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

Accounting
Assignment

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By student name
Professor
University
Date: 20 th Sep 2018.
Executive Summary
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A brief analysis on the annual report of last 3 years has been done for 2 companies which are
listed in the Australian Stock Exchange. Changes made in each line item of equity has been
analysed for 2015, 2016 & 2017. Analysis of cash flow statement of both the companies along
with the meaning of each item in the cash flow statement and the changes under all 3 categories
has been done. Comparison between the equity and debt in each company is also reflected in this
report. The report states the reason behind preparation of other comprehensive income statement
separately along with the income statement and discusses the changes made in the
comprehensive income statement. The statements have been analysed together to find whether
they should be included for evaluation of performance of employees. Lastly the tax paid by the
companies, the effective corporate tax rate, the deferred tax liabilities and total tax expenses of
both the companies has been highlighted in the accounting for corporate income tax.
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Contents
Executive Summary.....................................................................................................................................2
Introduction.................................................................................................................................................4
Owner’s Equity............................................................................................................................................4
Cash Flow Statement...................................................................................................................................7
Other comprehensive income statement..................................................................................................11
Accounting for Corporate Income Tax.......................................................................................................13
References.................................................................................................................................................16
Introduction
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The company South 32 Limited which is listed under Australian Stock Exchange deals in mining
and metallurgy. The chief producer of zinc, alumina, nickel, silver, lead, aluminium, thermal
coal, cooking coal and manganese has been rising of late in Australia. Also listed under
Johannesburg Stock Exchange and London Stock Exchange, the company employs more than
15000 people (Andiola, et al., 2018).
On the other hand BHP Billiton Limited which deals in mining, petroleum and metal industry is
also listed under Australian Stock Exchange. The company having operations all over the globe
is also listed under London Stock Exchange, Johannesburg Stock Exchange, New York Stock
Exchange and Financial Times Stock Exchange 100. The third largest revenue making company
of Australia & the world’s largest mining company employs 65000 employees.
Overview
A brief analysis on the annual report of last 3 years has been done for 2 companies which are
listed in the Australian Stock Exchange. Changes made in each line item of equity has been
analysed for 2015, 2016 & 2017. An overall analysis of the cash flow statement, income
statement, owneers equity and the overall taxation of the two companies have been taken into
consideration. This will help the investors in analysing which company do they want to invest in.
Owner’s Equity
1. The Owner’s Equity also known as the Owner’s capital is the total sum invested by the
shareholders in the company. There is huge degree of risk in the equity capital because of
which it has higher returns in comparison to the debt capital. Equity shares, Preference
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shares, Retained earnings, Net profit, dividend and different types of reserves are the
components of this equity capital. So these are also distributable to the shareholders
(Appelbaum, et al., 2018).
Each of the items mentioned above can be described as follows:
a) Share Capital: This is the fund invested by the Owners of the company which is
divided into small denominations called shares. These shares are traded in the market
and the buyers of these shares are called the shareholders. The total shares of South
32 Limited have decreased due to the buyback of shares in 2017 whereas there is no
change in the total capital of BHP Billiton Limited over the last 3 years.
b) Reserves: These are the profits earned by the company in past years which has not
been distributed as dividends to the shareholders but are kept aside for some future
endeavours of the business. These reserves also include the amount collected on
forfeited shares and employee share awards net of employee contributions and
unexercised awards. There was no change in the reserves of South 32 Limited in last
3 years and it also remained more or less constant for BHP Billiton Limited (Axelsen,
et al., 2017).
c) Treasury Shares: These are the shares which are generally allotted to the employees
in form of ESOP or dividend reinvestment plan. The ESOP trust purchases these
shares and the employees are later on paid by the company. The Purchase by ESOP
trusts has been more than exercising the option by the employees for BHP Billiton
Limited which resulted in the decrease in the Treasury shares of the company over the
analysed period.
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