Analysis of Annual Reports of BHP Billiton Limited and South 32 Limited

Accounting
Assignment

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By student name
Professor
University
Date: 23rd Sep 2018.
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Executive Summary
This report consists of analysis of annual reports of 2 companies listed under Australian stock
exchange. Meaning of each item of cash flow statements along with each line item of equity for
2015, 2016 and 2017. The report compares equity and debt of both countries along with the
preparation of comprehensive income statement with income statement and discusses changes
in the comprehensive income statement. The reason behind including the above for evaluation
of the employees and comparative analysis of same over the analysed period is given. Finally
tax expenses, effective corporate tax rate, total taxes paid and deferred tax assets and liabilities
of both companies are included in corporate income tax accounting.
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Contents
Introduction......................................................................................................................................4
Analysis...........................................................................................................................................5
References......................................................................................................................................10
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Introduction
BHP Billiton Limited, world’s largest mining company is listed under Australian stock exchange
and deals in mining, metal and petroleum industry. Also listed under New York stock exchange,
London stock exchange, Johannesburg stock exchange and Financial Times stock exchange 100
operates globally and employs more than 65000 people. It is the third largest revenue earning
company in Australia (Alsagoff, 2010).
The other company analysed in this report is South 32 Limited which is listed under
Johannesburg stock exchange and London stock exchange along with the Australian stock
exchange deals in mining and metallurgy. The chief producer of zinc, nickel, aluminium,
alumina, silver, thermal coal, lead, manganese and cooking coal employees more than 15000
people.
Owner’s Equity
1. The money invested by the shareholders in the company is known as Owner’s Equity
which has higher returns in comparison to debt capital and is more risky. Distributable to
the shareholders this equity contains preference shares, equity shares, dividend, net profit
and different types of reserves (Giacomo, et al., 2013).
The components of equity can be described as follows:
 Share Capital: The money invested by the owners of the company is known as share
capital. These are generally traded in the market in the form of small denominations
called shares. An overall decrease in the shares of South 32 Limited was seen due to
the buyback of shares in 2017. The share capital of BHP Billiton Limited remained
same throughout the analysed period.
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 Retained Earnings: The total undistributed profits of the company which can be used
by the company for dividend distribution is known as retained earnings. South 32
Limited paid dividends for both 2016 and 2017 although the company faced huge
losses in 2016 which depreciated the already negative balance of retained earnings
but the same increased in 2017 because of the accumulated profits of $1231 Mn. BHP
Billiton also paid dividend in 2016 in spite of incurrence of losses which led to an
overall decrease in the balance of retained earnings. The company earned profits in
2017 and also paid dividends from the same (Durtschi, 2004).
 Reserves: Consisting of forfeited employees share awards, comprehensive income of
the year and employee share awards net of employee contribution and unexercised
awards, reserves are the undistributed profits of the company. Due to awards and
losses in comprehensive income statement, it decreased drastically in 2017 for BHP
Billiton Limited but remained almost constant for the remaining period. It also
remained constant for South 32 Limited throughout the analysed period (Antle &
Smith, 1985).
 Treasury Shares: Mainly allotted in the form of ESOPs or dividend reinvestment plan
to the employees, Treasury shares can be purchased by ESOP trusts which later on
pays to the employees. Treasury shares has decreased for BHP Billiton Limited over
the past 3 years due to which exercise of option by the employees is lower than
purchases made by ESOP trusts (Coate & Mitschow, 2017).
 Non- Controlling Interest: Shareholders having no control over the decisions of the
company and owns less than 50% shares are also known as Minority interest whose
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