taxable income expenses that is reported by the company in the income statement stood 10,172 whereas it is noteworthy to denote that the no amount of tax expenses is reported by the firm in the statement of cash flow. The company did not report any income tax expenses in the statement of cash flow because there are certain transactions and computations that has been undertaken in the ordinary business course for the reason of this the ultimate amount of tax determination is not certain (Deegan 2013). Therefore, it can considered that the company has not reported an income tax expenses in the cash flow since the uncertainty of the transactions during the ordinary course of business and an appropriate judgement is needed in the determination of the provision for income taxes. Answer 7: On an interesting note it is learnt that the current amount of income tax that is charged is computed by the company based on the tax laws that has been legislated or fundamentally applied following the end of the reported in Australia. Interestingly the management of the firm on periodical basis assess the positions undertaken in determination of the tax returns concerning the situations in which the applicable amount of tax regulations is subjected to interpretations (Christensen 2015). However, there were difficulties in understanding the tax expenses payable by the company since the statement of cash flow did not stated the amount which the company has paid. On an important note it is found that the company was uncertain regarding the transactions that would take place in the ordinary course of the business and it was difficult to understand that the appropriate judgement was required by the firm in ascertaining the provision of income tax. Considerably on an interesting note the deferred tax assets that was identified for the purpose of deductions represented the temporary differences and the unused amount of tax losses represents the future amount of tax that would be available to make use of the temporary differences and losses (Ramanna 2013). The company identifies the deferred tax in the profit and loss given the extent to which it is associated with the items identified in the additional comprehensive statement of income or in equity directly. Reference Busco, C., Frigo, M.L., Quattrone, P. and Riccaboni, A., 2013. Redefining corporate accountability through integrated reporting: What happens when values and value creation meet?. Strategic Finance, 95(2), pp.33-42. Christensen, D.M., 2015. Corporate accountability reporting and high-profile misconduct. The Accounting Review, 91(2), pp.377-399. Christensen, D.M., 2015. Corporate accountability reporting and high-profile misconduct. The Accounting Review, 91(2), pp.377-399. Deegan, C., 2013. Financial accounting theory. McGraw-Hill Education Australia. Lys, T., Naughton, J.P. and Wang, C., 2015. Signaling through corporate accountability reporting. Journal of Accounting and Economics, 60(1), pp.56-72. Ramanna, K., 2013. A framework for research on corporate accountability reporting. Accounting Horizons, 27(2), pp.409-432. Smith, N.C., 2014. Morality and the Market (Routledge Revivals): Consumer Pressure for Corporate Accountability. Routledge. Zadek, S., Evans, R. and Pruzan, P., 2013. Building corporate accountability: Emerging practice in social and ethical accounting and auditing. Routledge.
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