Provision For Income Tax And Deferred Tax Liabilities Accounting Essay

Published: Last Edited:

This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

Company objective: the main agenda of this group was to increase its income stream for its shareholders which were in the form of fully franked dividends. This group also wants to establish themselves as a strong contendent in austrakian investment market.

Business strategy: this group is already a big name in investment market. Now they plan to invest a long term investment in companies and importance comportment securities by concentrate on Australian market. This group strategy in future is to spend time and money in strong businesses with tough background and having high distribution growth.

3.0 Company's equity

The main elements of company's equity are:

Share capital

Revaluation reserve

Realised capital gains reserve

Retained profits

3.1 share capital: Shares capital is defined as the total amount that is invested by different shareholders of the company. In the year 2008 brickworks ltd company had $322,915,000 of share capital which was only about $268,834,000 in the previous year.

3.2 revaluation reserve :the revaluation reserves are used to record the increments and decrements on the revaluation of the investment collection. In 2008 the bki total value of revaluation reserves were $67,381,000 which were $100,080,000 in 2007.

3.3 realised capital gains reserve:

these reserves are used to records the profit and loss after valid taxation . capital gain reserve for bki group had $6048,000 in 2008 which is far more then in 2007.

3.4 retained profits: Retain profit is reflected in the balance sheet under the Liabilities and Owner Equity section. Specifically it is a line item in Owners equity separated from Capital stock .Retained Profit or Retained Earning reflect the historical profitability of the company from inception and is the accumulation of current earnings or loss since the company started operations.

In 2008 Bki group earned retained profit worth $15,079,00 .

4.0 debt structure: Debt is the amount that is billed by a firm to others; it comes in various forms,it can be gifts,bonds, loan, or mortgage etc. in other words its Debt structure of liabilities of a company.

The liabilities of bricksworks company ltd include:

Total current liabilities:

Trade and other payables


Current tax liabilities


Total current liability


Total Non current liabilities:

Deferred tax liabilities


Total non current liabilities



4.1 Source of external financing

External financing means the funds is given to the companies by outsiders, bricksworks ltd had no liability because this group did not took any external source of financing.

5.0 Provision for Income tax and deferred tax liabilities

Provision for income tax is a "sketchy income tax liability , though taxes are rewarded according to a timetable given by the government and the certain liability may be accrued, the provision gives an indication of the company's effective tax rate which is used by analysts to compare and measure effective management and profitability".

An income tax expense or revenue for the period is the tax payable on the current period's taxable income based on the national income tax rate for each authority adjusted by changes in deferred tax assets and liabilities attributed by provisional differences between the tax bases and their carrying amounts in financial statements and to unused tax losses. (Leo, Hogget, Sweeting & Radford 2008).

Brickworks ltd in balance sheet and income statement do not show the provision for income tax expense but the company has income tax expense for the current year which is $819,000(

The main difference between the taxes and book value of liabilities and assets which are redeemed as tax liabilities are known as deferred tax. If the taxes are deductible in future for taxation purpose

Brickworks have The deferred tax liabilities in year 2008 is $30811000 but this liability in previous year was quite high about$43,777,000.The company decrease its deffered tax liability in 2008 (

6.0 Key elements in fixed (non-current) assets:

The few elements which comprises of noncurrent fixed assets are:

Property, Plant and equipment.

Intangible assets.

6.1 Property Plant and Equipment

Plant and equipment is measured at cost less accumulated depreciation and impairment losses. The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from those assets. The recoverable amount is assessed on the basis of the expected net cash flows which will be received from the assets employment and subsequent disposal. The expected net cash flows have not been discounted to present values in determining recoverable amounts. (Leo, Hogget, Sweeting & Radford 2008).

The fixed assets of brickworks ltd has…………………………………

Theis group earned total revenue of $22,013,000 in 2008. which includes

Rebateable dividends:

- other corporations 16,410,000

Rebateable dividends - special:

- other corporations 892,000

Non - rebateable dividends:

- other corporations 537,000

Trust distributions:

other corporations 289,000

Interest income -

bank deposits 3,731,000

Other revenue 5 000

Total Income 22,013,000



The depreciable amounts of all fixed assets are depreciated over their estimated useful lives, commencing from the time the asset is held ready for use. Depreciation is the other assets that are calculated using the straight-line method to allocate their cost, net of their residual values, over their estimated useful lives.

((Leo, Hogget, Sweeting & Radford 2008).

6.2 Intangible assets

The assets which do not have the monetary value and are without the physical appearance are known as intangible assets. Example goodwill, company's brands and the software etc (Leo, Hogget, Sweeting & Radford 2008).


Goodwill represents the excess of the cost of an purchase over the fair value of the Company's share of net identifiable assets of the acquired entity at the date of acquisition. Goodwill is not amortised but is tested annually for impairment or more frequently if events or changes in circumstances indicate that it might be impaired. Goodwill is carried at cost less accumulated impairment losses. (Leo, Hogget, Sweeting & Radford 2008)

Discount on acquisition

Discount on acquisition represents the excess of the fair value of the Company's share of net identifiable assets of the acquired business over the cost of acquisition at the date of acquisition. Discount on acquisition is recognised in the income statement in the period in which it is incurred.

7.0 Summarisation of company's financial operations

if we consider company,s income statement we can easily judge the financial condition of any limited company.income statement is a statement which gives the whole records of company,s financial position.

Slater & Gordon ltd financial operation during financial year 2008 includes retained earnings, dividend distribution, changes in capital etc. In the year 2008 brickworks ltd earned profit of $22576,000 after tax which was $14,930,000 in 2007.

This group paid about $15,426, 000 dividends to its shareholders in the year 2008. The fully Interim franked dividend at the tax rate of 30% for 2008: 3.0 cents per share (2007: 2.6 cents per share) Strong revenue and earning growth contributed $15,079,000 to company's retained profits. brickworks ltd continuously increasing profit indicates that the company has strong position in the financial market ( )


To sum up it is clear that by looking the financial situation of the Slater & Gordon Company in the year 2008 the company's profit has increased. The report generated on the basis of company's financial report gives the overview of the company's performance by discussing various topics like company's equity, debt structure, external financing, provision of income tax and deferred tax liabilities etc. the overall performance of the company is higher than the previous year 2007 because of high income and revenue. The company has improved its performance constantly over years and it's still focussing on to get the best productivity out of its all resources.