CORPORATE ACCOUNTING report

Document Type:Thesis

Subject Area:Accounting

Document 1

The two companies under study for the three comparative years are the Westpac Banking Corporation and National Australia Bank Limited to understand their performance through the different financial statements. The review will develop an understanding of the financial reports of the two companies in the same industry for the last three years to ascertain the organization of the corporate accounting. Table of Contents Executive Summary 2 Introduction 4 Analysis of the Financial Statements 5 Owners’ Equity 5 Cash Flow Statement 6 Other Comprehensive Income 7 Accounting for Corporate Income Tax 8 Conclusion 10 References 11 Introduction The paper takes an analysis of the banking and financial services industry to understand the performance status of two leading institutions in the Australian market. The two entities, Westpac Banking Corporation and National Australian Bank have demonstrated their ingenuity and capacity to operate strategic models which have guided their performance in yielding market relevance from time to time. The evolution towards deploying excellent market performance despite the challenging internal and external business environment cannot be gainsaid for the two banks. The banks have managed to transform lives of people both directly and indirectly in the diverse market segments within their reach. Westpac is credited with the honour of being one of the first banks in the history of Australia and has managed to consistently create value for their markets. Governor Lachlan Macquarie founded the masterpiece as Bank on South Wales in 1817 and outperformed their competitors through strategic moves such as merger with Commercial Bank of Australia to coin the Westpac Bank (Annual reports | Westpac, 2018).

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The institution has delivered the best for their extensive consumer base evident from the exponential growth witnessed over a short of time due to the impetus it ways on the transformative agenda. The commitment to advance better services has seen the entity enhance their branch network to 1, 251 across the world with an unmatched human resource strategy controlling around 35, 096 employees as at 2017 (Annual reports | Westpac, 2018). d. The corporation offers business, consumer and wholesale banking with excellent services when it comes to insurance and wealth management (Annual Reports, n. d. The company has a dedicated workforce of 35,063 to offer the best for the growing market to enhance their profitability across market segments. The growth trajectory of the bank is largely based on their understanding of the different markets they venture into with a commitment to transform lives and create consumer value through their engagement.

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Retained profits which is part of the owners’ equity for Westpac Corporation Limited relates to the net profit earned progressively by the company in their prior operations over the years. The reserves on the other hand represent the amount of resources that have been set aside to undertake a specific purpose earmarked by the organization. Non- Controlling Interest is the gains attained by the companies by virtue of being a subsidiary to an organization they do not have control over their operations. The changes in both the National Australian Bank and Westpac Banking Corporation are indicative of a cumulative growth in owners’ capital in the retained earnings and reserves. The changes in equity for both companies is due to the dividends paid out by the organization together with dividend reinvestment plans that reduce the gains realized while gains such as dividends received increase the owners’ equity.

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The profit or loss is then adjusted by appropriating the different changes in working capital items, depreciation and amortization. Moreover, the cash flow is divided into operating activities which relates to movement of cash in the course of the organizations usual course of trading. The net cash inflows from operating activities are ascertained upon analysis of the inflows and outflows in the course of the entities trade in the year under review to establish changes. Net cash inflows from investing activities relate to instances where in the spirit of furthering an organizations business, an entity might commit funds through outflows to invest in different projects while inflows resulting from sale of investment projects. The financing activities relate to the financial resources deployed within the organization to boost their capacity through investor or debt financing within the organization in operations.

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The cash and cash equivalent attributed to the organization in 2015 was $ 14, 770 million that increased to $ 17, 015 million in 2016 before the steady rise in 2017 to $ 18, 397 demonstrating the growth trajectory established by the organization in the financial services industry. Other Comprehensive Income The two companies reported other incomes for their business which could not be regarded as incomes from their core business since they are not realized at the reporting date. The gains, expenses and loses recognized as other comprehensive income in compliance with the generally accepted accounting principles and international financial reporting standards are excluded from the net income (Black, 2016, 21). The other comprehensive income in both companies is later added to the net income. The items are not recognized in the profit and loss statements of both companies since they have not been realized yet making it imperative not to include them as gains in recognition of the concept of prudence accounting.

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Deferred taxes relate to a situation in which organizations experience variances in their tax appropriation for a given fiscal period. For instance, a deferred tax asset will occur is an entity experiences differences between the book taxes from the income tax specified in an accounting year. Deferred tax assets involve the reduction when it comes to appropriation of future taxes leading to a prepayment since the taxes are paid in advanced assessed against the book income that is acknowledged on a future date (Hanna, Li, and Shaw, 2018, 9). On the other end, deferred tax liability refers to a situation where the reported book tax liability differs from the real world charged tax hence creating an obligation for the entity (Morris, 2017, 11). The recognition and recording of the deferred taxes and liabilities in the balance sheet for both companies represents the adjustments experienced in a given year to capture the temporal differences arising from different recorded transactions.

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Moreover, other comprehensive income of Westpac Banking Corporation recognized the deferred tax items as the available for sale securities together with defined benefit deficit. The net deferred tax asset for Westpac Banking Corporation decreased from $ 1, 351 million in 2016 to $ 1, 112 million in 2017. The amounts that were appropriated as deferred tax liabilities for Westpac Banking Corporation included the financial instruments, financial lease transactions, property plant and equipment, life insurance, and cash flows hedges. The net deferred tax liabilities reduced from $ 36 million in 2016 to $ 10 million in 2017 for the organization. The deferred tax assets in National Australian Bank and Westpac Banking Corporation comes in handy after being recorded in the entities transactions since they go a long way into reducing the underlying tax liabilities. The quality of financial reporting lies on the presentation model applied together with accuracy which drives sense into relying on the information presented to influence policy and action for growth.

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National Australian Bank and Westpac Banking Cooperation have presented excellent financial statements that focus on providing explicit roadmap for stakeholders to understand the business performance from time to time. References Annual reports | Westpac. February 15). Retrieved from https://www. Other comprehensive income: a review and directions for future research.  Accounting & Finance, 56(1), pp. Blaylock, B. Gaertner, F. B. D. Li, Z. and Shaw, W. Banks’ deferred tax assets during the financial crisis.  Review of Quantitative Finance and Accounting, pp.  Financial Accounting: a user perspective. Wiley Global Education. Morris, J. L. Classification of Deferred Tax Assets and Deferred Tax Liabilities: An Evaluation of FASB's Attempt at Standards Simplification.

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