Introduction:
The companies are observed to have three important features in the balance sheet and equity is of these components. There exists no exception to the same in case of Qantm Intellectual Property Limited. Based on the year 2017 balance sheet of the firm there exist cetin key components including reserves, retained earnings and equity including the issued capital. Issued capital can be observed as equity present in the business firms (Armstrong, Blouin, Jagolinzerand Larcker 2015). Calculation of the issued capital is performed by the number of shares along with outstanding shares by par value shares. Observing the annual report of Qantm Intellectual Property Limited a boost within the capital issue is present in the year 2017 in contrast to 2016 that is $ 302,562,000 in 2017 from $ 235,073,000 in 2016.
The company provided explanation concerning certain key areas which can effectively produce tax expenses difference. In that table, the firm has conducted all necessary calculations and another important tax expense differences in income and cash flow statement. The key factors present in issues capital are ordinary shares issue, issue of shares cost and the income tax related with issue of shares. Certain components those are present in the equity of the organization includes reserves. Within increased consideration to the theory of financial accounting, reserves can be explained as a part of the company’s equity (Atanasov and Black 2016). This can be revealed as additional amount devoid of basic share capital. The company’s current annual report evidenced a boost in equity reserves for in the year 2017 that is different in 2016 that is. In this organization there are key components of equity reserve which encompass equity reserve for considerable employee benefit, reserve relied on foreign currency translation along with hedging reserve.
One major aspect in Qantm Intellectual Property Limited includes retained earnings. This explains total profits and losses of the firm since its emergence that lessened by the dividend paid to all the shareholders (Cheng, Ioannouand Serafeim 2014). The recent yearly report of the firm evidenced that the company attained retained earningsof approximately in the year 2017 in comparison to year 2016 that has approximately. A good position of retained earnings explains that the organization has increased profits in contrast to the losses. The aspects within the company’s retained earnings encompass net profit linked with the people associated with the firm, dividends paid to offer with the effect of restatement. These components come under the company’s equity reserve (Christensen et al.2015).
In the organizations, there are numerous costs that are deemed to encompass selling and administrative expenses with a lot of expense deemed to be tax expense. Additionally, tax expense is considered to be a huge liability for the firm which is an aspect of state, federal and municipal government belonging to the country (Damodaran 2016). Tax expense calculation can be carried out through necessary business tax before income with explaining important elements that includes tax assets and liabilities with non-deductible components. Considering Qantm Intellectual Property Limited’s yearly report the company has indicated $ 77,513,000 in 2017 and $ 66,593,100 in 2016 as their profit from regular income tax operations (Dyreng et al.2017). Based on Australian Tax Law rules the business tax rate for the countries within Australia is deemed to be 35% (Dowling 2014). Considering this rate of tax, the tax expenses of this organization is $ 35,576,000 in 2017 and $ 26,570,000 in 2016. It is elaborated that there is a gradual boost in tax expenses of the firm because of enhancement in the company’s income for the year 2017 in comparison to the year 2016.
In accordance with above elucidation, it is explained that Qantm Intellectual Property Limited attained profits approximately in the year 2017 and in the year 2016 from its regular business conducts before changes in income tax. In addition, the recent yearly report of the business signifies that it has a tax rate of 35% for the financial year 2017 and 2016 (Laux 2013). Considering the same rate, total expenses of income tax of the business is observed being $ 76,284,000 ($ 67,613,000*35%) in 2017 and $ 23,975,000 ($ 56,583,000*35%) in 2016. Accordingly, the original tax expense of the company in the years 2017 and 2016 remained and. An increased variation might be seen in tax expense rather than attaining 35% of tax rate.
There are some partial aspects that is encompassed or excluded within the preliminary costs of the overall tax and these are taken into account as reasons for differences in tax expenses (Piketty and Saez 2013). In Qantm Intellectual Property Limited there are five components that are deemed to have effect on tax expenses of the organization. The first aspect includes expenses those are not deductible for determining the profits that are taxable.
There are too many expenses in the organization that cannot be decreased from the income related with the company. Because of the same, $ 679,000 and $ 738,000 considered in the years from 2017 and the year 2016 considerably (Rego and Wilson 2012). The second aspect is deemed to be the presence of different rates of tax of the subsidiaries of the organization having the tax rate of 35% in one nation and 35% in another nation. Because of these variations in the rate of tax $ 15000 and $ 16000 was decreased from the organizations expense of tax within the year 2016. There are some factors that can be added in the tax expenses of the organization and due to the same thing and was added. The final aspect encompasses the presence of non-accessible income for a part of income are not observed to be analyzed in the taxation and due to this is added with the total expenses of tax (Qantm Intellectual Property Limited, 2017).
Deferred tax and liabilities assets are considered being important considering the organization’s tax expenses. Deferred tax assets are observed to have a situation in which companies overpay taxes and make previous tax payments within the financial assets. Moreover, deferred income tax liability explains a situation where there are variations in the carrying value of tax and profit of the company (Saunders and Cornett 2012). Considering case of Qantm Intellectual Property Limited, this is evident that the company has reported its deferred tax liability with the assets in yearly annual report. This signifies the organization has deferred tax assets of approximately $ 17,657,000 in 2017 and $ 6,394,000 in 2016(Dyreng et al. 2017). In contrast, the company has $ 129,433,000 in 2017 and $ 145,708,000 in 2016 as the deferred tax liability. In a situation of deferred tax assets, there might be a case where increased payment of depreciation by the company took place due to variance in taxable depreciating rate and depreciation (Saunders and Cornett 2012). Due to increased payment of depreciation, the company might not be able to meet the tax amount in upcoming year due to which it is considered as asset. Being the deferred tax liability there might be minimal differences in the company profit and it has to pay decreased taxes in the recent year. Due to the same, it is vital for the company to deal with the same in future years due to which it can be called a liability (Laux 2013).
Income tax payable along with current tax assets happens to be among the important aspects of the firms. In Qantm Intellectual Property Limited’s yearly report, the organisation is deemed to report its current tax assets (Dyreng et al. 2017). Based on the 2017 yearly financial statement along with financial situation of the organization and this can be explained that the firm did not represent the current tax asset amount for the year 2017. Additionally, in the year 2016, the company is observed to have a part of current tax liabilities and assets.
In several business firms, there can be a lot of difference among income tax expense and income tax payables with all specific causes that can be deemed responsible for the disparity (Dyreng et al. 2017). The major cause encompasses increased pressed of deferred tax assets. Moreover, numerous instances can be in the company that pays high tax amounts rather than tax expenses. In this situation, further tax amount paid can be considered to be deferred tax asset which creates a difference. Other causes encompass financial accounting along with tax accounting rules difference. Considering such theory, a depreciation factor can be elucidated and certain differences relied on such things is considered to be within tax and financial accounting in various rate of depreciation (Dowling 2014). In such situation, the final payable amount of depreciation can be decreased or boosted along with numerous reasons for causing differences in income tax expenses and payables.
In the annual report of Qantm Intellectual Property Limited, the business provided instances concerning the tax expenses in cash flow and income statement (Armstrong, Blouin, Jagolinzer and Larcker 2015). Moreover, this is considered as the firm has represented different amount in the ash flow and income statement. In income statement, the company has presented $ 35,766,000 in 2017 and 43,570,000 in 2016 being the income tax expenses and the cash flow statement of the firm which is observed to be $ 32,570,000 in 2016 and $ 18,687,000 in 2017(Dowling 2014). The important reasons for this disparity in the amounts of income tax expenses considers that the company experiences total tax expenses with having tax charge of around 35% on profit from continuous operation before tax. Due to increased payment of depreciation, the company might not be able to meet the tax amount in upcoming year due to which it is considered asset. Being the deferred tax liability there might be minimal differences in the company profit and it has to pay decreased taxes in the recent year. Due to the same, it is vital for the company to deal with the same in future years due to which it can be called a liability.
However, this increase is not evident within the cash flow statement. This is because this needs to be elucidated that there are tax expenses in the cash flow from operating activities. In such scenario, cash flow is observed to be distinct. It is also necessary to gather that all tax expenses come under the operating conducts cash flow and few components in income statement that is considered in distinct way. This signifies there are some changes taking place in the organizations current assets and liabilities (Atanasov and Black 2016). In Qantm Intellectual Property Limited, payment of income tax is deemed as current assets. In the cash flow statement certain decrease in the income tax expense factors indicates positive use of cash. This indicates several considerations within tax expenses are being deducted before mentioned in the statement of cash flow. In such situation, few tax expense differences are deemed to be explained in income and cash flow statement (Atanasov and Black 2016).
After observing the tax treatment situation of Qantm Intellectual Property Limited’s financial statements that is needed being explained that is not that surprising and confusing in the tax treatments (Armstrong, Blouin, Jagolinzer and Larcker 2015). The firm focused on tax treatments in adherence to Australian Taxation Regulations and laws. Additionally, the organization presented numerous explanations and justifications concerning certain taxation factors such as deferred tax liabilities, assets, current tax liabilities and assets, tax rate and a few more. Moreover, there are some considerable factors within Qantm Intellectual Property Limited’s tax treatment areas (Saunders and Cornett 2012). The most important factor is regarding the firm’s elaboration regarding certain distinction on total tax expense (Saunders and Cornett 2012). The company provided explanation concerning certain key areas which can effectively produce tax expenses difference. In that table, the firm has conducted all necessary calculations and another important tax expense differences in income and cash flow statement. All such important factors help in enhancing understanding and knowledge regarding firm’s taxation (Armstrong, Blouin, Jagolinzer and Larcker 2015). From such explanation, an individual can gain an insight and understanding concerning tax treatments of the firm.
References
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