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HA2032 Corporate Accounting Assignment Help
The primry motivation behind this evaluation is to examine the financial statements of two organizations which have a place with a similar industry and has comparable level of business operations. The two organizations which are chosen for this analysis are Ausdrill Ltd and Rio Tinto Ltd which are both engaged extraction and mining and of mineral assets. For the analysis the yearly reports of the two organizations are taken. The analysis of the various components of the financial statements and furthermore make a comparison between the two organizations manage and find out the better reporting components of the yearly reports.
The company Ausdrill Ltd is occupied with the operations of extricating minerals and mining business in Australia. The primary operations of the organization are in Australia but in case, the business has additionally extended to specific zones of Africa and United Kingdom (Ausdrill.com.au. 2018). The organization has some expertise in mining administrations, review control and drill and blast investigation projects. The organization additionally utilizes a critical number of representatives in the business and the incomes of the business are continually improving.
On the other the Rio Tinto Ltd is viewed as one of the main organizations in Mining industry and has its beginning as an Anglo-Australian organization which has a larger part of its functions in Australia. The organization is known for its mining exercises and is a main metals producer in Australia. The organization deals with iron ores, coal, copper, uranium and precious stones. Additionally, the organization is additionally occupied with the operations of refining for items like bauxite and various different minerals (Riotinto.com. 2018).
The primary motive of the analysis will be to break down the yearly reports of both the organizations for a time of last three continuous years beginning from 2017. The evaluation additionally demonstrates examination and near investigation of the components which are appeared in the yearly reports (Bryce, Ali and Mather 2015). The significant areas that are covered from the annual reports the companies include equity capital, cash flow statements, disclosures and tax treatments. Moreover, calculations regarding effective tax rate and other tax computations are done in this report.
The owner equity represents the equity capital and businesses retained earnings which are utilized for financing the operations. The yearly report of 2017 is considered for both the organizations to analyze the equity of owners of the business. As per the yearly report of 2017 for the Ausdrill Ltd, the in the balance sheet, the owners equity appears. The owner’s equity contains retained earnings, other reserves and contributed equity. The contributed equity identifies with the share capital which the organization has gathered by issuing to the people in general. The owner’s equity of the business for the year 2017 is appeared to be $ 546,447,000 which is same as the figure which was appeared for past years. There have been no adjustments in the figure of value according to earlier estimates (Saito 2016). The retained earnings of the business refers to the profits which are kept aside either for reinvesting the same in the business or meeting certain future commitments. The retained earnings of the business for the year 2017 have essentially expanded in contrast with earlier year and the same is appeared to be $ 121,444,000. The estimate which is appeared for 2015 is $ 38,027,000 (Ausdrill.com.au. 2018). Hence, there is a general pattern which demonstrates increment in the held profit of the business. This might be because of the change in benefit of the business and furthermore because of change in the working structure of the business. The reserves of the business are appeared in negative which shows the accumulated losses of the business which are from earlier year.
Then again, the parts of owners equity which is appeared in the yearly report of the business for 2017 is appeared to be value share capital of the business, share premium, held income and stores. The share capital which is appeared for the business for 2017 contains owners equity Rio Tinto Limited (Suzuki 2015). The share capital speaks to the assets which are utilized by the business to meet the commitments of the business. The share capital of the business is appeared to be US$ 4,140 million which has altogether enhanced in contrast with earlier year. This is because of the way that the organization has issued certain number of offers amid the year with a specific end goal to draw capital from the same. The held income of the business is appeared to be US$ 23,761 million (Riotinto.com. 2018). The retained earnings of the business have additionally expanded which is because of increment in benefit producing capacity of the business. The yearly report additionally demonstrates that the stores of benefits of the business are fitting for meeting any commitments of the business.
Position of Capital Structure for both the organization
The Ausdrill ltd’s capital structure of according to the balance sheet the business for the year 2017 is appeared to be more depending on equity capital than the debt capital of the business. The obligation capital is appeared to be $ 385,815,000 for the year 2017 and the same was $ 395,019,000 of every 2016 as appeared to be determined sheet of the organization for 2016 which demonstrates that the administration of organization reimbursed a piece of the advance amid the present year. If there should be an occurrence of value share capital, the business has expanded value capital of the business amid the year as appeared to be determined sheet of the business. The borrowings of the business for the year 2015 are appeared to be $ 407,307,000 which is higher than estimation of 2016 (Ausdrill.com.au. 2018). The examination for three years uncovers that the administration is systematically reducing the debts of the business and accordingly concentrating on application of more equity capital.
On account of Rio Tinto Ltd, the balance sheet of the organization for the year 2017 demonstrates that the borrowings of the business are US$ 15,148 million which is lower than the estimate which is appeared for the year 2016 which is US$ 17,470 million. The borrowings of the business for the year 2015 are appeared to be US$ 21,140 million which is more than obligation capital which is appeared for 2016 (Bryce, Ali and Mather 2015). This demonstrates the administration of the organization is endeavoring to pay off the obligation capital of the business on step by step basis. The organization has additionally equity capital which is appeared in the yearly reports of the business amid the year which is appeared to be US$ 4,140 million for 2017 and the same was US$ 3,950 million of every 2015 which demonstrates that the administration of the organization is endeavoring to expand the equity capital in the business’s capital structure (Riotinto.com. 2018). The administration of Rio Tinto Ltd is attempting to expand the value capital of the business and is depending more on debt capital of the business.
Hence, the examination of the equity and debt capital which is utilized by both the organizations shows that Ausdrill ltd is more dependent on utilizing the debt capital for financing the business activities while then again the administration of Rio Tinto ltd is depending more on equity capital as the business is trying to pay off the debt capital which is utilized by the business (Schaltegger and Burritt 2017). In any case, in current situation, the administration of Rio Tinto ltd is as yet utilizing substantially more debt capital than the equity capital of the business.
Analysis of Cash Flow Statement
The cash flow statement speaks to the monetary position of the business and exhibits every activity which is either a cash inflow or a cash outflow for the business. The income articulation of Ausdrill ltd demonstrates money from working exercises which includes basically money receipts which the business gets from operating activities of the business and furthermore money payments which are made by the Ausdrill to its suppliers. Another vital thing which is incorporated in the statement of cash flow is the businesses income tax paid amid the year. The total cash flow for the year 2017 is appeared to be $ 94,613,000 which has expanded from 2016 that was $ 91,006,000. The clients receipts and furthermore the installments which are made to the providers of the business have expanded based on appraisals of 2016 which demonstrates that the level of activities of the business has significantly expanded. The investing activities cash flow of the business adequately demonstrates that primary income amid the year is from the purchase of property, equipments and plants amid the year which is appeared to be $ 147,418,000 (Scholes 2015). The outflow of cash recommends that the administration has invested huge amounts in assets amid the year. The income from financing activities incorporates different reimbursements which are attempted by the business amid the year, for example, borrowings repayment, Hire purchase repayments and furthermore the dividend paid to the investors of the company. The net cash and cash equivalent which is appeared for the year 2017 is appeared to be $ 166,710,000 and the same is appeared to be $ 181,157,000 for the year 2016. Accordingly, the cash balance of the business has somewhat fallen in contrast with earlier year results. The representation of the cash flow of Ausdrill ltd:
According to the cash flow which is set up by Rio Tinto ltd, for the FY 2017 the cash from the operating activities is appeared to be US$ 16,670 million which is higher than the figure which is appeared for FY 2016 which recommend that the operations of the business has risen (MacQueen, Bergevin and Mitchell 2016). The specific item which is appeared in the operating activity cash are Dividends from equity account units and the expenses of tax which the business brings about amid the year. The net cash which is produced from operating activities of the business is appeared to be significantly higher than any of 2015 or 2016 assessments. The amount is US$ 13,884 million (Bieber 2016 Bieber 2016). The money from investing activities of the business which is appeared for the year 2017 include purchase of properties, equipments and plants and purchase of financial assets. The cash flow from financing activities of the business for the FY 2017 tells us that the cash outflows has taken place due to loans repayments, shares buyback and payment of dividend during the year (Mohanram, Saiy and Vyas 2018). The total cash balance has significantly increased in comparison to analysis of the previous year. The net cash is shown to be US$ 10,547 million for the year 2017 and the same figure is shown to be US$ 9,354 million in 2016. Therefore, the rise in the cash can be identified from the analysis of the organizations statement of cash flow. The representation of the cash flow of Rio Tinto ltd:
Comparison of the three Components in the Cash Flow Statement
The statement of cash flow of both the organizations which are appeared in yearly reports of the business are viably arranged considering the format of the three activities that includes cash from operating, investing and financing activities. The money from operating activities of the business is appeared to be $ 94,613,000 in the FY 2017 and the same is appeared to be $ 91,006,000 for 2016 which demonstrates that the money from the operations of the business has enhanced (Hribar and Yehuda 2015). The money from business operations for the year 2015 is appeared to be $ 117,936,000. On the other hand, the cash from of Rio Tinto Ltd for the year 2017 is appeared to be US$ 13,884 million and US$ 8,465 million for the FY 2016 while for FY 2015 is $ 9,383,000. The money from operating activities demonstrates that the figure appeared for 2017 is more for Rio Tinto Ltd in contrast with Ausdrill Ltd. This might be because of the higher scale of operations business. The money from investing and manage activities of Ausdrill Ltd for the year 2017 is appeared to be negative and the figure is appeared to be $ 101,127,000 which is due to the payments which have taken place for t purchasing of the assets. The income for Rio Tinto ltd for the year 2017 is likewise appeared to be negative which is additionally because of the expanding amount of payments for business purchases. The cash from investing activities of the business is appeared to be better in case of Ausdrill Ltd. The cash from financing activities of the business essentially involve loans repayments higher purchase agreements (Epstein 2018). The income from financing exercises is appeared to be in negative which is $ 6,965 million for the year and the same has enhanced from the previous year. On account of Rio Tinto ltd, the financing money from tasks is appeared to more which implies that the organization has made many cash payments amid the FY.
Insight of Cash Flow Statement
The cash generated from the operations of the two companies represents that there is a rise in cash from operations that denotes an enhancement of the operational efficiency of the business. However the cash which is generated from operations is more appropriate for Rio Tinto ltd as compared to Ausdrill ltd after the analysis. The cash from investing activities are same as both the companies has an essential amount of cash flows related to purchases of property, plant and equipment and loans repayment. The net cash from investing activities for both the companies is negative (Mohanram, Saiy and Vyas 2018). The cash from financing activities includes loans and dividends. The total cash generated by the companies is more for Rio Tinto Ltd as compared to Ausdrill Ltd.
Other Comprehensive Income Statement Analysis
The comprehensive income statement involves the items which are not appearing in the statement of profit or loss of the business. In case of Ausdrill ltd the items includes, trade gains on exchange related to operations of foreign and is $ 882,000. There is additionally a income which the business has gotten from joint of the business. Furthermore, gains on revaluation on assets can also be identified (Wahlen, Baginski and Bradshaw 2014). According to the yearly report of Rio Tinto for the year 2017 shows actuarial gains and adjustments which are made to tax on various post-retirement plans. The business likewise represents loss and gains on revaluation and cash flow hedge gains, which are sale of variable stock of the business.
Reporting of Comprehensive Items
The items are independently demonstrated and excluded in the P/L statement as they are of extraordinary nature as they are not related to the regular operations of the business (Weber 2018). The items are reported generally for disclosing all the business activities during the year and therefore cannot be reported in the statement of P/L, and shown in the Comprehensive Statement of Income.
Comparative Analysis of Comprehensive Items
According to the yearly reports of Ausdrill Ltd, comprehensive income sources the business are trade gains foreign operations of the business which is appeared to be $ 882,000. The business has encountered loss on revaluation of assets which are appeared in the yearly report of the business amid the year. The yearly report of Rio Tinto ltd indicates actuarial gains, adjustments of tax and deferred tax retirement benefits which are appeared in the yearly report of the business amid the FY (Kothari, Ramanna and Skinner 2015). The examination demonstrates that the extraordinary items are more in case of both Rio Tinto Ltd than on account of Ausdrill ltd according to the yearly reports. . In both the cases, if the items are included in the statement of profit and loss hence the net profit of the business will either increase or decrease the income of the business.
Accounting for Income Tax
The expense of income tax of the business is shown for Ausdrill ltd for the FY 2017 is shown to be $ 13,885,000 that has slightly increased from the previous analysis which is represented to be $ 4,581,000 for the FY 2016 (Epstein 2018).
The expenses of income tax of Rio Tinto Ltd is represented in the annual report of the business for the year 2017 which is $ 3,965 million and the same was shown to be $ 1,567 million for 2016.
Effective Rate of Tax
The effective rate of tax refers to the aggregate tax rate at which the business profits are taxed and the computation of effective tax rate is shown in the figure above. The effective rate of tax of Ausdrill ltd and Rio Tinto Ltd is represented in the above figure which is 30.63% and 30.94% ( Campbell 2015). Hence, it is clearly observed that the effective rate of tax of Rio Tinto Ltd is improved than Ausdrill ltd and the same is higher.
Deferred Tax Assets and Liabilities
Deferred tax liabilities and assets shapes significant part of the financial statement of the organization which is recorded at the year- end closing of accounts books and the same has affects on the income tax which is appeared in the statement of Profit and loss. The deferred tax of Ausdrill ltd is appeared to be 4 36,372,000 for the year 2017 and the same is reduced in contrast with the previous year examination and the deferred tax liabilities of the business is appeared to be $ 22,077,000 for the year 2017 which has additionally lessened in contrast with the analysis of earlier year (Penman and Yehuda 2015).
In case of the deferred tax assets of Rio Tinto Ltd for the year 2017 is $ 3395 million for the FY which has also decreased as compared to the analysis of previous year. The deferred tax liabilities for the FY 2017 are 3628 million and have increased from the estimates of previous year.
Cash Tax Amount and Rate of Both Company
The cash tax rate of Rio Tinto is higher than Ausdrill ltd which is shown in the above figure which is 36.63% for the year 2017.
Difference between Book Tax Rate and Cash Tax Rate
The principle contrast between money book tax rate and cash tax rate and is the cash tax rate is evaluated on the basis of current year, while in case of book tax rate it is assessed based on both present and future year (DeFusco et al. 2015). For the calculation of cash tax rate increase in the deferred tax assets and liabilities are considered and interest can result in tax savings are added back. However, in the case book Tax rate computation, no such consideration like that of cash tax rate is taken in hand.