2101AFE Group Assignmentt

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GRIFFITH UNIVERSITY QLD 4111
GROUP
ASSESSMENT
COVER SHEET
Please complete all sections below
Course Code: 2101AFE
Course Name: Company Accounting
Due Date: 20/05/2016 Assessment Item #:
Course Tutor/Convenor: Kerry Bodle
Group Assignment Participants:
Student Number: s2919322 Student Name: Yuli YIN
Student Number: s5002687 Student Name: Alexander Daniel GONZALEZ
Student Number: s2921101 Student Name: Baojiang ZHOU
Student Number: Student Name:
Student Number: Student Name:
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Updated: 15 April 2016

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Acknowledged by: Yuli YIN, Alexander Daniel GONZALEZ, Baojiang ZHOU Date: 19/5/2016
(insert name here)
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Updated: April 2015

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Acknowledged by: Yuli YIN, Alexander Daniel GONZALEZ, Baojiang ZHOU Date: 19/5/2016
(insert name here)
Where the item is submitted electronically Clicking “I Agree” constitutes an electronic signature for the purpose of assignment declaration compliance.
Extension Requests:
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Updated: 15 April 2016

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2103AFE
Company Accounting
Group Research Assignment-Qantas
Name of student: Yuli Yin; Alexander Daniel Gonzalez; Baojiang Zhou
Student number: S2919322; S5002687; S2921101
Lecturer: Kerry Bodle
Due date: 20th
May 2016
Total of words: 1524words
Table of contents

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1.0Presentation of Financial Statements......................................................6
2.0 Accounting for Income Tax......................................................................7
3.0 Business combinations and consolidation...........................................8
4.0 Associates and joint venture .................................................................10
Reference List................................................................................................11
Appendices ....................................................................................................14
Picture 1.................................................................................................................................14
Picture 2 and analysis 1.......................................................................................................14
Picture 3 ................................................................................................................................15
Picture 4.................................................................................................................................15
Picture 5 and analysis 2.......................................................................................................16
Picture 6 ................................................................................................................................16
Picture 7.................................................................................................................................16
Picture 8................................................................................................................................17
Picture 9.................................................................................................................................17
Picture 10...............................................................................................................................18
Picture 11...............................................................................................................................18

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1.0 Presentation of Financial Statements
Companies are required to present its Financial Statements in an accurate and
standard method (AASB 1, 2015, para.3). According to AASB 101 must to be used as
a guide in order to gain the best approaches for different kind of companies. Pursuant
to AASB 101 (2015) expenses recognised in loss or profit must be presented
according to their nature or function in the firm to provide the most relevant and
accurate information (para.99).
In this case, Qantas has complied with AASB 101 and reported expenses
according to their nature. However, Qantas has reported their costs of sales according
to their function (AASB 101, 2015, para.102 and 103). It apparent that Qantas is using
the nature of expense method, because they are gathering expenses information based
on its attributes, and not on its tasks as cost of sales element (Kwok, 2005).
Furthermore, by checking the detail of the Qantas’ financial report, it seems does not
fit the condition of the function method. A firm dedicated in providing services has
less probabilities to manage its expenses by function, therefore it is more likely to do
it by nature (AASB 1018, 2002, para.5.2.4). Such as, Qantas is a firm engaged to
provide flight's services, thus the nature method seems to be the approach that fits
more in the presentation of its Financial Statements. In addition to that, the exposition
of expenses by its role can be associated with the exposure of distribution and
administration expenses, as well as cost of sales, and it is used to be related with
retailing or manufacturing entities (AASB 1018, 2002, para.5.2.2). Qantas has not
reported any expenses in the Financial Statement, since the company mainly provides
the flight services.
Finally, the choice between the nature of expense method and the function of
expense method is in relation with the entities' function, as well as historical and

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business factors (Kwok, 2005). Such as is known, Qantas is a flight services
company, which is a business factor for using nature of expenses method. Both
approaches give a prediction of the possible variation, direct or indirect, with the level
of performance or sales of the firm. Each approach has its advantages for different
companies, therefore it is required to their management to be more accurate and
relevant (AASB 101, 2015, para.105). The classification method that a company
should adopt, to deal with all this information, would for management to choose the
best method that fit with its “principle activities”, its background, and the role the
company has within the industry sector.
2.0 Accounting for Income Tax
Managers are not only required to have the necessary management skills; they are
also required to have a general understanding of accounting standards. To adequately
manage a firm, it is crucial that managers comprehend the generally accepted
accounting principles for financial reporting purposes and the tax connotations of
transactions (Graham, Raedy and Shackelford, 2012). Hence the managers of Qantas
explain in details the accounting for income tax in their financial reports.
Starting with the 2015 financial year, Qantas annual report determine figures
from the year about accounting for income tax. There is a $229million income tax
expense in the Qantas consolidated income statement (see Appendix 1, p.50).
Secondly, there is additionally income tax included in other comprehensive income,
which is $39million (see Appendix 2, p.51). Thirdly, the current and deferred income
tax expenses are respectively $2million and $227million, which are showed in the
income tax (see Appendix 3, p.62). Finally, in the applicable note 17 (p.68) in this
report only disclosed deferred tax asset (DTA), but not include deferred tax liability
(DTL). It means that $333million will be deducted in future tax (see Appendix 4,

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p.68). Under the going concern assumption, by having a huge DTA of $548million in
2104, the DTL from 2015 can be deducted based on the 2014 figure to get
$333million DTA remained (see Appendix 4, p.68).
The basis of accounting for income tax are that a firm have to admit both, the
current and future tax consequences, which arise from transaction and events of the
present acts, as well as the readjustment of assets and liabilities (Carlon, Tran and
Tran-Nam, 2013). Subsequently, current tax is included in income tax expense
established on the events and transactions of the present period and deferred element
that is linked to adjustments in liabilities and assets balances in the course of the
period. However, the other way to calculate the accounting tax expense, is that use the
total revenue minus the total cost, then times the tax rate (Leo, Hoggett, Sweeting and
Nicholson, 2012). For example, in this case, the income tax expense is $229million,
but the accounting tax expense is $168million (see Appendix 1 and 5, p.50).
Therefore, the income tax is usually not equal to accounting profit multiplied by the
company tax rate by having some readjustment.
3.0 Business combinations and consolidation
Accounting for business combinations and consolidations, four steps have to be
followed. Firstly, the acquirer has to be identified (Haswell & Langfield-Smith,
2008). The Qantas Frequent Flyer is the acquirer of Taylor Fry, which has owns 51%
of its shares (see Appendix 6). Secondly, the acquisition date is required (Deegan,
2012). For example, on 24/3/2015 the controlled entity was acquired (see Appendix
6). Thirdly, the acquirer’s Assets and Liabilities must be valued and recognised, as
well as acquiree’s Non-Controlling Interest (Nurnberg and Sweeney, 2007).
Regarding the Qantas assets and liabilities acquisition, it is shown in the annual report
that non-controlling interest is $1million (see Appendix 7). Fourthly, gain or goodwill

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is recognised and measured (Nurnberg and Sweeney, 2007). In this case, the goodwill
is recognised as $8million (see Appendix 6).
In the financial statement, the total comprehensive income is clearly stated as
$558million (see Appendix 8). The AASB 101 (2015, para. 81B) stated that a firm
will present profit or loss and other comprehensive income for the period of non-
controlling interest (NCI) and the parent’s owners. As it has been stated in the income
statement and comprehensive income statement, the NCI for the profit or loss for the
period is $3million and the comprehensive income for the period is $4million (see
Appendix 9). On the other hand, Qantas owns $557million for the profit or loss, and
$554million for the comprehensive income of the period (see Appendix 9). According
to the AASB 101 (2011, para.54), non-controlling interest stated in equity, as well as
reserves and issued capital attributable to owners, have to be presented in the
statement of financial position. The quantity attributable to the owners is
$3442million and the NCI is $5million (see Appendix 10). Moreover, NCI should be
presented by the parent in the financial statement independently from the equity of the
parent (AASB 10, 2011, para 22). This has been clearly stated in the balance sheet,
that both of the NCI and owners of parent are two separate figures as above (see
Appendix 10).
Linking the Qantas with the AASB 10, Qantas have met the principle of
consolidation. According to AASB 10 (2011，para 2) there are five objectives that
need to satisfied. These are: control has to be defined, and to establish the base of
consolidation; determine how acquirer controls acquiree, therefore the investee has to
be consolidated; meet the accounting requirements for the financial statement;
investment firm will be defined and exposing an omission to consolidate subsidiaries
of an investment firm. The case of Qantas has clearly stated the business
combinations; controlled entities; NCI; loss of control and equity accounted
investment to meet the five principles (see Appendix 11).

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4.0 Associates and joint venture
There are many different business combinations, two of them are associate
companies and joint ventures. A joint venture is a contractual agreement for sharing
the control upon economic enterprise, and exists only when the operating and
financial strategy relate to the exercise, and the unanimity of consent is required
(Espinosa, Mar and Suanes, 2011). Taken as an example Flyash Australia is
uniformly owned by Cement Australia Pty Ltd and Boral Limited, but they are
apparently running the company normally, and only when operating or financial
strategies have to be taken these two owners take voice into the decisions. Back to
Qantas group, the China Eastern signed an agreement in 2014, for a period of 5 years
in order to become a joint venture (“Qantas and China Eastern”, 2015). Both of them
benefit from the joint venture, by gaining an advantage against competitors.
However, the Associate companies are different from the joint venture. They are
the company which owns shares of the other company, ranging from a quarter to half
of the company share. The share they own is having the voting rights, but they will
not combine their financial statement and take the profit equally, instead of combining
the statement the companies that own the share would only like to pick up their
interests and dividends (Leo, Hoggett, Sweeting and Nicholson, 2012). For example,
the Cement Australia is an associate company with the Flyash Australia, and they
have owned the Flyash equally with Boral limited. Furthermore, the Jetstar Pacific
Airline is associate with Qantas by having 30% of its shares (Jetstar Group, n.d.).

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Reference List
Australian Accounting Standards Board [AASB] 2002, AASB 1018 Statements of
financial performance, Canberra. Retrieved from: http://www.aasb.com.au
Australian Accounting Standards Board [AASB] 2011, AASB 10 Consolidated
financial statement, Victoria. Retrieved from: http://www.aasb.com.au
Australian Accounting Standards Board [AASB] 2015, AASB 1 First-time Adoption
of Australian Accounting Standards, Victoria. Retrieved from:
http://www.aasb.com.au
Australian Accounting Standards Board [AASB] 2015, AASB 101 Presentation of
financial statements, Victoria. Retrieved from: http://www.aasb.com.au
Carlon, S., Tran, A., & Tran-Nam, B. (2013). How close are taxable income and
accounting profit? An empirical study of large Australian companies. Australian
Tax Forum, 28(3), 641-677.
Deegan, C. M., (2012). Australian financial accounting (7th ed.). Sydney: McGraw-
Hill Australia.
Espinosa, B., Mar, M. D., & Suanes, A. M. (2011). Corporate entrepreneurship
through joint venture. International Entrepreneurship and Management
Journal,7(3), 413-430. doi:10.1007/s11365-011-0203-2
Graham, J. R., Raedy, J. S., & Shackelford, D. A. (2012). Research in accounting for

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income taxes. Journal of Accounting and Economics, 53(1-2), 412-434. doi:
10.1016/j.jacceco.2011.11.006
Haswell, S., & Langfield-Smith, I. (2008). Fifty-seven serious defects in 'Australian'
IFRS. Australian Accounting Review, 18(1), 46-62. Retrieved from
http://search.proquest.com.libraryproxy.griffith.edu.au/docview/217552125?
accountid=14543
Jetstar Group. (n.d.). Retrieved May 06, 2016, from
http://www.jetstar.com/au/en/about-us/jetstar-group
Kwok, B. K. B. (2005). Accounting irregularities in financial statements: A definitive
guide for litigators, auditors and fraud investigators. Burlington, VT; Aldershot,
England;: Gower.
Leo, K. J., Hoggett, J., Sweeting, J. W., & Nicholson, G. (2012). Company
accounting (9th ed.). Milton, Qld: John Wiley & Sons Australia
Nurnberg, H., & Sweeney, J. (2007). Understanding accounting for business
combinations: An instructional resource. Issues in Accounting Education, 22(2),
255-284. Retrieved from
http://search.proquest.com.libraryproxy.griffith.edu.au/docview/210911433?
accountid=14543
Qantas 2015 Annual Report. (2015) Retrieved from
https://www.qantas.com.au/infodetail/about/investors/2015AnnualReport.pdf

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Qantas and China Eastern welcome ACCC authorisation of joint venture - Qantas
News Room. (2015, August 21). Retrieved May 06, 2016, from
http://www.qantasnewsroom.com.au/media-releases/qantas-and-china-eastern-
welcome-accc-authorisation-of-joint-venture/

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Appendices
Picture 1
Picture 2 and analysis 1
Analysis 1: That there are four elements in this statement have been already deducted
the tax, but three of them is a negative number, which means only the positive will
counted for the tax expense. Income tax expense = 91/0.7*0.3=39million.

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Picture 3
Picture 4

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Picture 5 and analysis 2
Analysis 2: To calculate the income tax expense, we need use the accounting profit
times the tax rate. The accounting profit as what have showed above on the picture is
560million, and the Australian tax rate is 30%. Then, the income tax expense=
560*0.3=168million
Picture 6
Picture 7

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Picture 8
Picture 9
(profit or loss for the period)
(the comprehensive income for the period)

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Picture 10
Picture 11

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