HI5020 The Fields of Horticulture
In this section, go to your companies’ annual reports and save to your computer your firms’ latest annual reports consecutively for last three years. Do not use your companies’ interim financial statements or their concise financial statements. Please read the financial statements (balance sheet, income statement, statement of changes in owner’s equity, cash flow statement) very carefully. Also please read the relevant footnotes of your companies’ financial statements carefully and include information from these footnotes in your answer.
You need to do the following tasks:
OWNERS EQUITY
(i) From your companies’ financial statements, list each item of equity and write your understanding of each item. Discuss any changes in each item of equity for your firms over the past year articulating the reasons for the change.
(ii) Provide a comparative analysis of the debt and equity position of the two firms that you have selected.
CASH FLOWS STATEMENT
(iii) From the financial statement of your chosen companies, list each item reported in the cash flows statement and write your understanding of each item. Discuss any changes in each item of cash flows statement for your companies over the past years articulating the reasons for the change.
(iv) Provide a comparative analysis of your companies’ three broad categories of cash flows (operating activities, investing activities, financing activities) and make a comparative evaluation for three years.
(v) Also provide a comparative analysis of the two companies that you have selected explaining the insights that you can get from the comparative analysis.
OTHER COMPREHENSIVE INCOME STATEMENT
(vi) What items have been reported in the other comprehensive income statement for each company
(vii) Why have these items not been reported in Income Statement/Profit and Loss Statements
(viii) Provide a comparative analysis of the items shown in the other comprehensive income statement section for the two companies. If these items were included in the income statement / profit and loss statements of each company, how would the profit attributable to shareholders of the company be affected
(ix) Should other comprehensive income be included in evaluating the performance of managers of the company.
ACCOUNTING FOR CROPORATE INCOME TAX
(x) What are the tax expenses shown in the latest financial statements of the two companies that you have selected
(xi) Calculate the effective tax rate for both companies that you have selected.Effective tax rate is calculated as (income tax expense / earnings before tax). Which one of the companies has the higher effective tax rate
(xii) Comment on deferred tax assets/liabilities that is reported in the balance sheetarticulating the possible reasons why they have been recorded.
(xiii) Was there any increase or decrease in the deferred tax assets or in the deferred tax liability reported by each of your selected companies.
(xiv) Please calculate the cash tax amount for both companies using the book tax amount, changes in the deferred tax assets and deferred tax liability (please do your own research for your better understanding of these concepts and the method of calculating the cash tax amount the book tax amount.)
(xv) Calculate the cash tax rate for both companies. Which company has higher cash tax rate (Please do your own research to familiarise yourself with how to calculate cash tax rate).
(xvi) Why is the cash tax rate different from the book tax rate
Answer:
The second company chosen is Select Harvests which is the country’s biggest vertically integrated company that supplies the health food and also has its wings in the fields of Horticulture, Orchard Management, Processing, Sales and Marketing. This would help in the benefitting of the various different capability throughout the value in chain. The company is the largest growers of almond and is also a leading manufacturer, processor and the marketer of the nut products.
The company has many orchards, located in Victoria, South Australia and the New South Wales. The portfolio of the company sets across about 4,000 hectares of land.
The brands of the company provides a variety of almonds and other such natural products (Select harvests, 2018).
Owners’ equity:.
Part i:
The following are the desired statements:
Seafarms:
|
Owner's equity: | |||||
|
|
(Amounts in $) |
|
|
| |
|
Particulars |
2017 |
2016 |
Understanding |
Change |
Change in % |
|
| ="126">
|
|
|
|
|
|
Contributed equity |
1015,12,627.00 |
790,21,152.00 |
this is the amount of the money that each shareholder has invested in the company |
could be due to new capital/investment by the shareholders |
28.46% |
|
Other reserves |
52,52,773.00 |
52,52,773.00 |
this is the amount of money that the company has put aside from the net profits earned in the previous years for some contingency that may arise in future or for future unforseen circumstances |
could be due to addition of previous years losses |
0.00% |
|
Retained earnings |
-740,46,780.00 |
-542,71,317.00 |
these are the part of the profits earned in the previous years after paying off dividend etc |
could be due to previous years losses being transferred in this account |
36.44% |
|
|
|
|
|
|
#DIV/0! |
|
|
|
|
|
|
|
|
Total |
327,18,620.00 |
300,02,608.00 |
|
|
|
|
|
|
|
|
|
|
Select Harvests:
|
Particulars |
2017 |
2016 |
Understanding |
Change |
Change in % |
|
|
|
|
|
|
|
|
Contributed equity |
1,81,164.00 |
1,78,553.00 |
this is the amount of the money that each shareholder has invested in the company |
could be due to new capital/investment by the shareholders |
1.46% |
|
Reserves |
11,602.00 |
11,168.00 |
this is the amount of money that the company has put aside from the net profits earned in the previous years for some contingency that may arise in future or for future unforseen circumstances |
could be due to addition of previous years losses |
3.89% |
|
Retained earnings |
84,853.00 |
1,01,180.00 |
these are the part of the profits earned in the previous years after paying off dividend etc |
could be due to previous year’s profits/losses being transferred in this account |
-16.14% |
|
|
|
|
|
|
|
|
Total |
2,77,619.00 |
2,90,901.00 |
|
|
|
Part ii:
The following is the desired analysis:
|
|
Seafarmers |
Select Harvests |
|
Particulars |
2017 |
2017 |
|
|
|
|
|
Contributed equity |
1015,12,627.00 |
1,81,164.00 |
|
|
|
|
|
Reserves |
52,52,773.00 |
84,853.00 |
|
Retained earnings |
-740,46,780.00 |
- |
|
|
|
|
|
|
|
|
|
Total |
327,18,620.00 |
2,66,017.00 |
|
|
|
|
Cash flow statement:
Part iii:
Seafarms:
|
Cash flow statement: | ||||
|
|
(Amounts in $) |
|
| |
|
Particulars |
2017 |
2016 |
Understanding |
Change in % |
|
|
|
|
|
|
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
Receipts from customers |
366,79,784.00 |
249,41,098.00 |
these are the amounts that the company has received from its customers from the sale of its goods or services |
47.07% |
|
Payments to suppliers and employees |
-504,81,890.00 |
-346,54,732.00 |
these are the amounts that have been paid by the company to the suppliers that supply the goods that they ultimtaley sell to its customers |
45.67% |
|
Interest paid |
-10,10,193.00 |
-4,70,768.00 |
this is the sum of the interest paid on the borrowed capital by the company |
114.58% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
-148,12,299.00 |
-101,84,402.00 |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
Payments for property, plant and equipment |
-28,17,666.00 |
-11,53,848.00 |
these are the amounts that are made by the company towards the property, plant and equipment |
144.20% |
|
Proceeds from/(Payments for) other financial assets |
3,13,190.00 |
-53,442.00 |
these are the amounts that are made/received by the company towards the financial assets |
-686.04% |
|
Loans to related parties |
- |
-74,190.00 |
amounts given to the outsiders as loan |
-100.00% |
|
Proceeds from sale of non-current assets held for sale |
- |
12,80,000.00 |
these are the amounts that are received by the company towards the sale of non-current assets |
-100.00% |
|
Proceeds from sale of available-for-sale financial assets |
- |
2,067.00 |
these are the amounts that are received by the company towards the sale of securities |
-100.00% |
|
Interest received |
62,754.00 |
72,888.00 |
amounts received by the company towards the interest from loans given to outsiders |
-13.90% |
|
|
|
|
|
|
|
Net cash used in investing activities |
-24,41,722.00 |
73,475.00 |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issues of shares and other equity securities |
224,91,475.00 |
94,21,234.00 |
amounts received by the company from the sale of equity shares |
138.73% |
|
Repayment of borrowings |
-16,46,148.00 |
-30,58,000.00 |
amounts paid to the outsiders for the loans taken from them |
-46.17% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities |
208,45,327.00 |
63,63,234.00 |
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents |
35,91,306.00 |
-37,47,693.00 |
Net cash from aggregate of the activities in the year |
|
|
Cash and cash equivalents at start of period |
82,83,532.00 |
120,31,225.00 |
Cash in the start |
|
|
Cash and cash equivalents at end of period |
118,74,838.00 |
82,83,532.00 |
Net cash at the end of the year |
|
|
|
|
|
|
|
Select Harvest:
|
Particulars |
2017 |
2016 |
Understanding |
Change |
Change in % |
|
|
|
|
|
|
|
|
Cash flows from operating activities: |
|
|
|
|
|
|
Receipts from customers |
2,49,969.00 |
3,04,306.00 |
these are the amounts that the company has received from the customers |
-54,337.00 |
-17.86% |
|
Payments to suppliers and employees |
-2,11,212.00 |
-2,05,688.00 |
these are the amounts paid to the local vendors of the company |
-5,524.00 |
2.69% |
|
Interest received |
31.00 |
294.00 |
this is the amount of the interest received from the loans given to outsiders |
-263.00 |
-89.46% |
|
Interest paid |
-5,028.00 |
-5,156.00 |
this is the amount of the interest paid on the loans taken from outsiders |
128.00 |
-2.48% |
|
Income tax paid |
-29,022.00 |
-890.00 |
amount paid towards the income taxes |
-28,132.00 |
3160.90% |
|
|
|
|
|
|
|
|
Net cash inflow from operating activities |
4,738.00 |
92,866.00 |
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
Proceeds from Government grants |
2,805.00 |
4,118.00 |
amounts received from the government as grants |
-1,313.00 |
-31.88% |
|
Proceeds from sale of property, plant and equipment |
12.00 |
9,800.00 |
amounts received from the sale of property, plant and equipment |
-9,788.00 |
-99.88% |
|
Proceeds from sale and leaseback transaction |
- |
34,922.00 |
amounts received from the sale of leaseback property |
-34,922.00 |
-100.00% |
|
Payment for water rights |
-4,540.00 |
-9,591.00 |
amounts paid towards the water rights |
5,051.00 |
-52.66% |
|
Payment for property, plant and equipment |
-23,581.00 |
-32,717.00 |
amounts paid towards the purchase of property, plant and equipment |
9,136.00 |
-27.92% |
|
Acquisition of almond orchards |
-21,838.00 |
-5,285.00 |
amount paid towards the acquisition of almond orchards |
-16,553.00 |
313.21% |
|
Tree development costs |
-9,646.00 |
-4,408.00 |
amount paid towards the tree development costs |
-5,238.00 |
118.83% |
|
|
|
|
|
|
|
|
Net cash outflow from investing activities |
-56,788.00 |
-3,161.00 |
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
Proceeds from sale and leaseback transaction |
- |
28,362.00 |
amounts received from the sale of lease back transaction |
-28,362.00 |
-100.00% |
|
Proceeds from borrowings |
2,09,250.00 |
1,97,000.00 |
amounts received from borrowing money from outside |
12,250.00 |
6.22% |
|
Repayments of borrowings |
-1,28,750.00 |
-2,79,608.00 |
amounts paid towards the repayment of the borrowings |
1,50,858.00 |
-53.95% |
|
Repayments of finance leases |
-3,962.00 |
-1,911.00 |
amounts paid towards the finance lease |
-2,051.00 |
107.33% |
|
Dividends on ordinary shares, net of Dividend Reinvestment Plan |
-22,964.00 |
-31,903.00 |
amounts paid towards the reinvestment plan |
8,939.00 |
-28.02% |
|
|
|
|
|
|
|
|
Net cash (outflow)/inflow from financing activities |
53,574.00 |
-88,060.00 |
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents |
1,524.00 |
1,645.00 |
Net cash from aggregate of the activties in the year |
-121.00 |
-7.36% |
|
Cash and cash equivalents at start of period |
-3,455.00 |
-5,100.00 |
Cash in the start |
1,645.00 |
-32.25% |
|
Cash and cash equivalents at end of period |
-1,931.00 |
-3,455.00 |
Net cash at the end of the year |
1,524.00 |
-44.11% |
|
|
|
|
|
|
|
Part IV:
The following is the desired comparative statement:
|
|
Seafarms |
Select Harvest | ||||
|
Particulars |
2017 |
2016 |
2015 |
2017 |
2016 |
2015 |
|
|
|
|
|
|
|
|
|
Net cash from operating activities |
-148,12,299.00 |
4,738.00 |
-101,84,402.00 |
4,738.00 |
92,866.00 |
30,399.00 |
|
Net cash from financing activities |
208,45,327.00 |
53,574.00 |
63,63,234.00 |
53,574.00 |
-88,060.00 |
60,420.00 |
|
Net cash from investing activities |
-24,41,722.00 |
-56,788.00 |
73,475.00 |
-56,788.00 |
-3,161.00 |
-99,932.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
35,91,306.00 |
1,524.00 |
-37,47,693.00 |
1,524.00 |
1,645.00 |
-9,113.00 |
Part v:
In respect of Seafarms, it could be said that the company could be facing a cash crunch which could be seen from the negative amount of the cash flows in 2015 but the same has then improved over the years.
In respect of Select Harvest, it could be said that the company could be facing a cash crunch which could be seen from the negative amount of the cash flows in 2015 but the same has then improved over the years.
Also, when comparing the 2, the following could be said:
- In year 2017, Seafarms was better in terms of cash in hand
- In year 2016, Select Harvest was better in terms of cash in hand
- In year 2015, none is better
Other comprehensive income statement:
Part vi:
Seafarms:
|
Statement of comprehensive income | |||
|
|
(Amounts in $) |
| |
|
Particulars |
2017 |
2016 |
|
|
|
|
|
|
|
Profit/(Loss) for the period |
-197,75,463.00 |
-183,60,319.00 |
|
|
Total comprehensive loss for the year/period is attributable to: Owners of Seafarms Group Limited |
-197,75,463.00 |
-183,60,319.00 |
|
Select Harvest:
|
Statement of comprehensive income | |||
|
|
(Amounts in $ in millions) |
| |
|
Particulars |
2017 |
2016 |
|
|
|
Contributed Equity |
Reserves |
Retained Earnings |
|
Profit/(Loss) for the period |
- |
- |
9,249.00 |
|
Other comprehensive loss |
|
205.00 |
33,796.00 |
|
|
|
|
|
|
Total comprehensive income for the year |
- |
205.00 |
43,045.00 |
|
|
|
|
|
The company does not have any comprehensive income.
Part vii:
The other comprehensive income comprises of the items that as such do not have an effect on the balance sheet. But then it is also true that the same cannot be reported in the income statement of the company. These are the changes that are reported in the statement of comprehensive income with all of the other amounts from the income statement.
Merely due to the reason that the other comprehensive income has no effect on the net income, that would lead to a cause in the change in the retained earnings, shareholder’s equity, etc.
The example include unrealised gains or losses, foreign currency translation adjustments, unrealised gains or losses on the investments etc. (Accounting coach, 2018).
Part viii:
The following is the desired statement:
|
|
Seafarmers |
Select Harvests |
|
Particulars |
2017 |
2017 |
|
|
|
|
|
Comprehensive income |
-197,75,463.00 |
- |
If these income form the part of the profit and loss statement, then the company’s profit earned during the year would increase. Which would in turn benefit the shareholders. But the company shall be at a loss since it will have to pay taxes on them.
Part ix:
The other comprehensive income comprises of the items that as such do not have an effect on the balance sheet. But then it is also true that the same cannot be reported in the income statement of the company. These are the changes that are reported in the statement of comprehensive income with all of the other amounts from the income statement.
Merely due to the reason that the other comprehensive income has no effect on the net income, that would lead to a cause in the change in the retained earnings, shareholder’s equity, etc.
The example include unrealised gains or losses, foreign currency translation adjustments, unrealised gains or losses on the investments etc.
So, it would not be fair to record these in the income statement.
Accounting for corporate income tax:
Part x:
The following are that tax expense that are shown in the financial statements of the 2 companies:
|
|
Seafarmers |
Select Farmers |
|
Particulars |
2017 |
2016 |
|
|
|
|
|
Income taxes |
62,69,297.00 |
2,729.00 |
The companies have reported the income taxes in their financial statements that have been paid in by the company on the revenue that it has generated during the ordinary course of trade.
Part xi:
The following is the desired table:
|
|
Effective tax rate | |
|
|
Seafarmers |
Select Farmers |
|
Particulars |
2017 |
2016 |
|
|
|
|
|
Effective tax rate: |
-46% |
23% |
|
|
|
|
|
Income taxes |
62,69,297.00 |
2,729.00 |
|
Earnings before taxes |
-135,06,166.00 |
11,978.00 |
|
|
|
|
Since Seafarms has reported a loss in its financial statements, hence the effective tax rate is negative for it.
Part xii:
Deferred tax assets are the assets that are allowable as an expense for the company in the future periods. These are the expenses that are disallowed during the current year of the company due to its timing difference (Taxmann, 2018).
Part xiii:
In respect of Woolworth, there has been an increase in the amount of the deferred tax assets.
In respect of Wesfarmers, there has been an increase in the amount of the deferred tax assets.
Part xiv:
The following is the desired computation:
|
Particulars |
Seafarms |
Select Harvest |
|
|
|
|
|
|
|
Net income |
-197,75,463.00 |
9,249.00 |
|
|
Less: deferred tax assets |
38,51,000.00 |
30,591.00 |
|
|
|
|
|
|
|
Income on which taxes would have been paid |
-236,26,463.00 |
-21,342.00 |
|
|
|
|
|
|
Part xv:
The following is the desired table:
|
Particulars |
Seafarms |
Select Harvest |
|
|
|
|
|
|
|
Income tax provision |
- |
- |
|
|
Increase in deferred tax assets |
126.10 |
- |
|
|
|
|
|
|
|
Current income taxes |
126.10 |
- |
|
|
Other income |
- |
2,161.00 |
|
|
Taxes paid on other income |
- |
497.03 |
|
|
Unlevered cash taxes |
126.10 |
-2,658.03 |
|
|
EBITA |
-197,75,463.00 |
11,978.00 |
|
|
|
|
|
|
|
Cash tax rate |
0.00% |
-22.19% |
|
|
|
|
|
|
In case of Seafarms, since the company has reported a loss during the year, hence the cash rate is 0% and in the case of Select Harvest, since there are no current year’s income taxes, deferred taxes, hence, the cash rate is negative. The company Select Harvest has negative unlevered cash taxes and hence, the final result which is the cash tax rate is also negative.
Part xvi:
Cash tax rate is different from the book tax rate since the companies always pay less taxes than what becomes due.
Conclusion
Both these companies that have bene undertaken for review have represented the transactions that have been entered into during the year in the utmost beneficial way. But since Seafarms has reported a loss, it needs to have a discussion with regard to the improvement of its affairs so that either more revenue could be generated or expense could be decreased.
In respect of equity, Seafarms has more investment made from the outsiders when compared with Select Harvest. In respect of comprehensive income, Seafarms only has such a statement reported in its financial statement. In terms of cash flows, Seafarms seems to be better in term of cash in hand.
References:
AccountingCoach.com. (2018). What is other comprehensive income? | AccountingCoach
Harvests, S. and Harvests, S. (2018). Our Company | Select Harvests.
Difference between Deferred Tax Asset (DTA) and Deferred Tax Liability (DTL)
Martin, F. (2018). About Us | Seafarms Group Limited. [online] Seafarms Group Limited.
Annual report 2017.
Annual report 2016.
Annual report 2015.
.Annual report 2017.
Asx.com.au. (2018). The official list.
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