Tax Analysis And The Corporate Accounting - Myassignmenthelp.Com

Question: Discuss about the Tax Analysis And The Corporate Accounting. Answer: Answer 1 The Eureka group holdings limited has equity capital divided into three specific parts. Common Stock Other Accumulated profit Retained earnings or distributable profit The common stock is the contributed capital which is invested amount by the equity share holders. It is considered that Eureka group holdings limited has common stock AUD $ 94 million in 2017. In addition to this, retained earnings of company is AUD $ 19. However, it is shown as negative. As company has plugged back all of its retained earnings in its business (Eureka group holdings limited 2017). Equity (Amount in dollar million) ($M) 2017 2016 Common stock 94 91 Retained earning 19 26 Total equity 129 111 Discussion of equity part of the company It is observed that Eureka group holdings limited has negative retained earnings. It has kept AUD $ 19 million retained earning which is not good indicator for the organization. Company has plugged back all of its earning and shown negative retained earnings in its equity capital side. Therefore, it could be inferred that retained earnings is the amount of profit available for the company which it has used in its business and reflected negative retained earnings in its equity capital. Answer 2 It is considered that the tax amount of money that is charged on the profit of company. It is evaluated that Eureka group holdings limited has been paying zero amount of tax throughout the time. It is observed that Eureka group holdings limited has been delivering, affordable, caring and inclusive committee which is operating its business in the best inters of needy people. Therefore, government has exempted company from its tax payment and there is no implication on the company to pay tax on its profit. Particular(AUD $ in million) 2015 2016 Income tax expenses 0 0 Therefore, it could be inferred that there are several companies who have been exempted by the government from the tax implication. Eureka group holdings limited is one of the exempted company for the tax payment. However, company has good amount of profit in its business which is plugged back by company in its business operations for the betterment of society and people at large. It has reduced the income tax burden of company in determined approach. Answer 3 It is observed that tax expenses of Eureka group holdings limited has been shown in the income statement as zero. Company is having zero level of tax implication due to the exemption granted to it. The Eureka group a holding limited is wholly owned Australian resident entity that have formed tax-consolidation group with effect from 1st July 2003. On the other hand, company has not paid any tax in any of its financial year. However, in order to answer the fact whether the income tax charged is equal to the tax rate times computed on the net profit following information could be drawn. The tax rate 30% is the standard tax rate which is determined with a view to determine the tax rate of income in determined approach. The tax charged on the profit of company which is implicated as per the rules and regulations of income tax. In addition to this, tax rate times is computed by using accounting income* 30% tax rate, i.e. 6538*30%. This amount is AUD $ 1961.4 million. Therefore, due to the difference in accounting rules and income tax rules, tax amount shown in the income statement would be differ from the tax rate times computed. Explain why this The main reason for this is based on the difference in accounting rules and income tax rules applicable on the company. The treatment of charging tax on the net profit is completely different as per the accounting rules and income tax rules. The tax expenses shown in the income statement is completely based on the income tax rules and regulations. On the other hand, tax rate times is determined as per the accounting rules and charged on the profit earned by company. The main reasons are given as below. The main first difference is related to recording of revenue and expenses recorded in the profit and loss account such as recording of depreciation, bed debts and treatment of revenue and expenses of company. The recording of revenue and expenses shown in the financial statement differ due to the difference between accounting and income tax rules AASB-122 (Devereux, Griffith and Klemm, 2012). Answer 4 After evaluating the annual report of Eureka group holdings limited it is determined that company is having zero amount of tax payment. It is considered that deferred tax is recognized by using balance sheet method. This method is provided for temporary difference between the carrying value of the assets and liabilities of company and amount used for taxation purpose. For instance, if company pays higher income tax due to the difference between accounting an income tax then it will mark the excess amount of money as deferred tax assets in the books of account of company. On the other hand, if company paid less amount of tax as per the taxation rules and regulations, as compared to accounting rules and regulations then it will have to books the fewer amounts in its books of account as deferred tax liabilities (Eureka group holdings limited 2017). The deferred tax amount is not recorded in the books account of company. It shows that company has no deferred tax liabilities in the books of account of company which reflects that company need not to pay any amount to government in future. The deferred tax is not realised in the books of accounts of Eureka group holdings limited so it is not booked in the financial statement of accounts. Particular (AUD $ million) 2017 2016 Deferred tax assets 0 0 Answer5 Current tax payable and current tax expenses of Eureka group holdings limited It is evaluated that current tax is charged on the profit of Eureka group holdings limited. However, due to the tax exemption, company has paid zero amount of tax to government. Therefore, there is no amount of tax payable by company to government. The current tax is charged as per the taxation rules and regulations given under AASB 112. The current tax reflects the amount of tax charged on the profit of company in current year. On the other hand, current tax payable is the amount of overall tax payable by company to government. The current tax payment is shown in income statement and tax payable amount is recorded in the liabilities side of financial statement of company (Garrett, Hoitash and Prawitt, 2014). Therefore, it could be inferred that company has not current tax expenses nor any tax payable. It has showcased no liabilities on company. Deferred tax payment of Eureka group holdings limited is also zero. Particular(AUD $ in million) 2016 2017 Income tax Expenses 0 0 Why income tax expenses is not same as the income tax payable There are several reasons which have resulted to differences between tax expenses and tax payable company. Answer6 Is the income tax expense shown in the income statement same as the income tax paid shown in the cash flow statement? If not No, the income tax expenses shown in the income statement is not equal to income tax amount shown in the cash flow statement of company. Why are the differences? It is evaluated that cash flow statement is accompanied with the cash inflow and outflow from the business in particular year irrespective of the fact that whether it is related to current year or previous year. The income tax charged on the profit of company is zero as company is exempted from all tax payment. In addition to this, company has been paying zero amount of tax to government. Therefore, there is zero amount of tax payment shown in the books of account of company. Cash flow statement covers all the cash expenses of company. On the other hand, income statement covers only the amount of tax which is charged on the current year profit of organization. The recording of tax amount in the books of account is done by following AASB 112 of the taxation act (Robinson, Stomberg and Towery, 2015). Therefore, it could be inferred that company need not to worry about the tax payment to government as it is exempted from the tax implication. Answer7 Treatment of tax in the books of accounts of company Interesting thing about the recorded its entire tax amount The main interesting thing about the recording of entire tax amount is based on the recording of tax as per the accounting rules and regulations. It may results to differences between accounting profit and profit computed by income tax rules and regulations. This difference in amount may be recorded as deferred tax assets or deferred tax liabilities in the financial statement of company. This is really interesting thing about the company which has shown that company has positive recording of assets in the books of accounts Surprising thing about the recorded its entire tax amount The main surprising thing about the recording of entries tax amount in Eureka group holdings limited is related to its corporate governance. Government of Australia has exempted various companies and bodies from the tax burden. Eureka group holdings limited is one of the selected company which is not allowed to pay tax to government. (Eureka group holdings limited, 2017). Difficulty in recorded the entire tax amount Eureka group holdings limited has been exempted from the tax burden by the government. It is evaluated that company has not paid any tax in its books of account as per the AASB-112 income tax rules and regulations. It has increased the complexity in recording of income tax. As per the accounting rules and regulations, company should pay tax amount of AUD $ 1491million to government then it will increase the overall outcomes of the organization (Eureka group holdings limited, 2017). New insight about the company account for the income tax The main insight about the income tax recording is related to governance structure of company. It is evaluated that Eureka group holdings limited is falling under the exemption list of government. It is considered that Eureka group holdings limited has paid zero amount of tax to government due to the applicable rules and regulation of the income tax act. However, if any case, existing rules and regulations are changed then company will have to pay tax to government. References Bauer, A.M., 2016. Tax avoidance and the implications of weak internal controls.Contemporary Accounting Research,33(2), pp.449-486. Brigham, E.F. and Ehrhardt, M.C., 2013.Financial management: Theory practice. Cengage Learning. Devereux, M.P., Griffith, R. and Klemm, A., 2012. Corporate income tax reforms and international tax competition.Economic policy,17(35), pp.449-495 Eureka group holdings limited, 2017, annual report, Retrieved on 21st January, 2017 from https://investor.genworth.com.au/Investor-Centre/?page=reports-and-presentations Feldstein, M., 2009. Tax avoidance and the deadweight loss of the income tax.The Review of Economics and Statistics,81(4), pp.674-680. Garrett, J., Hoitash, R. and Prawitt, D.F., 2014. Trust and financial reporting quality.Journal of Accounting Research,52(5), pp.1087-1125. Kundakchyan, R.M. and Zulfakarova, L.F., 2014. Current issues of optimal capital structure based on forecasting financial performance of the company.Life Science Journal,11(6s), pp.368-371. Robinson, L.A., Stomberg, B. and Towery, E.M., 2015. One size does not fit all: How the uniform rules of FIN 48 affect the relevance of income tax accounting.The Accounting Review,91(4), pp.1195-1217.