Analysis And Comparison Of Beach Energy And AGL Energy Limited Financial Statements Essay.

Discuss about the HI5020 Corporate Accounting Companies.

Equity Section of the Balance Sheet

It is necessary in all the business that the financial information should be presented in the proper and appropriate manner so that the accuracy can be maintained within the organization. This information is necessary as it helps the managers of organization in taking the strategic decisions for the organization. With this the report will also the comparative analysis of the various elements which are present in the cash flow statement.The analysis of the comprehensive income statement is also done as it will enable in understanding the variations between thelast years data and the current financial year. The cash tax rates are also evaluated with the effective tax rates so that the actual taxable income of the organization can be determined. These all the adjustments are done in accordance with that of the Beach energy and AGL energy Limited which deals in the same industry.

I).There are various items which are listed in the Beach Energy and AGL energy Limited owner’s equity section of the balance sheet.

Contributed Equity:

It is determined as the amount of cash and is also the one of element of the total equity which is recorded by the organization in their financial accounts (AGL Energy Limited, 2017). It is also termed as the paid up capital which in other words can be determined as the amount of the total assets and the cash that is given by the shareholders to the organization or the firms in exchange of stock (Beach Energy Limited, 2017).

Reserves:

It can be defined as the amount which shows the credit balance and is also determined as the shareholder’s equity. It is also the part of retained earnings which is kept by the organizations for specific purpose so that it can be used by the organization in future (AGL Energy Limited, 2017).

Retained earnings:

This is the profit which is generated by the firms as well as the organizations and is also distributed to the shareholders as dividends. This can also be said that if some of the amount is left after paying the shareholders that amount is been used for the reinvestment so that it can be taken into consideration for future operations of business.

Issued Capital:

This is the part of capital that is authorized by the organization. It also depicts the number of the equity shares that can be earned or gained by the organizations (Beach Energy Limited, 2017).

Cash Flows Statement

Yes, there has been the change which has been noticed that in AGL limited the retained earnings amount have shown the increment which can be said that this amount may be invested by the organization for their future operations. In case of Beach Energy Limitedthere has been increase from the year 2016 to 2017 that the earlier the amount was $1548 which has been increased to $1558 (AGL Energy Limited, 2017).

II).The investigation of the obligation and value has been finished by making the correlation between both the associations. In Beach Energy Limited it has been seen that the measure of obligation has been diminished from 2016 to 2017 that is it was $149 and which diminished to $126 which is great sign for the association (Beach Energy Limited, 2018). The measure of the value has been expanded that is in 2016 it was $1074 which expanded to $1402. Along these lines, it very well may be said that the association is utilizing the value source to fund its tasks (Beach Energy Limited, 2018).

In AGL Energy constrained the obligation has demonstrated the immense increment which can be uncovered that the sum in 2016 was $6678 which has expanded to $6884 and the value sum has been diminished from $7926 to $7574. Subsequently, the financing of the association has been finished by raising the obligation (AGL Energy Limited, 2017).

III). In the cash flow statement of any organization, there are a few things which are incorporated which have been conveyed in real money. They will be required to be comprehended in an appropriate way with the goal that legitimate detailing is made. The points of interest of them are given beneath:

• The focused transactions which are given in the operating activities segment are those which help in compelling completing of the tasks, for example, the receipt which is produced using the clients and the installments that are made to providers. With that, the money related pay and cost are likewise included (AGL Energy Limited, 2017). There they are changing in past years as installment expanded from 10397 to 12216 in AGL and for the shoreline; this is declining from 411.4 to 378. Additionally, the ascent is made in receipts which are from 11903 to 13552 for AGL Energy and in the shoreline from 642.2 to 676.6 (AGL Energy Limited, 2017).
• The buy has been made for the advantages and property and furthermore different speculations are made. The installment for resources and plants is declining in the previous year from 533 of every 2016 to 498 of every 2017(AGL Energy Limited, 2017). Offer of property is likewise produced using which money of 278 is gained.
• The buyback is made in AGL and sums to $473 million and furthermore the reimbursement of the borrowings is made. If there should arise an occurrence of shoreline vitality, there was reimbursement of convertible notes made in 2016 adding up to $165.2 however that isn't made in a present year (Beach Energy Limited, 2017).

IV). It has been observed that in the cash flow statement of both the organizations there are various items which has seen the change and these changes needs to be taken into consideration in the important ways as this will enable in achieving growth. The comparison of three years has been done to evaluate the change.

Particulars	2015	2016	2017	Change 2015-2016	change 2016-2017	Change 2015-2017
Cash flow from operating activity	1044	1186	891	142	-295	-153
Cash flow from investing activity	2175	81	302	-2094	221	-1873
Cash flow from financing activity	924	1274	687	350	-587	-237

Particulars	2015	2016	2017	Change 2015-2016	change 2016-2017	Change 2015-2017
Cash flow from operating activity	228.5	233.4	321.2	4.9	87.8	92.7
Cash flow from investing activity	442.3	36.4	154.2	-405.9	117.8	-288.1
Cash flow from financing activity	28.7	168.7	18.3	140	-150.4	-10.4

V). From the correlation which has been influenced it to can be noticed that AGL Energy Limited is making more exchange in real money. The sums which are associated with this are higher than that of shoreline vitality which demonstrates that it is working at a larger amount. In the event of working increment there is a consistent ascent in shoreline restricted yet in AGL this brought up in 2016 and after that there was a decrease in 2017 (AGL Energy Limited, 2017). The speculation has additionally declined in AGL at a quick pace and shoreline vitality is likewise confronting the same. The last position of trade is certain out shoreline vitality yet in AGL Energy Limited there is a negative income balance.

Other Comprehensive Income Statement

VI). Theother comprehensive income statement is the one in which those earnings and costs are incorporated which are not considered in the pay explanations. In this, the different things are included which have not be acknowledged in the current money related year thus the incorporation of them will be made in the period in which they will be figured it out. Some of them are such which not be moved in wage explanation whenever and incorporates gain or misfortune on the characterized benefits designs and wage impose which is there in connection to such benefit or misfortune (AGL Energy Limited, 2017). Alternate exchanges which will be moved in the consequent period incorporate the sum in regard of the income fences which are occurring and offer of such wage from joint endeavor together with the expense which is to be met for them. If there should arise an occurrence of Beach vitality, the occasions incorporate the adjustment in the reasonable estimation of the benefits which are held available to be purchased, procuring on the interpretation of every single outside task and the duty impact on them (Beach Energy Limited, 2017).

VII). The main motive of the income statement is to articulate the genuine position of the salary of the business thus it in this just the practical sums which have been acknowledged is included. By this, the genuine picture is appeared and those sums which won't be acknowledged in the present time frame are incorporated into this with the goal that they can be conveyed to the notice of all (Atanasov& Black, 2016). By this, they will be informed and will be exchanged to the fundamental record once acknowledgment will be made.

VIII). Comprehensive Income Statement Comparison

Particulars	2016	2017	change 2016-2017
Items that will not be reclassified subsequently to profit or loss
Remeasurement gain/(loss) on defined benefit plans	-111	107	218
Income tax relating to items that will not be reclassified subsequently	33	-32	-65
Items that may be reclassified subsequently to profit or loss
The gain in fair value of cash flow hedges	12	72	60
Reclassification adjustments transferred to profit or loss	29	-15	-44
The share of other comprehensive income of a joint venture	-1	0	1
Reclassification of joint venture losses transferred to profit or loss on disposal of investment	15	0	-15
Income tax relating to items that may be reclassified subsequently	-12	-17	-5
Other comprehensive income for the year, net of income tax	-35	115	150

Particulars	2016	2017	change 2016-2017
Items that may be reclassified to profit or loss
Net change in fair value of available-for-sale financial assets	-9.3	13.8	23.1
Net gain/(loss) on the translation of foreign operations	2.1	-0.3	-2.4
Tax effect relating to components of other comprehensive income	0.6	-2.3	-2.9
Other comprehensive income, net of tax	-6.6	11.2	17.8

These items are not reported in the income statement as they will impact the overall income of the organization. So, these items are reported separately in their respective other comprehensive income statement account (AGL Energy Limited, 2017).

IX). It is necessary in the organization to properly evaluate the financial performance of the organization as well as the managers. The information related to the performance of the managers is basically reported in the other comprehensive income statement of the organization so this information will not be considered while evaluating the financial performance of managers (AGL Energy Limited, 2017). The main reason behind this is they are not yet reconcile and also they does not impact the profitability of organization until they are reconciled.

Comparison of Comprehensive Income Statements

X). What are the tax expenses shown in the latest financial statements of the two companies that you have selected.

The income tax is the amount which basically represents the statutory amount that is paid as the tax or about to pay. In case of Beach energy limited the amount was $-79.8 million in the 2017 while that in AGL energy the tax expenses were $225(AGL Energy Limited, 2017). The income tax benefit perceived by Beach Energy constrained is the consequence of acknowledgment of conceded charge costs by the organization in the earlier years. The present assessment cost identifying with budgetary year 2017 identifies with sum $6 million. The proper method of advantage perceived by Beach Energy Limited is demonstrated as follows:

Particulars	Amount ($) million
Current financial year tax expense	6.0
Over provision in the prior year	(4.3)
Other	0.1
Recognition of capital losses	(2.3)
Recognition of deferred taxes	(79.3)
Income tax benefit	(79.8)

Tax Expense = $225

The calendar for money charge cost perceived by AGL Energy Limited identifies with the present wage impose perceived on the assessable salary of the company for the year finishing 2017. The sum on which pay charge rate has been connected is $764 million whichrepresent the benefit perceived by the organization amid the year(AGL Energy Limited, 2017).

Calculate the effective tax rate for both companies that you have selected. Which one of the companies has the higher effective tax rate?

Tax rate is the proportion in which an individual and business can be burdened. It very well may be demanded on the chief sum or the pay which can be earned by associations(Crane and Matten, 2016).

Effective Tax Rate = Tax Expenses/ Earnings before Tax

Effective Tax rate for Beach Energy Limited

Particulars	Amount ($) million
Income tax expense	(79.8)
EBT	307.7
Effective tax rate	25.9%

Particulars	Amount ($) million
Income tax expense	225
EBT	764
Effective tax rate	29.4%

From the analysis above it can be determines that the effective tax rate is higher in AGL Energy Limited than that of the Beach Energy Limited which basically is 29.4%. This means that the higher amount of the taxes will be charged from the profits of AGL Energy in the account of profit and loss.

XII). Comment on deferred tax assets/liabilities that are reported in the balance sheet articulating the possible reasons why they have been recorded.

The deferred tax assets or the liabilities are the one which represents the differences on the temporary basis and these differences has been occurred due to the variations in the taxation treatment of the organization(Beach Energy Limited, 2017). It has been observed that in the financial statements of the Beach Energy Limited there is $79.3 million which is reported as the deferred tax assets.

The Deferred tax assets in the event of AGL Energy constrained is $792 million which is identifying with impose misfortunes perceived amid the earlier years and whose advantage will be gotten in the present assessment year. The conceded assess resource as announced by the organization in current monetary year identifies with the misfortune acquired by auxiliary AGL Energy limited(AGL Energy Limited, 2017).

The conceded charge resources if there should be an occurrence of Beach vitality constrained has been perceived because of oil and gas resources, provisions recognized amid the earlier year however whose advantage will be profited in the following year (Crane and Matten, 2016). Alternate things for conceded charge resources incorporate representative advantages whose conclusion is not available in the present year and different kinds of costs whose advantage will be accessible in future (Beach Energy Limited, 2017).

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?

If there should arise an occurrence of AGL Energy Limited it very well may be perceived that conceded assess resources has diminished essentially as the same was $953 million in the year 2016 though it is $792 million in the year 2017. This speaks to that formation of conceded assess resources has lessened by $161 million in the year 2017(AGL Energy Limited, 2017). The diminishing can be the aftereffect of decrease in net misfortunes bringing about to the auxiliary and using the conceded imposes resources of past year in the current money related year 2017.

In the event of Beach Energy Limited the conceded impose resources has expanded from the earlier year 2016 as there was nothing detailed as the parity of conceded resources in the year 2016 while the end equalization of conceded assess resources has been $79.3 million in the year 2017. In this way it very well may be built up that there has been increment of $79.3 million in the conceded charge resources of organization (Beach Energy Limited, 2017).

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.

AGL energy Limited

The amount of the cash taxis represented as the tax paid by the organization and is reported under the operating activities section of the cash flow statement.  Similar demonstrates the money assess measure of $292 million paid by thecompany anyway the book charge sum has been $225 million as detailed in the announcement of benefit and misfortune(AGL Energy Limited, 2017). There has been a distinction of $67 million in both the sums and along these lines the same are introduced independently (AGL Energy Limited, 2017).

Beach energy Limited

This is the amount which is represented by the company in cash flow statement of the organization and the income tax refunds are also provided to the organization. So, the amount which is tax paid is $2.5 million and the refund amount is $10.1 in the financial year 2017(Beach Energy Limited, 2017).

XV). Calculate the cash tax rate for both companies. Which company has higher cash tax rate?

Beach Energy Limited

Particulars	Amount ($) million
Cash tax amount	2.5
EBT	307.7
Cash tax rate	81.2%

AGL Energy Limited

Particulars	Amount ($) million
Cash tax amount	292
EBT	764
Cash tax rate	38.2%

The higher tax rate is of the Beach Energy Limited.

XVI). Why is the cash tax rate different from the book tax rate?

There is the difference due to the fact that the book tax rate is the amount which has actually been occurred and is the income tax expense while the cash tax rate is the tax paid by the organization during the year (Crane and Matten, 2016).

Conclusion

From the overall discussion it can be concluded that financial statements are necessary as they help in examining the financial position of organization. The comparisons are also evaluated so that the reason for change can be determined and accordingly the actions for future growth can be taken. The tax rates will helps in analysing the amounts that needs to be paid by the organization in the form of tax.

References

AGL Energy Limited, (2016). Annual report.[Online].Retrieved from: https://www.agl.com.au/-/media/aglmedia/documents/about-agl/investors/annual-reports/2016-annual-report_about-agl.pdf?la=en&hash=DBB9F2B35CAE02055B56A19CF9F2FD3D3109BDD4

AGL Energy Limited. (2017)..Annual report. [Online].Retrieved from: https://www.agl.com.au/-/media/aglmedia/documents/about-agl/investors/annual-reports/170825-agl-207-annual-report-asx.pdf?la=en&hash=7DAB19CD5A9A948AA9ACCF3D0B5C4D19E6402AE4

Atanasov, V. and Black, B., (2016).Shock-based causal inference in corporate finance and accounting research.

Beach Energy Limited. (2016). Annual report.[Online].Retrieved from: https://www.beachenergy.com.au/irm/PDF/6288_0/2016BeachEnergyLtdAnnualReport Beach Energy Limited.(2017). Annual report.[Online].Retrieved from: https://www.beachenergy.com.au/irm/PDF/6793_0/2017annualreport?IncludeUnapproved=83324855

Crane, A. and Matten, D., (2016). Business ethics: Managing corporate citizenship and sustainability in the age of globalization. UK: Oxford University Press.