Corporate Accounting: Analysis of Financial Statements of Ausdrill Ltd and Rio Tinto Ltd

This report analyzes the financial statements of Ausdrill Ltd and Rio Tinto Ltd for three years. It includes a comparative analysis of cash flow statements, effective tax rate, and tax structure. The report also discusses the equity and debt capital structure of both companies.

Running head: CORPORATE ACCOUNTING
Corporate Accounting
Name of the Student:
Name of the University:
Author’s Note:

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Executive Summary
The primary reason for this evaluation is to investigate the financial statements of two
organizations for a time of three years. The organizations which are chosen for this
discussion are Ausdrill ltd and Rio Tinto Ltd. The assessment breaks down various
components which are disclosed in the yearly report, for example, the income tax expense.
The evaluation in dept analyses the income articulation of both the organizations keeping in
mind the end goal to under the cash flows of the business amid the year. The analysis leads to
a comparative analysis of the cash flow statement between Ausdrill ltd and Rio Tinto Ltd.
The evaluation of Effective tax rate and Cash and Book tax rates and furthermore a
clarification of the tax structure and tax expenses of both the organizations.

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Table of Contents
Introduction................................................................................................................................3
Discussion..................................................................................................................................4
Owner’s Equity......................................................................................................................4
Position of Capital Structure for both the organization.........................................................5
Analysis of Cash Flow Statement..........................................................................................6
Comparison of the three Components in the Cash Flow Statement.......................................8
Insight of Cash flow Statement..............................................................................................9
Other Comprehensive Income Statement Analysis................................................................9
Reporting of Comprehensive Items.....................................................................................10
Comparative Analysis of Comprehensive Items..................................................................10
Accounting for Income Tax.................................................................................................10
Effective Rate of Tax...........................................................................................................11
Deferred Tax Assets and Liabilities.....................................................................................11
Cash Tax Amount and Rate of Both Company....................................................................12
Difference between Book Tax Rate and Cash Tax Rate......................................................12
References................................................................................................................................12

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Introduction
The primary motivation behind this evaluation is to examine the financial statements
of two organizations that operates in similar industry and has comparable level of business
operations. The two organizations which are chosen for this analysis are Ausdrill Ltd and Rio
Tinto Ltd which are both engaged in extraction and mining and of mineral assets. For the
analysis the yearly reports of the two organizations are taken. The analysis includes the
various components of the financial statements and furthermore makes a comparison between
the two organizations and find out the better reporting components of the yearly reports.
The company Ausdrill Ltd is occupied with the operations of extricating minerals and
mining business in Australia. The primary operations of the organization are in Australia but
the business has additionally extended to specific zones of Africa and United Kingdom
(Ausdrill.com.au. 2018). The organization has some expertise in mining administrations,
review control and drill and blast investigation projects. The organization additionally utilizes
a critical number of representatives in the business and the incomes of the business are
continually improving.
On the other hand the Rio Tinto Ltd is viewed as one of the main organizations in
Mining industry and has its beginning as an Anglo-Australian organization which has a larger
part of its functions in Australia. The organization is known for its mining exercises and is a
main metals producer in Australia. The organization deals with iron ores, coal, copper,
uranium and precious stones. Additionally, the organization is additionally occupied with the
operations of refining bauxite and various different minerals (Riotinto.com. 2018).
The primary motive of the analysis will be to break down the yearly reports of both
the organizations for last three continuous years beginning from 2017. The evaluation

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additionally demonstrates examination and investigation of the components that appear in the
yearly reports (Bryce, Ali and Mather 2015). The significant areas that are covered from the
annual reports the companies include equity capital, cash flow statements, disclosures and tax
treatments. Moreover, calculations regarding effective tax rate and other tax computations are
done in this report.
Discussion
Owner’s Equity
The owner equity represents the equity capital and businesses retained earnings which
are utilized for financing the operations. The yearly report of 2017 is considered for both the
organizations to analyze the equity of owners of the business. As per the yearly report of
2017 for the Ausdrill Ltd, in the balance sheet, the owners equity appears. The owner’s equity
contains retained earnings, other reserves and contributed equity. The contributed equity
identifies with the share capital which the organization has gathered by issuing to the people
in general. The owner’s equity of the business for the year 2017 is appeared to be $
546,447,000 which is same as the figure that appeared for past years. There have been no
adjustments in the figure of value according to earlier estimates (Saito 2016). The retained
earnings of the business refers to the profits which are kept aside either for reinvesting the
same in the business or meeting certain future commitments. The retained earnings of the
business for the year 2017 have essentially expanded in contrast with earlier year and the
same is appeared to be $ 121,444,000. The estimate which appeared for 2015 is $ 38,027,000
(Ausdrill.com.au. 2018). Hence, there is a general pattern which demonstrates the rise in the
profit of the business. This may occur because of the change in profit of the business and
because of changes in the working structure of the business. The reserves of the business are

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appeared is negative, this represents that the accumulated losses of the business which are
from earlier year.
Then again, the owners equity which is appearing in the yearly report of the business
for 2017 includes the share capital of the business, share premium, held income and stores.
The share capital for the business for 2017 contains owners equity Rio Tinto Limited (Suzuki
2015). The share capital speaks to the assets which are utilized by the business to meet the
commitments of the business. The share capital of the business is appeared to be US$ 4,140
million which has altogether enhanced in comparison with earlier year. This is because of the
way that the organization has issued certain number of offers amid the year with a specific
end goal to draw capital from the same. The held income of the business is appeared to be
US$ 23,761 million (Riotinto.com. 2018). The retained earnings of the business have
additionally expanded which is because of increase in the profit making capacity of the
business. The yearly report additionally demonstrates that the profit reserves of the business
are for meeting any future commitments of the business.
Position of Capital Structure for both the organization
The Ausdrill ltd’s capital structure of according to the balance sheet the business for
the year 2017 is appeared to be more depending on equity capital than the debt capital of the
business. The obligation capital is appeared to be $ 385,815,000 for the year 2017 and the
same was $ 395,019,000 of every 2016 as appeared to be determined sheet of the
organization for 2016 which demonstrates that the administration of organization repayed the
advance amid the present year. If there ids an occurrence of share capital, the business has
expanded the share capital of the business amid the year as appeared in the balance sheet of
the business. The borrowings of the business for the year 2015 are appeared to be $
407,307,000 which is higher than estimation of 2016 (Ausdrill.com.au. 2018). The

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examination for three years uncovers that the administration is systematically reducing the
debts of the business and accordingly concentrating on application of more equity capital.
On account of Rio Tinto Ltd, the balance sheet of the organization for the year 2017
demonstrates that the borrowings of the business are US$ 15,148 million which is lower than
the estimate which is appeared for the year 2016 which is US$ 17,470 million. The
borrowings of the business for the year 2015 are appeared to be US$ 21,140 million which is
more than debt capital which is appeared for 2016 (Bryce, Ali and Mather 2015). This
represents that the administration of the organization is required to pay off the debt capital of
the business on step by step basis. The organization has additionally equity capital which is
appeared in the yearly reports of the business amid the year that amounted to US$ 4,140
million for 2017 and the same was US$ 3,950 million of every 2015 which demonstrates that
the administration of the organization wanted to expand the equity capital in the business’s
capital structure (Riotinto.com. 2018). The administration of Rio Tinto Ltd is attempting to
expand the value capital of the business and is depending more on debt capital of the
business.
Hence, the examination of the equity and debt capital which is utilized by both the
organizations shows that Ausdrill ltd is more dependent on utilizing the debt capital for
financing the business activities while then again the administration of Rio Tinto ltd is
depending more on equity capital as the business is trying to pay off the debt capital which is
utilized by the business (Schaltegger and Burritt 2017). In any case, in current situation, the
administration of Rio Tinto ltd is utilizing more debt capital than the equity capital of the
business.

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Analysis of Cash Flow Statement
The cash flow statement speaks to the monetary position of the business and exhibits
every activity which is either a cash inflow or a cash outflow for the business. The income
statement of Ausdrill ltd demonstrates cash from working exercises which includes basically
money receipts which the business gets from operating activities of the business and
furthermore money payments which are made by the Ausdrill from its suppliers. Another
vital thing which is incorporated in the statement of cash flow is the businesses income tax
paid amid the year. The total cash flow for the year 2017 is appeared to be $ 94,613,000
which has expanded from 2016 that was $ 91,006,000. The receipts from the clients and
furthermore the payments which are made to the suppliers of the business have expanded
based on appraisals of 2016 which demonstrates that the level of activities of the business has
significantly expanded. The investing activities cash flow of the business adequately
demonstrates that primary income amid the year is from the purchase of property, equipments
and plants amid the year which is appeared to be $ 147,418,000 (Scholes 2015). The outflow
of cash recommends that the administration has invested huge amounts in assets amid the
year. The income from financing activities incorporates different reimbursements which are
attempted by the business amid the year, for example, borrowings repayment, Hire purchase
repayments and furthermore the dividend paid to the investors of the company. The net cash
and cash equivalent which is appeared for the year 2017 is appeared to be $ 166,710,000 and
the same is appeared to be $ 181,157,000 for the year 2016. Accordingly, the cash balance of
the business has somewhat fallen in contrast with earlier year results. The representation of
the cash flow of Ausdrill ltd:
Particular 2015 2016 2017
Net cash flows from operating activities 117936 91,006 94,613
Net cash flows used in investing activities -738 -60,853 101,127
Net cash flows used in financing activities -104693 47,772 6,965

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According to the cash flow which is set up by Rio Tinto ltd, for the FY 2017 the cash
from the operating activities is appeared to be US$ 16,670 million which is higher than the
figure which is appeared for FY 2016 which recommend that the operations of the business
has risen (MacQueen, Bergevin and Mitchell 2016). The specific item which is appeared in
the operating activity cash are Dividends from equity account units and the expenses of tax
which the business brings about amid the year. The net cash which is produced from
operating activities of the business is appeared to be significantly higher than any of 2015 or
2016 assessments. The amount is US$ 13,884 million (Bieber 2016 Bieber 2016). The
money from investing activities of the business which was shown for the year 2017 include
purchase of properties, equipments and plants and purchase of financial assets. The cash flow
from financing activities of the business for the FY 2017 tells us that the cash outflows has
taken place due to loans repayments, shares buyback and payment of dividend during the
year (Mohanram, Saiy and Vyas 2018). The total cash balance has significantly increased in
comparison to analysis of the previous year. The net cash is shown to be US$ 10,547 million
for the year 2017 and the same figure is shown to be US$ 9,354 million in 2016. Therefore,
the rise in the cash can be identified from the analysis of the organizations statement of cash
flow. The representation of the cash flow of Rio Tinto ltd:

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Particular 2015 2016 2017
Net cash flows from operating activities 9383 8,465 13,884
Net cash flows used in investing activities -4600 2,104 2,373
Net cash flows used in financing activities -7670 7,491 9,141
Comparison of the three Components in the Cash Flow Statement
The statement of cash flow of both the organizations which are appeared in yearly
reports of the business are viably arranged considering the format of the three activities that
includes cash from operating, investing and financing activities. The money from operating
activities of the business is appeared to be $ 94,613,000 in the FY 2017 and the same is
appeared to be $ 91,006,000 for 2016 which demonstrates that the money from the operations
of the business has enhanced (Hribar and Yehuda 2015). The money from business
operations for the year 2015 is appeared to be $ 117,936,000. On the other hand, the cash
from of Rio Tinto Ltd for the year 2017 is appeared to be US$ 13,884 million and US$ 8,465
million for the FY 2016 while for FY 2015 is $ 9,383,000. The money from operating
activities demonstrates that the figure appeared for 2017 is more for Rio Tinto Ltd in contrast
with Ausdrill Ltd. This might be because of the higher scale of operations business. The
money from investing activities of Ausdrill Ltd for the year 2017 is appeared to be negative
and the figure is appeared to be $ 101,127,000 which is due to the payments which has taken
place for t purchasing of the assets. The income for Rio Tinto ltd for the year 2017 is likewise

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appeared to be negative which is additionally because of the expanding amount of payments
for business purchases. The cash from investing activities of the business is appeared to be
better in case of Ausdrill Ltd. The cash from financing activities of the business essentially
involve loans repayments higher purchase agreements (Epstein 2018). The income from
financing exercises is appeared to be in negative which is $ 6,965 million for the year and the
same has enhanced from the previous year. On account of Rio Tinto ltd, the financing money
from tasks is appeared to more which implies that the organization has made many cash
payments amid the FY.
Insight of Cash flow Statement
The cash generated from the operations of the two companies represents that there is a
rise in cash from operations that denotes an enhancement of the operational efficiency of the
business. However the cash which is generated from operations is more appropriate for Rio
Tinto ltd as compared to Ausdrill ltd after the analysis. The cash from investing activities are
same as both the companies has an essential amount of cash flows related to purchases of
property, plant and equipment and loans repayment. The net cash from investing activities for
both the companies is negative (Mohanram, Saiy and Vyas 2018). The cash from financing
activities includes loans and dividends. The total cash generated by the companies is more for
Rio Tinto Ltd as compared to Ausdrill Ltd.
Other Comprehensive Income Statement Analysis
The comprehensive income statement involves the items which are not appearing in
the statement of profit or loss of the business. In case of Ausdrill ltd the items includes, trade
gains on exchange related to operations of foreign and is $ 882,000. There is additionally a
income which the business has obtained from joint ventures. Furthermore, gains on
revaluation on assets can also be identified (Wahlen, Baginski and Bradshaw 2014).
According to the yearly report of Rio Tinto for the year 2017 shows actuarial gains and

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adjustments which are made to tax on various post-retirement plans. The business likewise
represents loss and gains on revaluation and cash flow hedge gains, which are sale of variable
stock of the business.
Reporting of Comprehensive Items
The items are independently demonstrated and excluded in the P/L statement as they
are of extraordinary nature as they are not related to the regular operations of the business
(Weber 2018). The items are reported generally for disclosing all the business activities
during the year and therefore cannot be reported in the statement of P/L, and shown in the
Comprehensive Statement of Income.
Comparative Analysis of Comprehensive Items
According to the yearly reports of Ausdrill Ltd, comprehensive income sources the
business are trade gains foreign operations of the business which is appeared to be $ 882,000.
The business has encountered loss on revaluation of assets which are appeared in the yearly
report of the business amid the year. The yearly report of Rio Tinto ltd indicates actuarial
gains, adjustments of tax and deferred tax retirement benefits which are appeared in the
yearly report of the business amid the FY (Kothari, Ramanna and Skinner 2015). The
examination demonstrates that the extraordinary items are more in case of both Rio Tinto Ltd
than on account of Ausdrill ltd according to the yearly reports. . In both the cases, if the items
are included in the statement of profit and loss hence the net profit of the business will either
increase or decrease the income of the business.
Accounting for Income Tax
The expense of income tax of the business is shown for Ausdrill ltd for the FY 2017 is
shown to be $ 13,885,000 that has slightly increased from the previous analysis which is
represented to be $ 4,581,000 for the FY 2016 (Epstein 2018).

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The expenses of income tax of Rio Tinto Ltd is represented in the annual report of the
business for the year 2017 which is $ 3,965 million and the same was shown to be $ 1,567
million for 2016.
Effective Rate of Tax
Particulars Ausdrill Ltd Rio Tinto Ltd
Income Tax Expense 13,885,000 3,965,000,000
Earnings Before Tax 45,328,000 12,816,000,000
Effective Tax Rate 30.63% 30.94%
Computation of Effective Tax Rate
The effective rate of tax refers to the aggregate tax rate at which the business profits
are taxed and the computation of effective tax rate is shown in the figure above. The effective
rate of tax of Ausdrill ltd and Rio Tinto Ltd is represented in the above figure which is
30.63% and 30.94% ( Campbell 2015). Hence, it is clearly observed that the effective rate of
tax of Rio Tinto Ltd is improved than Ausdrill ltd and the same is higher.
Deferred Tax Assets and Liabilities
Deferred tax liabilities and assets shapes significant part of the financial statement of
the organization which is recorded at the year- end closing of accounts books and the same
has affects on the income tax which is appeared in the statement of Profit and loss. The
deferred tax of Ausdrill ltd is appeared to be 4 36,372,000 for the year 2017 and the same is
reduced in contrast with the previous year examination and the deferred tax liabilities of the
business is appeared to be $ 22,077,000 for the year 2017 which has additionally lessened in
contrast with the analysis of earlier year (Penman and Yehuda 2015).
In case of the deferred tax assets of Rio Tinto Ltd for the year 2017 is $ 3395 million
for the FY which has also decreased as compared to the analysis of previous year. The

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deferred tax liabilities for the FY 2017 are 3628 million and have increased from the
estimates of previous year.
Cash Tax Amount and Rate of Both Company
$ $
Particulars Ausdrill Ltd Rio Tinto Ltd
Income Tax Provison 13,885,000.00$ 3,965,000,000.00$
Add: Increase in DTL 1,507,000.00-$ 507,000,000.00$
Less: Increase in DTA 928,000.00-$ 333,000,000.00-$
Add: Taxes on Finance Costs 9,453,600.00$ 497,400,000.00$
Cash Tax amount 22,759,600.00$ 5,302,400,000.00$
EBIT 76,840,000.00$ 14,474,000,000.00$
Cash Tax Rate 29.62% 36.63%
Computation of Effective Tax Rate
The cash tax rate of Rio Tinto is higher than Ausdrill ltd which is shown in the above
figure which is 36.63% for the year 2017.
Difference between Book Tax Rate and Cash Tax Rate
The principle difference between money book tax rate and cash tax rate and is the
cash tax rate is evaluated on the basis of current year, while in case of book tax rate, it is
evaluated based on both currentt and future year (DeFusco et al. 2015). For the calculation of
cash tax rate, increase in the deferred tax assets and liabilities are considered. However, in the
case book Tax rate, no such consideration like that of cash tax rate is taken in hand.

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