With a rapidly growing economy and the multitude of organisations that exist in Australia, there is a great need for consistency and regulation when it comes to accounting. The AASB (Australian Accounting Standards Board), has set out such guidelines known as “accounting standards” which govern how businesses should be recording their financial reports. These range from the recording of share-based payments to agriculture of the business.
There are three main benefits of a business following the standards set out by the AASB.
The first being that investors' interests are ensured as the financial reports that they review are guaranteed to be accurate and genuine. ...view middle of the document...
The second standard being discussed is in reference to income tax which is covered by AASB 112. This will analyse any income tax benefits or obligations that are being incurred by Qantas. This part will also examine whether Qantas is abiding by the accounting standards correctly
The final standard to be discussed will be AASB 8 which covers operating segments. This section will discuss Qantas’ four operating segments: Qantas, Jetstar, Qantas Frequent Flyer and Qantas Freight. This section will also discuss whether or not the recording of these operating segments meet the criteria set out by the accounting standard.
Income Tax Expense
The recording of income tax expense is governed by AASB 112 and can be also be defined as “the amount of income tax that is associated with the net income reported on the company's income statement.” (Accounting Coach, 2013) Income taxes also include withholding taxes. Providing this information allows for better decision making by stakeholder within the business and outside as well. According to this section, the main issue with accounting for income taxes is how to account for the settlement of the carrying amount of assets/liabilities that are recognised in an entity's statement of financial position and also the transactions and other events of the current period that are recognised in an entity's financial statements.
Qantas does meet the requirements of AASB 112. This standard requires that current tax liabilities/assets must be recognised for any current and prior period taxes that are due to be measured at the rates applicable for their period. Qantas proves that it follows this section of AASB 112 in its Notes to the Financial Statements in section “I” as it says that it uses “tax rates enacted or substantially enacted at balance date and any adjustment to tax payable with respect to previous years.” Section 12 also states that current tax for the current period and any prior periods shall be recognised as a liability. However if the amount already paid exceeds the amount due for those periods, the excess shall be recognised as an asset. This section is fulfilled as seen in Qantas' consolidated balance sheet as deferred tax liabilities is listed under non-current liabilities. As there are no current tax assets, it can be assumed that Qantas has not paid an excess amount of tax.
Section 15 of AASB 112 discusses the recognition of deferred tax liabilities and deferred tax assets. Deferred tax liability is the result of temporary differences between a firm's accounting and tax carrying values, the anticipated and enacted income tax rate, and estimated taxes payable for the current year. AASB 112 states that the deferred tax liability will be “recognised for all taxable temporary differences except to the extent that the deferred tax liability arises from the initial recognition of an asset or liability in a transaction which at the time of the transaction affects...