FACULTY OF BUSINESS, GOVERNMENT & LAW Group Assignmen Co!ers"ee
Country
Su#en I$ num%er Kananust Pongpanich & Su#en N&me U3061556 Muhammad Saleh U3104936
Thailand Pakistan China
Uni n&me
ompan! "ccounting
Uni num%er
6##$
Nme o' (e)urer*uor
Simon %o!
Assignmen opi)
a' a' e(ect accounting accounting decisions in oca ola "matil and Metcash
$ue #&e
#3 )cto*e+ #014
You must keep a photocopy or electronic copy of your assignment.
Su#en #e)(rion ,e,e- ce+ti.! ce+ti.! that the attached attached assignme assignment nt is the /o+ o. m!sel. m!sel. and othe+ mem*e+s mem*e+s o. m! g+oup g+oup Mate Mate+i +ial al d+a/ d+a/n n .+om .+om othe othe++ sou+ sou+ce ces s has has *een *een app+ app+op op+i +iat atel el! ! and and .ull .ull! ! acn acno/ o/le ledg dged ed as to autho+2c+eato+- sou+ce and othe+ *i*liog+aphic details Such +e.e+encing ma! need to meet unitspecic +eui+ements as to .o+mat and st!le
Signure o' "e group+s represeni!e --------------------- $e -----------$e o' su%mission-----./ O)o%er .012----------
1
Conens 7U8 SUMM":; # L8:"U: :8, 3 )")L" "M"8L L8M8< 6 Pe+centage o. <"s to otal "ssets and =on u++ent "ssets6 Pe+centage o. <Ls to otal Lia*ilities and <"s to <Ls6 M"S% L< $ Pe+centage o. <"s to otal "ssets and =on u++ent "ssets$ Pe+centage o. <Ls to otal Lia*ilities and <"s to <Ls$ >8=<8=?S @
#
E3ECUTIVE SUMMARY This paper summarizes a comparison between the company performances of Coca-Cola Amatil Ltd and Metcash Ltd with the help data from their annual reports. Furthermore the criti!ue outlined in this document will discuss "A# $% &AA#' $$%( and the proposed chan)es which relates to the accountin) treatment for income ta*. "n the li)ht of the ratio analysis by usin) the data from their Annual +eports for the past three years the information will illuminate how the recordin) of deferred ta* assets and deferred ta* liabilities becomes unclear for the users for decision makin) particularly when there is a si)nificant difference between the size and ,olume of the companies. Finally the implications of our findin)s with help of ratio analysis will be discussed within the conclusion.
3
LITERATURE REVIEW Accordin) to "A# plus &n.d( Accountin) standard for income ta* has been pro,ided under "A# $% &AA#'$$%( to )i,e an e*planation for the ta* conse!uences of transactions and reco)nize profit or loss in any narrated ta* effects. Furthermore under "A# $% an asset or liability will ultimately be either reco,ered or settled and it may lead to future ta* conse!uences that should be reco)nized immediately at the same time when the asset or liability is purchased or incurred. "f the reco,ery or settlement has no ta* conse!uences the standard imposes an or)anization to be aware of a deferred ta* liability &deferred ta* asset( and the entity should also record the conse!uential ta* amount on transactions which is the same way as it records for the transactions or other e,ents themsel,es &"A# plus n.d(. Australian Accountin) #tandard 'oard &%$( mentions that the proposed amendment of "A# $% simplifies the accountin) when an or)anization informs ta* losses for deferred ta* assets related to debt instrument considered at fair ,alue. The debt instrument which is measured at fair ,alue and its ta* base remains at cost will increase a deductible temporary different if there is a decrease in the carryin) amount of that debt instrument has been occurred. Moreo,er the entity/s future ta*able profit will be estimated from reco,erin) assets e*clude ta* deductions from the repudiation of deductable temporary differences. "n addition the ta* effect of the deductable ta* difference can be reco)nized as a deferred ta* asset with other deferred ta* assets howe,er the entity can subtract ta* losses a)ainst income with specific deferred ta* assets if the lawsuit is limited &Australia Accountin) #tandard 'oard %$(. As #tephens &%0( defines that deferred ta*es are really important to understand the financial position because they )i,e us a clear picture of the e!uity position and accrual earnin)s of the company. There are always )ood situations and bad situations in the company cycle and they can moderate the earnin)s by increasin) or decreasin) the ta* liability in that cycle. At the end of a financial year the closin) balance of a particular financial period becomes the openin) balance of the other1 creates a ta* re,ersal effect and bolsters the financial operations of the company &#tephens %0(. The Australia Accountin) #tandard 'oard &%$2( states that deferred ta* asset and deferred ta* liability can be prescribed into % ob3ecti,es as followin)1 deferred ta* asset performs as prepaid structure that will be reduced the amount of future ta*es if ta*able income is lar)er than reported income while deferred ta* liability will be indicated to the future ta* that 4
firm has to pay. +ouillard &%$2( describes that e*amples of deferred ta* asset can be included pro,isions annual lea,e product warranty reser,es and e*amples of deferred ta* liability include accelerated depreciation payments and non-deductable intan)ibles &+ouillard %$2(. As #tephens &%0( says the deferred ta* liability will be reco)nized for all ta*able temporary differences e*cept deferred ta* liability occurs from )ood will not a transaction of business combination in,estments in subsidiaries and interests in 3oint ,entures. Likewise deferred ta* asset will not be identified if it is not a transaction of business combination and do not affect both accountin) profit and ta*able profit in,estments in subsidiaries and interests in 3oint ,entures which is the temporary difference will not o,erturn in predictable future &#tephens %0(. These restrictions may be misleadin) the users toward the understandin) of deferred ta* asset4liability reco)nition. Apart from that the process to disclose an annual report to display deferred ta* asset4liability may be confused the in,estors thus both deferred ta* asset4liability can be described under the "A# $%.5 and "A# $%.5$ and some disclosures are related to "A# $ as well &CPA Australia %$( . This papeer demonstrates a comparison of the accountin) for income ta* between two companies Metcash and Coca-Cola Amatil that has been shown in the financial statements from %$$-%$2. The annual report of Coca-Cola Amatil %$$-%$2 has recorded their financial statement by accordin) to the AA#' rules and the Corporation Act %$ e*cept "A# $% &AA#'$$%( as they do not mention in the reports. 6hether Coca Cola do not include the "A# $% &AA#' $$%( in their accountin) policies but they ha,e pro,ided ade!uate information to the in,estors in term of their profit or loss related to ta* effects also present deferred ta* asset4liability as mo,ements of their financial o,er the year which can be reco)nized the asset or liability when it occurred. 6hereas Metcash annual reports %$$-%$2 has been stated about the ta* effect accountin) base on the AA#' $$% &"A# $%( under the ta* effect accountin) howe,er they pro,ide insufficient information in the financial statement relate to deferred ta* asset4liability which effect the accountin) in the or)anization that should be )i,en and indicates under "A# $%. Furthermore the comparison of the policies use accordin) to Australian Accountin) #tandard 'ase +ules between Metcash and Coca Cola can be classified that Metcash has been pro,ided their financial report by follow more AA#' rules than Coca Cola because the di,ersity of the market. Coca Cola/s product mostly in,ol,e in a be,era)e market which may not cause the comple*ity in the business thus the information relate to the financial account has been 5
)ranted and adopted with reasonable and easy to understand. 7n the other hand Metcash has a di,ersity market composition far more than Coca Cola hence this may be lead to the complicated financial structure.
6
COCA4COLA AMATIL LIMITE$ 5er)enge o' $TAs o To( Asses n# Non Curren Asses 2013 Total DTAs
Total 8on-Current Assets Percentage of DTAs to Total Non-Current Assets
Total Assets Percentage of DTAs to Total Assets
2012
2011
86.4
100.2
84
20.$
2999.:
225.9
2.50%
2.65%
2.48%
::5.
:95.9
:%;.
1.31%
1.49%
1.39%
5er)enge o' $TLs o To( Li%i(iies n# $TAs o $TLs Total DTLs
259.5
252
237.8
%900.5
%5;:.
%::.2
9.42%
8.70%
9.12%
5:5.:
:0.%
2;;.9
Percentage of DTLs to Total Liabilities
5.33%
5.42%
5.95%
Percentage o DTAs to DTLs
33.29%
39.76%
35.32%
Total 8on-Current Liabilities Percentage of DTLs to Total Non-Current Liabilities
Total Liabilities
$
METCAS6 LT$ 5er)enge o' $TAs o To( Asses n# Non Curren Asses 2013 Total DTAs
Total 8on-Current Assets Percentage of DTAs to Total Non-Current Assets
Total Assets Percentage of DTAs to Total assets
2012
2011
129.9
146.6
55.9
%%25.
%$0.9
$::5.%
5.80%
7.27%
3.35%
$22.2
%9.:
29;;.;
3.14%
3.64%
1.47%
5er)enge o' $TLs o To( Li%i(iies n# $TAs o $TLs Total DTLs
68.1
51.1
49.3
Total 8on-Current Liabilities
;09.;
$$2$.$
55%.9
Percentage of DTLs to Total Non-Current Liabilities
7.11%
4.52%
5.59%
%0;.$
%:;%.0
%209.$
2.71%
1.90%
2.09%
190.75%
286.89%
113.39%
Total Liabilities Percentage of DTLs to Total Liabilities
Percentage o DTAs to DTLs
From the abo,e calculation it is e,ident that the percenta)e of deferred ta* assets to non- current assets of Coca-Cola Amatil Ltd is %.0< %.:0< and %.5< in year %$2 %$% and %$$. The proportion of deferred ta* assets to total assets is $.2$< $.;< and $.2;< in %$2 %$% and %$$. The percenta)e of deferred ta* assets to non- current assets of Met Cash is 0.5< in year %$2 9.%9< in %$% and 2.20< in %$$. The percenta)e of deferred ta* assets to total assets is 2.$< 2.:< and $.9< in year %$2 %$% and %$$. "t is noticeable that Met Cash has a lar)er proportion of deferred ta* to non-current assets and total assets in all three years. =owe,er we took deferred ta* liabilities into account to determine whether this indicates a better >TAs of Met Cash. The proportion of deferred ta* liabilities to non- current liabilities of Coca-Cola Amatil Ltd is ;.%< 5.9< and ;.$%< in year %$2 %$% and %$$. The proportion of deferred ta* assets to total assets is 0.22< 0.%< and 0.;0< in %$2 %$% and %$$. The percenta)e of deferred ta* liabilities to non- current liabilities of Met
@
Cash is 9.$$< in year %$2 .0%< in %$% and 0.0;< in %$$. The percenta)e of deferred ta* liabilities to total liabilities is %.9$< $.;< and %.;< in year % $2 %$% and %$$.
FIN$INGS Met Cash shows a lower percenta)e of deferred ta* liabilities than Coca-Cola Amatil Ltd both to non- current liabilities and to total liabilities. Furthermore Met cash holds a hi)her proportion of >TAs to >TLs &$;.9< %5:.5;< and $$2.2;< in %$2 %$% and %$$( than Coca-Cola Amatil Ltd &22.%;< 2;.9:< and 20.2%<( in all three years. 6e ha,e stron) e,idence to conclude that from all the calculations abo,e Metcash has a ,ery stron) financial position. 6e can see Met Cash holds 8et deferred ta* assets :$.5 ;0.0 and :.: Million in %$2 %$% and %$$ respecti,ely. 7n the other hand Coca Cola Amatil Ltd has deferred ta* liabilities $92.$ Million in year %$2 $0$.5 Million in %$% and $02.0 Million for %$$.
$ei(s o' $e'erre# T7es COCA4COLA AMATIL LIMITE$ 2013!"# $
2012!"# $
2011!"#$
Allowances for current assets
&$.5(
&$2.0(
&$0.0(
Accrued char)es and employee e*pense obli)ations
&20.;(
&0.9(
&5.0(
7ther deductible items
&20.9(
&$.(
&%.(
Total DTAs
!86.4$
!100.2$
!84.0$
"n,estments in bottlers/ a)reements
$%;.;
$2.$
$2.9
Property plant and e!uipment and intan)ible assets
95.
9.
9%.:
+etained earnin)s balances of o,erseas subsidiaries
$$.0
$:.
%$.
7ther ta*able items
2;.9
20.0
$2.$
Total DTLs
259.5
252.0
237.8
et Deerre& Ta' L(a)(l(t(es
173.1
151.8
153.8
Deferred Taxes
9
10
MET CAS6 LIMITE$ Deferred Tax Liabilities
2013!"#$
2012!"#$
2011!"#$
::.5
9.%
0.
$.2
%.2
2.%
-
$.:
.9
!68.1$
!51.1$
!49.3$
$$0.:
$22.%
02.$
7ther
.9
$.%
.
?nutilized ta* losses
$2.:
$%.%
%.
Total
129.9
146.6
55.9
#et off from deferred ta* liabilities
&:5.$(
&0$.$(
&;.2(
61.8
95.5
6.6
"ntan)ibles Accelerated depreciation for ta* purposes 7ther #et off a)ainst deferred ta* assets Deferred Tax Assets
Pro,isions
et Deerre& Ta' Assets
6e can see Met Cash holds net deferred ta* assets of :$.5 ;0.0 and :.: Million in %$2 %$% and %$$ respecti,ely. 7n the other hand Coca Cola Amatil Ltd has deferred ta* liabilities $92.$ Million in year %$2 $0$.5 Million in %$% and $02.0 Million for %$$. Coca Cola Amatil Ltd discloses deferred ta* specifically in an independent section all components re!uired by AA#' $$% can be seen from its annual report. 6hile Met Cash interprets deferred ta* in the section of @income ta* and not show all stories of deferred ta* for instance details of @&Char)ed(4credited to the income statement as deferred ta* &e*pense(4benefit
11
Rio An(8sis
METCAS6 LT$
2013
2012
2011
*nco+e ta' e',ense
9$.%
$;.0
55.0
Deerre& ta' e',ense-!(nco+e$
5.5
&29.(
%.:
A&ust+ent or ,re/(ous year
&2.;(
&.9(
&2.(
Total Ta' ',ense or te year
$$:.$
9$.5
$:.$
Pro(t or te year attr()uta)le to Parent
%:.
;.
%$.
Pro(t or te year attr()uta)le to on controll(ng (nterest
2.$
5.%
;.
ter Co+,reens(/e *nco+e
2.
&2.0(
&.%(
Total Co+,reens(/e *nco+e or te year ater Deerre& Ta' (+,act
%$%.$
;.9
%0.:
Deerre& Ta' e',ense-!(nco+e$
5.5
&29.(
%.:
Total Co+,reens(/e *nco+e )eore &eerre& ta' (+,act
%:.;
09.9
%9$.%
Long Ter+ De)ts (nterest )ear(ng
90$.
;9.
5%:.9
$:%.%
$220.$
$%.5
5.5
&29.(
%.:
$:92.
$%;5.$
$:2.
u(ty (nclu&(ng C* ater Deerre& Ta' *+,act
Deerre& Ta' *+,act
u(ty (nclu&(ng C* )eore Deerre& Ta' *+,act
1#
$e% o E9ui8 Rio >ebt To B!uity after >eferred Ta* impact
>ebt To B!uity before >eferred Ta* impact
Profit for the year after >eferred Ta* impact >eferred ta* e*pense4&income( Profit for the year before >eferred Ta* impact
90$. $:%.%
;9 $220.$
5%:.9 $%.5
0.463 1
0.730 1
0.573 1
90$. $:92
;9 $%;5.$
5%:.9 $:2.
0.449 1
0.75 1
0.565 1
%;.$ 5.5 %09.;
;5.% &29.( :$.%
%0.5 %.: %9$.
%;.$4$:%.%D$
;5.%4$220.$D$
%0.54$%.5D$
12.87%
7.36%
17.38%
%09.;4$:92D$
:$.%4$%;5.$
%9$.4$:2.D$
12.50%
4.71%
18.55%
%;.$ 4 $2;0 D $
;5.% 4 $%:$%.2 D$
%0.5 4 $%:$.: D$
1.60%
0.78%
2.01%
%09.; 4 $2;0 D $
:$.% 4 $%:$%.2 D$
%9$. 4 $%:$.: D$
1.97%
0.49%
2.18%
Reurn on E9ui8 +eturn on B!uity after >eferred Ta* impact
+eturn on B!uity before >eferred Ta* impact
Ne 5ro: Rio 8P +atio E 8P after Ta* 4 #ales +e,enue D $
8P +atio after >eferred Ta* "mpact
8P +atio before >eferred Ta* "mpact
Ernings 5er S"re Barnin)s Per #hare E Profit for the year 4 8o. of #hares 7utstandin)
8umber of #hares 7utstandin)
55.9
99$.20
9:5.50
BP# after >eferred Ta* "mpact
%;.$ 4 55.9
;5.% 4 99$.20
%0.5 4 9:5.50
Cents 0.24
0.13
0.33
%09.; 4 55.9
:$.% 4 99$.20
%9$. 4 9:5.50
Cents 0.29
0.08
0.35
BP# after >eferred Ta* "mpact
13
14
COCA4COLA AMATIL LT$
.01/
.01.
.011
#4310
64610
$4#$0
In)ome T7 in)(u#ing $e'erre# T7
A16#50B
A1@@10B
A15090B
5ro: 'er T7 'er #e'erre# 7 imp)
;0<=0
2>;<00
>?1<;0
$e'erre# 7 @%ene: * e7pense
A160B
#90
A$150B
5ro: 'er 7 %e'ore #e'erre# 7 imp)
$900
46090
5#030
Long Term $e%s ineres %ering
#-3$$40
#-435@0
#-#01$0
E9ui8 'er $e'erre# T7 Imp)
1-$39@0
#-06350
#-03430
A160B
#90
A$150B
1-$3@#0
#-06640
1-96#@0
5ro: %e'ore In)ome T7
$e'erre# 7 imp) E9ui8 %e'ore $e'erre# T7 Imp)
15
$e% o E9ui8 Rio
#3$$40 C 1$39@ 1
#435@0 C #0635 1<1;0 1
##01$0 C #03430 1<0;. 1
#3$$40 C 1$3@#0 1
#435@ C #06640 1<1? 1
##01$0 C 196#@0 1<1.. 1
@060 A160B
45@00 #90
591@0 A$150B
$900
46090
5#030
:etu+n on uit! a.te+
@060 2 1$39@0 D 100 2<=/
45@00 2 #0635 D 100 ..<.0
591@0 2 #0343 D 100 .?<0?
:etu+n on uit! *e.o+e
$90021$3@#0D 100 2<>2
460902#06640D 100 ..
5#030 2 196#@ D 100 .=<>1
@060 2 50364 D 100 1<=0 $90 2 50364 D 100 1<>
45@0 2 509$4 D 100 ;
591@0 2 4@01# D 100 1.
=/<>?
=.<1//
>?<>=;
P+ot .o+ the !ea+ a.te+
Reurn on E9ui8
Ne 5ro: Rio =P :atio E =P a.te+ a' 2 Sales :eFenue D 100
=P :atio a.te+
Ernings 5er S"re Ernings 5er S"re D 5ro: 'or "e 8er * No< o' S"res Ousn#ing =um*e+ o. Sha+es )utstanding
16
PS *e.o+e
PS a.te+
@060 2 $6359 0<10=
$900 2 $6359 0<10/
45@00 2 $6#133 0<=01
591@ 2 $5956@ 0<?
46090 2 $6#133 0<=0>
5#030 2 $5956@ 0<=;>
CONCLUSION
From abo,e discussion and calculation of the ratios it is clear that in case >TA arises it increases after ta* income and if >TL arises it reduces income after ta*. =owe,er the spirit of incorporatin) deferred ta* asset or deferred ta* liability is that the ta* effect should be included in the year to which it relates or pertains as per Matching Concept stipulated in the International Accounting Standards so that financial statements should reflect the true and fair picture. =ad the deferred ta* impact i.e. >TA or >eferred Ta* >TL is not incorporated could materially affect the financial ratios as computed abo,e whereby the users can be dis)uised and their financial decisions can also be affected. From the ratio analysis it is e,ident that the return on in,estment will reduce when a company has more >TA/s and it doesn/t reflect the true picture of the financial position of the company with respect to real cash flow because of the hi)her ,alue of the assets. "n our case considerin) the effect of >TA Coca-Cola Amatil Ltd has a ,ery little effect on the >ebt to B!uity +eturn on B!uity 8et Profit and Barnin)s per #hare. =owe,er Metcash Ltd has a si)nificant effect. 'i) companies ha,e more employees and keepin) that ,iew under "A#$; they need to desi)n more post-employment benefit plans and they make pro,isions for it. There are always )ood days and bad days in the company cycle and they can moderate the earnin)s by increasin) or decreasin) the ta* liability to bolsters the financial operations of the company in that cycle. =owe,er in the li)ht of ratio analysis the amount of >TA >TL may create a si)nificant difference1 i.e. a nominal amount of >TA >TL does not affect any rele,ant ratios because it does not materially affect the Profit After Tax. =owe,er if there is si)nificant amount in,ol,ed for >TA or >TL then it materially affect the rele,ant ratios because it materially affects the After Tax Profit .
1$
Re'eren)es Australia Accountin) #tandard 'oard. &%$2(. "ncome ta*es%$2. +etrie,ed from http44www.aasb.)o,.au4admin4file4content$04c;4AA#'$$%G9-GC7MPoct$G$-$$.pdf Australia Accountin) #tandard 'oard. &%$(. About the AA#' &%$(. +etrie,ed from http44www.aasb.)o,.au4About-the-AA#'4For-students.asp* Australia Accountin) #tandard 'oard. &%$(. +eco)n ition of >eferred Ta* Assets for ?nrealised Losses &%$(. +etrie,ed from http44www.aasb.)o,.au4admin4file4content$04c;4ACCB>%02G5-$.pdf
Coca Cola Amatil %$2 Annual +eport #ydney ,iewed $2 7ctober %$ file444H4pro. <%acct.<%e*t4semester<%%<%%$4Assi)nments4company<%accountin)4Coca<%Cola <%Amatil4Annual<%+eportGA<%%$2.pdf
Coca Cola Amatil %$% Annual +eport #ydney ,iewed $2 7ctober %$ file444H4pro. <%acct.<%e*t4semester<%%<%%$4Assi)nments4company<%accountin)4Coca<%Cola <%Amatil4Annual<%+eport<%-<%%$%.pdf
Coca Cola Amatil %$2 Annual +eport #ydney ,iewed $2 7ctober %$ file444H4pro. <%acct.<%e*t4semester<%%<%%$4Assi)nments4company<%accountin)4Coca<%Cola <%Amatil4Annual<%+eport<%-<%%$$.pdf
>elottie n.d. "A# $%-"ncome ta*es ,iewed $ 7ct %$ http44www.iasplus.com4en4standards4ias4ias
%$1@
Metcash %$$ Annual +eport #ydney ,iewed $2 7ctober file444H4pro.<%acct. <%e*t4semester<%%<%%$4Assi)nments4company <%accountin)4Metcash4Annual+eport%$$.pdf
Metcash %$% Annual +eport #ydney ,iewed $2 7ctober file444H4pro.<%acct. <%e*t4semester<%%<%%$4Assi)nments4company <%accountin)4Metcash4Annual+eport%$%.pdf
Metcash %$2 Annual +eport #ydney ,iewed $2 7ctober file444H4pro.<%acct.<%e*t4semester<%%<%%$4Assi)nments4company <%accountin)4Metcash4Annual+eport%$2.pdf
+ouillard A %$2 I >eferred Ta* Assets and Liabilities J "n,ested Capital Ad3ustment/ 8ew Constructs blo) web blo) post % Au)ust ,iewed $0 7ctober %$ http44blo).newconstructs.com4%$2454%4deferred-ta*-assets-and-liabilities4
#tephens M %0 Ta* Bffect Accountin) Toolkit Thompson ,iewed $0 7ctober %$ http44www.thomsonreuters.com.au4media4)uides4cpd4teatGu).pdf
19
