The key objective of this assignment is to analyse
the annual financial report of Industria Reit ltd and comment on the same. The
report will be recognizing different kind of equities which are depicted in the
annual financial reports of Industria Reit and also access the reason for the
changes in the value of equity in the financial statements. The report will be
providing more emphasis on the treatment of taxes of the company and analyse
the tax expenses of the company in contrast with figures of previous year. The
report will then be concluding with how the company will be handling its taxes
and also deal with the current and deferred tax expenses in the company.
Table of Contents
Overview of the Company. 3
i. Types of Equity. 3
ii. Tax Expenses of Industria Reit 4
iii. Tax expenses and Tax Policy of Industria Reit 4
iv. Deferred Tax Assets/Liabilities of Industria Reit ltd. 5
v. Income Tax Payable. 6
vi. Difference in Income Tax Expenses. 6
vii. Insights of Income Tax of Industria Reit ltd. 6
Accounting is defined as the process of preparing of financial reports of a
company in a systematic and presentable manner which can display the financial
performance of the particular in that particular year (DeBusk 2012). The
financial reports of any organisation consist of a Consolidated statement of
profit and loss, a consolidated Balance sheet and a Consolidated Balance Sheet.
The main purpose of a financial report is to show the financial performance of
the company in a particular year. In other words a financial report is a
summarised report which contains the financial data of a company. The financial
reports are prepared following certain established principles, standards and
Overview of the Company
Reit is an Australian listed company which is engaged Real Estate investment
business. Its headquarters is situated in Australia. The company has businesses
in Melbourne, Sydney and Adelaide. The total valuation of the company as per
recent estimates is around $ 638 million (Industriareit.com.au.2018).
Types of Equity
represents the different kind of stocks and securities which exists in the
stock market and such equities give holders of the same, ownership rights in
the company (Favilukis 2013). Equity is described as a security or a group of
securities which gives the owner of such securities, right of ownership over
different types of equity as shown in the balance sheet are given below:
Contributed Equity: This means the equity capital of the company
which is contributed by the public when shares are issued by the company. This
refers to the capital which is collected from the issue of shares by the
company (Damar, Meh and Terajima 2013). In other words it is a figure which
shows all the stock which the investors invest in during a particular year in
the company. The contributed equity of the company was $165674000 in 2015 which
decreases to amount of $165096000 in 2016 which shows that there is a decrease
in contributed equity from the past year. The reason for decrease in the
contributed equity from last year is due to the buyback programs which the
business has undertaken.
Retained Earnings and Accumulated losses:
Retained earning refers to that part of profits which are kept aside by the
business for either reinvesting in business or distribute it as profits. Accumulated
losses refer to a situation where the company does not have profits and has
incurred loss over some years which has accumulated over the years. In such a
case retained earnings is depleted due to set offs with losses and the losses
are accumulated and shown in the balance sheet until these are set off and
positive retained earnings can be shown again (Gul et al. 2012). The company has accumulated losses of $384000 in 2015
and this becomes positive figure and shows retained earnings of $10922000.
Tax Expenses of Industria Reit
company does have any current tax expenses in the year 2016 which was in the
$74000 in 2015. The company follows the relevant tax policies which is as
required by AASB. The tax expense figure as shown in the financial reports of
Industria Reit is divided in deferred tax expenses and current tax expenses.
The deferred tax of Industria Reit which is as $ 78000 in 2015 and $ 234000 in
Tax expenses and Tax Policy of Industria Reit
The tax expenses
as shown by the financial report of the company follows the relevant tax laws
and rules which are prevailing in the country. There are no current tax
expenses of the company for the present year 2016 and only has a deferred tax
benefit of $ 234000. The current tax expenses of 2015 was $ 74000 and the
deferred tax was $ 78000. The company
charges taxes at the rate of 30% as per the relevant rules of Australia. The
company does not have any tax expenses for the current year as the profit which
the company earns from ongoing operations amounts to $ 31027000 and the company
also has control over a non taxable trust entities which has a loss of $ 31917000
which will be set off. After the set off is done the company has a net loss
figure of $ 890000. The tax rate is charged at the rate of 30% on the figure of
$ 890000 which results in the tax benefit figure of $ 267000 as shown in the
notes of accounts in the financial statement of Industria Reit. Industria Reit
Ltd follows the corporate tax rules of the country therefore the figure of
current tax expenses shown are genuine as per the tax rules.
Deferred Tax Assets/Liabilities
tax asset arises when the company has paid more tax than what was initially
required to be paid by the company. For such extra tax paid the company can
claim tax relief in near future. This future tax relief which the company will
receive is treated as an asset of the company (Chytis 2015). On the other hand,
deferred tax liabilities are completely reverse of deferred tax assets and is
shown in the liability side. This occurs when the tax paid by the company is
less than the actual tax liability which the company has to actually pay as per
the company’s net income.
income tax is to be provided on all non permanent differences which arise on reporting
date between the tax charged on assets and liabilities and their respective
amounts for financial reporting purpose as per the company’s policy (Kasipillai
and Mahenthiran 2013). The deferred tax liability of the business for the year
2015 is $ 2069000 and the same has increased to $ 2303000 in 2016. The main
objective of recording deferred tax assets and liabilities is to acknowledge
the difference in timing of when the tax was actually recognized in the
financial statements and when the tax becomes effective. Another reason for
which deferred tax assets and liabilities arises is due to difference of
depreciations amount in tax and accounts as both follow different methods and
different rates also.
Income Tax Payable
is no current tax asset or liability in the balance sheet as shown in the
financial statements for the year 2016. However there was income tax
recoverable of $ 82000 in the year 2015. This figure is shown in the other
assets in the balance sheet for the year 2015. The notes to accounts show that
other assets contain an income tax recoverable of $ 82000 for the year 2015.
Difference in Income Tax
cash flow statement shows that there is tax refund of $ 71000 in 2016 and the
tax paid in 2015 was $ 437000. There is a difference between the figures shown
in cash flow statement and figures shown in profit and loss account. The company may be following quarterly tax
payments or half yearly tax payments system (Tang and Firth 2012). The company
may have just followed this policy and paid for a quarter or half year and paid
tax and thus the variation may have occured. Another reason may be that the
income tax expense as shown in the current year also contains part of deferred
tax assets which might have caused the variation.
Insights of Income Tax of Industria Reit ltd
financial reports analysis of Industria Reit ltd shows that the company follows
the AASB 112 in order to calculate the tax of the company. The company
maintains deferred tax liabilities which can be used to adjust the taxes which
are to be paid in future. Deferred income tax assets are recognised in the
financial statements for all deductible temporary differences, carry-forward of
unused tax assets and unused tax losses. The company follows tax consolidation
structure for its operating business and non taxable trust.
main aim of this assignment is to analysis the annual financial report of
Industria Reit. The assignment will be covering the different types of equity
which the company has shown in the balance sheet and also cover the areas of
how much tax the company pays and also if there is any deferred tax or current
tax assets in the financial report of the company. The report also states the tax rate at which
the company is charged with and the reasons as to why the tax paid as shown in
cash flow statement differs from the tax payments in the profit and loss
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add value to the organization. Journal of Corporate Accounting &
Finance, 23(3), pp.35-41.
Industriareit.com.au. (2018). Industria
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Favilukis, J., 2013. Inequality, stock
market participation, and the equity premium. Journal of Financial
Economics, 107(3), pp.740-759.
Damar, H.E., Meh, C.A. and Terajima, Y.,
2013. Leverage, balance-sheet size and wholesale funding. Journal of
Financial Intermediation, 22(4), pp.639-662.
Gul, S., Sajid, M., Razzaq, N., Iqbal, M.
and Khan, M.B., 2012. The relationship between dividend policy and
shareholders’ wealth. Economics and Finance Review, 2(2),
Tang, T.Y. and Firth, M., 2012. Earnings
persistence and stock market reactions to the different information in book-tax
differences: Evidence from China. The International Journal of
Accounting, 47(3), pp.369-397.
Chytis, E., 2015, February. Deferred Tax
Assets from unused Tax Losses under the prism of Financial Crisis. In International
Conference on Business & Economics of the Hellenic Open University, Athens.
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Kasipillai, J. and Mahenthiran, S., 2013.
Deferred taxes, earnings management, and corporate governance: Malaysian
evidence. Journal of Contemporary Accounting & Economics, 9(1),