Cash Flow And Liquidity Samples for Students †MyAssignmenthelp.com

Question: Discuss about the Cash Flow And Liquidity In Accounting. Answer: Cash flow and liquidity Cash flow from the operation of the company for the year ended 30th June 2016 was $ 437,691 thousands as compared to the $ 340,448 thousand as on 30th June 2015. However, the closing balance for cash reduced to $ 103,631 as on 30th June 2016 as compared to $ 153,220 as on 30th June 2015. Therefore, the companys liquidity position is reducing that indicated that the companys ability of paying the short-term liabilities is decreasing (Harveynorman.com.au 2017). On contrary, closing cash balance of Woolworths, companys competitor, is $ 956,000 as on 30th June 2016 whereas as on 30th June 2015 it was $ 133,340. Therefore, with respect to liquidity aspect, Woolworths is in better position (Woolworths.com.au 2017). AASB 107 Note 28b that is stated in the page 112 is no more required after the amendment issued during 2016 March with respect to AASB 107 with the added paragraph under 44A to 44E (Carey, Potter and Tanewski 2014) Impairment If there is any indication that due to any event of loss the expected future cash flows will be impacted and the amounted can be reliably estimated, the asset will be impaired. Impairment amount is determined by computing the market value and carrying value of asset (Amiraslani, Iatridis and Pope 2013). When the carrying amount exceeds the market value, the difference is charged as impairment. Impairment of asset for Harvey Norman as on 30th June 2016 is as follows Equity accounted investment - $ 72,35,000 Computer software - $ 18,83,000 Information regarding dividend payment Dividend related information is stated in Note 25 of the financial statement for the year ended on 30th June 2016 Other comprehensive income Other comprehensive incomes are the gains, revenues, losses and expenses that are excluded from the computation of net income and they are included in the comprehensive income statement even before the realization of those expenses, gains, revenues or losses (Babalola and Abiola 2013). As on 30th June 2016 the comprehensive income item for Harvey Norman were Foreign currency transactions Income tax effect on cash flows hedging movement Investment of cash flow hedging Net gain from investment held for sale Share option plan of executives The details of share option plan for executives are as follows Name of the executive No. of vested option Value No. of unvested option Value J. E. Slack-Smith 567,000 $ 159,894 817,000 $ 287,394 D. M. Ackery 567,000 $ 159,894 - - C. Mentis 567,000 $ 159,894 817,000 $ 287,394 Total 17,01,000 $ 479,682 16,34,000 $ 574,788 Reserves Reserves related information are stated in Note 24 and the amount of reserves as on 30th June 2016 was $ 155,814,000. Reserves of the company are mentioned below Acquisition reserve Cash flow hedging reserve Available for sale reserve Asset revaluation reserve Foreign currency transaction reserves Employee equity benefit reserve Remuneration of the auditor The audit fees proportion was 45% as compared to the other fees like legal fees. This is acceptable proportion as the services of audit is not availed throughout the year whereas they legal services are availed for throughout the year. Auditors remuneration includes the following Review of financial report Entitys tax services Other services of the company Financial statement preparation In accordance with Para 71 of AASB 101, any prescribed format like as per function or nature for presentation of financial statement is not mentioned. However, Harvey Norman classifies the expenses by function. Deferred tax liability The temporary differences are identified as the deferred tax liabilities by the company (Laux 2013). The company recognized the following as deferred tax liabilities Research and development $ 17,053,000 Revaluation of investment properties to the fair values - $ 116,814,000 Depreciation on the building reversal for investment properties - $ 70,085,000 Difference among theaccounting carrying amount and tax base of computer software cost - $ 479,000 Land and buildings revaluation to its fair values - $ 30,677,000 Non-allowable depreciation for building for the changes in legislative of New Zealand - $ 17,798,000 Other items - $ 23,61,000 Income tax Current income tax for the year ended on 30th June 2016 is $ 46,92,000 and the tax as per income statement is $ 142,423,000. The difference is there as the changes in equity show the tax along with deferred tax and the income statement shows the paid amount of tax. Standards on accounting AASB that are issued or amended during the year but Harvey Norman has not yet adopted those are mentioned below AASB 15 on revenue from the contracts with the customers AASB 9 on financial instruments AASB 16 on leases Reflection report Analysing the annual report of a company like Harvey Norman will definitely help me to analyse the performance the company from the financial aspect. Analysing the annual report of the company dated 30th June 2016, I found out that the annual report is an essential part to the company for its customers, creditors, shareholders and investors to state its sustainability, liquidity, solvency and profitability position. While going through the report, I found that the company complies with the framework and guidelines of IFRS and AASB. I further found that the auditors of the company are responsible for approving that the financial statements of the company are prepared as per the required standards and they issue their audit report accordingly. The most important fact regarding the annual report that I found is that the disclosure notes plays an important role and states the preparation basis of the financial statements,accounting treatment, concepts used for preparing the statement and revealing the detailed break-up for each item. Thus, I can state that annual reports of the company play crucial role in stating its financial position. References Amiraslani, H., Iatridis, G.E. and Pope, P.F., 2013.Accounting for asset impairment: a test for IFRS compliance across Europe. Centre for Financial Analysis and Reporting Research (CeFARR). Babalola, Y.A. and Abiola, F.R., 2013. Financial ratio analysis of firms: A tool for decision making.International journal of management sciences,1(4), pp.132-137. Carey, P., Potter, B. and Tanewski, G., 2014. AASB Research Report Harveynorman.com.au. 2017. Harvey Norman | Shop Online for Computers, Electrical, Furniture, Bedding, Bathrooms Flooring | Harvey Norman Australia. [online] Available at: https://www.harveynorman.com.au/ [Accessed 23 Oct. 2017]. Laux, R.C., 2013. The association between deferred tax assets and liabilities and future tax payments.TheAccounting Review,88(4), pp.1357-1383. Woolworths.com.au. 2017.Woolworths.com.au. [online] Available at: https://www.woolworths.com.au/ [Accessed 22 Oct. 2017].