Corporate Accounting

Corporate Accounting

By (Name)

Name of the class (course)

Professor (tutor)

Name of the school (university)

The city and the state where it is located

The Date
 Corporate Accounting 1

Executive Summary

In the following report, a brief analysis of the financial reports of Coca-Cola Amatil limited and
Fonterra shareholders’ funds limited over the three recent consecutive years have been made.

The income, statement, balance sheet, change in equity statement, etc. of both companies have
been analyzed and using the rules and regulations, all the questions have been answered.

Hence, this report will display all the required data and their analysis in detail.
 Corporate Accounting 2

Table of Contents

Executive Summary ................................................................................................................... 1

Introduction ................................................................................................................................ 3

Owners’ Equity ...................................................................................................................... 4

Cash Flow Statement .............................................................................................................. 6

Other Comprehensive Income Statement ............................................................................. 10

Accounting For Corporate Income Tax ............................................................................... 11

References ................................................................................................................................ 13
 Corporate Accounting 3

Introduction

The companies I have selected for the purpose of carrying out this assignment are
‘Coca-Cola Amatil limited’ and ‘Australian Vintage’. Both of the part of Food and Beverages
industry and they are one of the highly growing brands running their businesses on international
levels.

Coca-Cola Amatil is an international organization that offers an ample amount of

brands like alcoholic and non-alcoholic beverages, coffee and ready to eat food items. It
operates at a very large scale in the six states that are, Australia, New Zealand, Indonesia, Papua
New Guinea, Fiji and Samoa. They have employed around 14000 direct workers in these
companies and offers a wider range of products including, non-alcoholic sparkling beverages,
spring water, sports and energy drinks, iced tea, flavored milk, coffee, tea, beer, cider, spirits
and ready to eat vegetable and fruit snacks and products. This organization having a continuous
growth and development have occupied almost 270 million potential consumers and among
them, around 850,000 can be counted as active customers. Coca-Cola Amatil limited works
with an open approach towards sustainability and focuses more on the challenges and
opportunities available in future for the betterment and success of their own organization as
well as the economy of the states they are operating in (2017, pp. 1-27).

Fonterra is a global dairy organization that aims to provide dairy facilitates to its
customers in the best possible manner across the globe. It employs a large no. of farmers and
plays an integral part in strengthening the economy of those states where it is operating along
with growing and developing itself. Under the name of Fonterra, a large no. of well-known
brands are operating and are satisfying the dairy needs of millions of individuals on daily basis
across the globe. Being a market leader in dairy products, Fonterra follows a very strategic
system of development and thus there main focus is to keep their organization heading towards
success and prosperity (Andrea 2012, p. 015).

In this report, the individual analysis of the financial statements of above mentioned
companies will be done with reference to their annual reports of last three years and a
comparative analysis between both these companies will also be carried out.
 Corporate Accounting 4

Owners’ Equity

(I) Components of Owners’ Equity

Coca-Cola Amatil Limited

1. Share Capital
At the end of the year 2015, the total share capital recorded was $2,271.7 M. It
remained same at the end of the year 2016 but decreased at the end of 2017 to $ 1,920.5
M.
As no dividend was paid in the years 2015 and 2016 but a dividend of $ 351.2
M was paid because of the share being bought back in the year 2017.
2. Treasury Share
The Treasury shares at the end of the year 2015 were $ 16.8 M with share based
remuneration of $ 0.5 M. They decreased to $ 115.7 M because of the increased share
based remuneration of $1.1 M at the end of the year 2016 and further decreased to $
13.4 M with a much increased share based remuneration of $2.3 M at the end of the
year 2017.
3. Reserves
Their reserves at the end of the year 2015 were $ 322.9, they increased to $
393.6 at the end of the year 2016 while with a declination the figure was turned to $
262.5 M at the end of 2017. These ups and downs faced by the reserves. A huge
incremental change in the reserves at the end of 2015 was seen because of the change
in ownership’s interest in subsidiary up to $ 342.7 M. While it again decreased to even
a lower figure at the end of the year 2017 because of an increased share-based
remuneration of $ 3.9 M.
4. Accumulated Losses
The accumulated losses at the end of the year 2015 were $ 491.7 M, increased
to $ 585.4 M at the end of 2016 and further increased at the end of 2017 up to the
amount of $ 620.7 M. these incremental shifts in the accumulated losses each year were
faced because of the increased dividends of $ 320.7 M, $ 339.8 M and $ 345.6 M paid
respectively.
5. Non-Controlling Interest
The non-controlling interest recorded was $ 323.7 M, $ 346.1 M and $ 331.4 M
at the end of the years 2015, 2016 and 2017 respectively. This irregular change in the
 Corporate Accounting 5

interests recorded was due the ups and downs in the total comprehensive income of
these years.
Total Equity
The total equity of Coca-Cola Amatil limited was recorded as $ 2409.8 M, $
2410.3 M and $ 1880.3 M at the end of the years 2015, 2016 and 2017 respectively. A
huge increment in the total equity at the end of 2015 was recorded because of the change
in owners’ interest, it remained almost stagnant at the end of the year 2016 because of
no special change and declined to a much lower figure in the year 2017 because of the
large no. of shares being bought back (2018, p. N.PAG).

Fonterra Shareholders’ Limited

1. Revaluation of Liability to unit holders

The revaluation of liability to unit holders was recorded as $ 119 M in the year
ended at July 31st, 2014, it increased to $176 M in the year ended at July 31st, 2015 and
then declined back to $ 101 M in the year ended at 31st July, 2016. This up and down
in the liability was noted because of the ups and downs in their payments recorded each
year.
2. Issue of units
The issue of units were amounted at $ 83M, $131M and $152M in the years
ending at July 31st 2014, 2015 and 2016 respectively. And tis incremental shift was
notified because of the expenditure in business over these years.
3. Redemption of Units
The redemption of units in the years ending at July 31st 2014, 2015 and 2016
were recorded as $71M, $ 142M and $110M respectively.
Net Assets
The net assets attributable to the unit holders were recorded as $681M,
$494M and $687M in the years ending at July 31st 2014, 2015 and 2016
respectively. This declining shift in the net assets of the year 2015 was recorded
because of the increased issue of units and liability. While it was somehow
regained in the year 2016 by declining the revaluation of liability up to a great
level (2018, pp. 1-39).
 Corporate Accounting 6

(II) Comparative Analysis

By comparing the components of owners’ equity and their changes over the
three consecutive years, it has been analyzed that the owner’s equity of Coca-Cola
Amatil is declining because of their shares being bought back while Fonterra
shareholders’ funds are facing an incremental change in their total assets possession
after facing a recent downfall which shows that they have now stood back and are in
the process of progress. While Coca-Cola Amatil has to work hard in selling their shares
again.

Cash Flow Statement

(III) Components of a Cash Statement

Coca-Cola Amatil Limited
1. Operating Cash Flows
 Receipts from Customers
It was recorded as $5965.4M, $ 6,097.8M and $ 5,780.1M at the end of the years
2015, 2016 and 2017 respectively.
 Payments to suppliers and employees
It was recorded as $5,098.8M, $5,122.0M AND $4,964.0M at the end of the
years 2015, 2016 and 2017 respectively.
 Interest income received
It was recorded as $21.6M, $41.8M and $ 44.9M at the end of the years 2015,
2016 and 2017 respectively.
 Interest and other finance costs paid
It was recorded as $113.2M, $97.8M and $98.4M at the end of the years 2015,
2016 and 2017 respectively.
 Income taxes paid
It was recorded as $148.2M, $145.0M and $173.3M at the end of the years 2015,
2016 and 2017 respectively.
Net operating Cash Flows
The net operating cash flows recorded were $626.8M, $774.8M and $589.2 at
the end of the years 2015. 2016 and 2017 respectively.
 Corporate Accounting 7

2. Investing Cash Flows

 Investments in long term deposits
They were recorded as $84.9M at the end of the year 2015, null at the end of
the year 2016 while a withdrawal of $85.3M was recorded from the long term
deposits at the end of the year 2017.
 Investments in joint venture entity
There were investments recorded for joint venture entity in the years 2015 and
2016. While an investment of $2.0M was recorded at the end of 2017.
 Additions of property, plant, equipment
It was recorded as $246.4M, $283.5M and $293.7M at the end of the years 2015,
2016 and 2017 respectively. While a disposal of $19.7M, $13.9M and $152.3M
was recorded in the property, plant and equipment at the end of the years 2015,
2016 and 2017 respectively.
 Additions of other intangible assets
They were recorded as $ 0.2M, $2.5M and null at the end of the years 2015,
2016 and 2017 respectively.
 Additions of software development assets
They were recorded as $19.6M, $17.2M and $18.5M at the end of the years
2015, 2016 and 2017 respectively.
 Acquisition of business
No acquisition of business was recorded in the year 2015, a disposal was
recorded up to the figure of $9.2M and an acquisition of $20.7M was recorded
at the end of the year 2017.
 Government grand relating to property, plant, equipment
Government grant was recorded to be $10.0M, $5.0M and null at the end of the
years 2015, 2016 and 2017 respectively.
Net investing cash flows
The net investing cash flows were recorded as $321.4M, $189.8 and $182.6M
at the end of the years 2015, 2016 and 2017 respectively.
3. Financing cash flows
 Proceeds from issue of ordinary subsidiary (net)
They were recorded as $646.8M, null and $351.2M at the end of the years 2015,
2016 and 2017 respectively.
 Corporate Accounting 8

 Proceeds from borrowing

They were recorded as 167.6M, $589.5M and $473.1M at the end of the years
2015, 2016 and 2017 respectively.
 Borrowings repaid
They were recorded as $371.3M, $339.8M and $460.6M at the end of the years
2015, 2016 and 2017 respectively.
 Dividends paid
They were recorded as $320.7M, $340.0M and $345.8M at the end of the years
2015, 2016 and 2017 respectively.
Net financing cash flows
The net financing cash flows were recorded as $122.4M, $438.5M and $684.5M
at the end of the years 2015, 2016 and 2017.
4. Cash and cash equivalents held at the end of the year
They were recorded as $1,237.4M, $1,377.0M and $1,036.3M at the end of the years
2015, 2016 and 2017 respectively (2016, pp. 1-18).
Fonterra shareholder’s funds limited
1. Cash flows from operating activities
 Sale of economic rights for Fonterra shares
It was recorded as $71M, %142M and $110M in the years ending on July 31st
2014, 2015 and 2017 respectively.
 Dividends received (net of dividends reinvested)
It was recorded as $22M, $17M and $38M in the years ending at July 31st 2014,
2015 and 2016 respectively.
 Purchase of economic rights of Fonterra shares
They were recorded as 483M, $130M and $144M in the years ending at July
31st 2014, 2015 and 2016.
Net cash flow from operating activities
They were recorded as $10M, $29M and $4M in the years ending at July 31 st
2014, 2015 and 2016 respectively.
2. Cash flows from financing activities
 Proceeds from issue of units
They were recorded as $83M, $130M and $144M in the years ending at July
31st 2014, 2015 and 2016 respectively.
 Corporate Accounting 9

 Outflows on redemption of units

They were recorded as $71M, $ 142M and $110M in the years ending at July
31st 2014, 2015 and 2016 respectively.
 Distributions paid to unit holders (net of dividends reinvested)
They were recorded as $22M, $17M and $32M in the years ending at July 31st
2014, 2015 and 2017 respectively.
Net cash flows from financing activity
They were recorded as $10M, $29m and $4M in the years ending at July 31 st
2014, 2015 and 2016 respectively.
3. Cash and cash equivalents recorded at the end of the year
They were recorded as null in the years ending at July 31st 2014, 2015 and 2016
respectively (2018, New Zealand Herald).

(IV) Comparative analysis of Operating, Investing and financing cash flows

Coca-Cola Amatil Limited
The net operating cash flows of Coca-Cola Amatil went downward at the end
of 2016 while they again raised at the end of the year 2017. There investing cash flows
kept on decreasing with each passing year while their financing cash flows increased
with each passing year. With each passing year the investment required was less while
the financing kept increasing.
Fonterra Shareholders’ Funds limited
The cash flows of Fonterra’s operating and financing activities were recorded
to be similar over the three consecutive years and they first faced an incremental shift
in the year 2016 as compared to that of 2015 and then declined in the year 2017 again.

(V) Comparative Analysis of Coca-Cola Amatil and Fonterra shareholders’ funds

limited
If we compare the cash flows statements of both these companies, it can be
analyzed that Coca-Cola Amatil is facing a decline at first and then an incremental shift.
While Fonterra has faced an incremental shift first and then a decline.
 Corporate Accounting 10

Other Comprehensive Income Statement

(VI) Items of Other Comprehensive Statement

Coca-Cola Amatil Limited
1. Items to be reclassified into the income statement in subsequent periods
 Foreign exchange differences on translation of foreign expenses
 Cash flow hedges
 Income tax effect relating to cash flow hedges
2. Items not to be reclassified into the income statement in subsequent periods
 Actuarial valuation reserve
 Income tax effect
3. Total other Comprehensive income of the year (2015, pp. 1-19).

Fonterra Shareholders’ Funds Limited

There are no items in the other comprehensive income statement of this company.

(VII) Reporting of items

The above mentioned items under the heading of Coca-Cola have been added in the
other comprehensive income statement because they are not the usual items that are a part
of regular operations of the company. According to the international set standards of
finance and accounting, the items that may do not come under the operations of an
organization shall not be mentioned in the income statement and instead of it a separate
statement shall be prepared for them named as Other Comprehensive Income Statement. If
the company would have added these items in the general income statement, it would have
affected the overall, calculations of the profits and losses.

While the other company Fonterra Shareholders fund limited do not possess any such
items to be listed under other comprehensive income statement.

(VIII) There are no items listed in the other comprehensive income statement in the
financial report of the Fonterra shareholders’ funds limited because they do not have any
source of income other than their regular operations. While if the items from the other
comprehensive income statement of Coca-Cola Amatil limited have been listed in the
 Corporate Accounting 11

regular income statement, it would have affected the distributions of dividends and shares,
etc.

(IX) Yes, they should be counted while evaluating the performance of the managers
of the company, as they are also a part of income earned by the functions carried out within
the organization by the managers.

Accounting For Corporate Income Tax

(X) Income Tax Expense

The income tax expense of the Coca-Cola Amatil limited in the latest financial
statement (2017) was recorded as $148.6 M while it was recorded nil in the latest financial
statement of Fonterra (2016) because the fund has selected to be a ‘foreign investment
variable-rate portfolio investment entity.’ And because of this election income is taxed in
the hands of unit holders and fund itself has no tax expense.

(XI) Effective Tax Rate

The effective tax rate of the Coca-Cola Amatil according to the latest financial
statement (2017) can be calculated by dividing the income before tax (i.e. $609.6M) income
tax expense (i.e. $148.6M) and is equal to (4.1%). While it would be null for Fonterra.

(XII) Deferred Tax Liabilities/ Assets

Deferred tax liabilities/assets in the balance sheet of Coca-Cola Amatil limited 2017 is
recorded as $283M. The purpose of listing it in the balance sheet is that it has to be excluded
from the total income of the company before the distribution of dividends, etc. In the recent
balance sheet of Fonterra 2016, no deferred tax assets/liabilities is recorded because income
tax is not applicable to this company.

(XIII) Cash Tax Amount

The cash tax amount for Coca-Cola Amatil (2017) is $258.10M while for Fonterra, it
is null as tax is not applicable to this company.

(XIV) Cash Tax Rate

The cash tax rate for Coca-Cola Amatil (2017) is $4.021M %. While for Fonterra it’s
null.
 Corporate Accounting 12

(XV) Cash tax amount is different from the book tax amount because cash tax amount
only comprises of the actual taxes paid to the government while book tax amount is the amount
listed on the financial statements of the companies for providing a detailed view of company’s
position to the stakeholders.
 Corporate Accounting 13

References

Andrea, F 2012, 'Fonterra shareholder fund 'a Trojan horse'', Southland Times, The, p. 015.

Coca-Cola Amatil Limited', 2017, pp. 1-27.

'Coca-Cola Amatil Limited', 2018, p. N.PAG.

'Coca-Cola Amatil Ltd', 2015, pp. 1-19.

'Coca-Cola Amatil Ltd', 2016, pp. 1-18.

'First NZ Capital grows darker on Fonterra', 2018, New Zealand Herald.

'Fonterra Co-operative Group Ltd', 2018, pp. 1-39.