Posted: September 13th, 2017

Financial reporting and fair taxation: Why does Australia require income tax disclosures beyond AASB 112?

Paper, Order, or Assignment Requirements

 

 

Financial reporting and fair taxation:
Why does Australia require income tax
disclosures beyond AASB 112?

NOTE : General Information
– Follow the “Detailed Instruction” information in PAGE 2 
– Using Harvard Referencing, at least 8 sources ( See Harvard referencing file as guideline)
– Using several references given in “Reference sources” as the sources options ( last page)

– Background

In recent times, there has been an ongoing public debate about tax avoidance by large,
multinational companies worldwide leading to the OECD Base Erosion and Profit
Shifting project (OECD 2015) which was endorsed by the G20 governments, including
the Australian government. One of the key proposals resulting from the project is to
increase tax transparency (Ting 2014, paras 1-3). In 2013, the Australian legislator
amended the Taxation Administration Act 1953 requiring the Australian Taxation Office
(ATO) to disclose every year publicly the total income, taxable income and income tax
payable of corporate tax entities with a total income of $100 million or more. The first
ATO report for the financial year 2013-14 is expected to be released on the ATO
website in November/December 2015 (ATO 2015).

– Choose 2 company based on Australia like woollies etc..that fulfill the criteria**

• First company as your company (the main company )
• Second company (another company just to compare with )

**You need to select a suitable company by yourself. Apart from being incorporated in
Australia, your company must have a profit before income tax of at least $100m in
their consolidated financial statement for the financial year ending 2014. Since we
cannot know (yet) the total income 2013-14 as reported to the ATO, we assume that
these requirements ensure your company meets the tax disclosure threshold. These
requirements should also mean the company’s financial reports are audited, publicly
accessible and fully compliant with AASB

QUESTION!!!!!!!
You now find yourself working in the financial reporting unit of a large company (Main company) with headquarters in Australia*. The CEO of your company has no accounting experience and is quite confused about this new disclosure requirement. She/He was in the belie fthat AASB 112 already requires your company to disclose taxable income and income tax payable publicly in the financial reports.

Required:
1. Summarise the current disclosure requirements of AASB 112 that may provide an
indication of the ‘ATO taxable income’ and the ‘ATO income tax payable’ which are
now to be publicly disclosed as explained above [Note: ‘income tax payable’ in the
ATO sense may be named differently in AASB 112; for part a. refer to paras 79,
80, 81 (c), and 84-86 only of AASB 112]. (15 marks)

2. Based on the income tax information as disclosed in the latest financial report of
your company, explain why the Australian legislator believes there is a need for the
additional ATO disclosures as explained above. (15 marks)

3. By using a suitable example of another company (Second company, just to compare with) which already discloses tax information beyond the AASB 112 requirements, provide recommendations how your company (main company) could proactively respond to the additional ATO disclosures.(10 marks)

Detailed Instructions
Requirements for the report:

Structure: The report requires the conventional structure of a professional/
technical report, including the following components (in this order):

(1) a self-created report cover page* (including name of your selected
company, topic under investigation, addressee [who is reported to],
prepared by [Name, Student ID], date and word count),
(2) a table of contents,
(3) an executive summary (not more than 1/2 a page),
(4) an introduction (no subheadings, single paragraph),
(5) discussion (requirements a. and b.),
(6) conclusion/recommendations (requirement c.),
(7) a list of references (including [working!] online links to all company
information that you have used and referred to in your report).