Corporate Accounting: BHP Billiton Financial Report Analysis

This report analyses the financial information of BHP Billiton and provides recommendations for compliance disclosure. It also discusses pre and post-acquisition entries and their adjustment.

Running head: CORPORATE ACCOUNTING
Corporate Accounting
Name of the Student
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Table of Contents
Introduction:...............................................................................................................................2
Part A:........................................................................................................................................2
Answer to 1 A:.......................................................................................................................2
Qualitative characteristics of the relevance and comparability:............................................2
Disclosing environmental reporting practices:.......................................................................4
Explanation of Disclosure of opinion:.......................................................................................6
Recommendations to top management to strengthen compliance in future reporting:..............7
Answer to Part B:.......................................................................................................................7
Answer to question 1:.............................................................................................................7
Answer to question 2:.............................................................................................................8
Answer to question 3:.............................................................................................................9
Answer to question 4:.............................................................................................................9
Answer to question 5:...........................................................................................................10
Conclusion:..............................................................................................................................10
Reference List:.........................................................................................................................12

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Introduction:
In the corporate accounting analysing the financial reports are considered as the vital
element. The financial statement that are provided by the company acts as the tool for
measuring the annual performance of the company. The statement of financial position,
income statement and cash flow statement acts the vital medium of providing the
shareholders with the necessary information regarding the overall performance of the
organization (Crowther 2016).
The present report is based on the understanding of the corporate reporting
environment of the BHP Billiton. The report would be assessing the financial information’s
of the company presented through the information disclosure and would also provide the top
management with the recommendations relating to the compliance disclosure. The report
would further focus on the adjustment related to the acquisition provided in the annual report
of BHP Billiton.
Part A:
Answer to 1 A:
Qualitative characteristics of the relevance and comparability:
The qualitative characteristics of an organizations financial statement is largely
consisting of the comparability, consistency and dependability (Kareiva et al. 2015). The
report presently emphasis on the BHP Billiton comparability and relevance of the annual
reports.
Relevance: The element of relevance of financial report provides that the financial
statements should be relevant to the numerous kinds of needs of an organizations shareholder.
The statement of financial position serves as tool in decision making for the stakeholders and
requires a due care in preparing the financial statements (Boyd and Golden 2016). Relevant

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information contained in the financial statements should not be omitted as this may result in
negative consequences. For BHP financial statements the payment of dividends, total income
and net amount of cash flow are held as important aspects of the company. An illustrations of
the example has been provided below;
Table 1: Table representing Dividend Paid
(Source: BHP Billiton 2018)
Cash Flow Statement:
Table 2: Table representing Dividend Paid
(Source: BHP Billiton 2018)

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Comparability: The comparability aspects of the financial statement is held as the
noteworthy aspects in the preparation of the financial statements (Stent and Dowler 2015).
The financial statements provide the value investors with the useful information in decision
making. Furthermore, the financial statements act as the meaningful tool in identifying the
trends in performance along with the financial health of the organization. There are elements
such as the total assets and the cash flow from the operating activities of the company is
illustrated below;
Summary of Total Assets:
Table 3: Table representing the Summary of Total Assets
(Source: BHP Billiton 2018)
Disclosing environmental reporting practices:
BHP Billiton is regarded as the largest mining company in the world and considers it
as the foremost duty in protecting natural resources of earth. For BHP Billiton the
environmental safety and health is regarded as the important factor and remains integrated
into the daily activities of the business (Crowther 2018). The company is committed to
complying with the laws and regulations of the jurisdictions in which it operates. BHP

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Billiton aims to go past the legal and the regulatory requirements. The company identifies the
responsibilities of minimizing the environmental impact and contributing to the enduring
benefits. BHP Billiton has separate set of segment in their annual statement which is
dedicated towards disclosing the environmental reports. The below listed are the disclosure
that are provided under the heads of the environmental disclosure of the annual reports.
 Under the environmental reporting segment offers information regarding the vital
economic and natural resources namely the water, land and biodiversity.
 The company finances current environmental projects that are associated with the
biodiversity and ecosystem through setting certain specific targets (Eccles and
Serafeim 2014). The company has minimum mandatory requirements for
environmental management that forms the addition to the local regulatory
requirements. The standard requires BHP Billiton to undertake the integrated risk
based approach to manage the impact on land, biodiversity, water and air.
 Climate is considered as one of the important factor for BHP. The company has
aligned with the government and the other non-governmental organizations to
protect the environment (Merkl-Davies et al. 2016). BHP Billiton has implemented
Carbon Disclosure Project that has led to significant reduction as well as
improvement in carbon disclosure project scores over the last two years. The
company in combination with the Taskforce on Climate Related Disclosure has
comprehensively provided the climate related disclosure and the same is stated
below;

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Explanation of Disclosure of opinion:
On analysing the annual report of the BHP Billiton it can be stated that the company
has provided a robust disclosure of the company’s overall performance (Barkemeyer et al.
2015). As the centre part of BHP Billiton involves mining activities the company has
provided a disclosure regarding the numerous features of mining and other environmental
related activities. The major areas covered in the disclosure includes;
a. Taxation and transparency
b. Environmental reports
c. Sustainability reports
d. Detailed disclosure of financial information
e. Report on energy consumption
f. Anti-competitive policy
g. Anti-corruption policy

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As evident from the above stated important disclosure elements BHP Billiton in its annual
statements has provided sufficient amount of disclosure regarding the all the necessary
elements contained in report.
Recommendations to top management to strengthen compliance in future reporting:
Two important recommendations can be provided to the top management as the
measure of strengthening the compliance in disclosure is stated below;
a. A recommendations can be provided to the top management regarding more use of
graphical representation of data relating to the financial performance of the company
(Bianchi Martini et al. 2016). The graphical representation should not only remain
limited to financial aspects but should also cover the environmental and biodiversity
report as well. This will enable the users in better understanding of the both the
financial and non-financial parameters.
b. Another recommendations can be made in the areas of sustainability reporting. This
includes more detailed information regarding the environmental impact and climate
change based on the quantitative as well as the qualitative aspects (Busco 2016). It is
recommended that BHP Billiton should provide a five year tabular representation
regarding carbon disclosure project. This would enable the users of financial
statement to make a comparative analysis and better overall understanding of the BHP
Billiton environmental related activities.
Answer to Part B:
Answer to question 1:
There are numerous vital aspects that are associated with the pre-acquisition entities
while preparing the consolidated financial statements. Below listed are some of the important
considerations;

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a. To avoid counting the assets twice of the concerned company.
b. The pre-acquisition entries helps in preventing the counting of equities twice of an
organization.
c. With the objective of identifying any form of gain or bargain procurement for an
organization.
Answer to question 2:
There are namely two major conditions that requires sufficient attention at the time of
paying dividend during the acquisition date of an organization. The below listed are the two
criteria’s;
a. Cum Dividend Payment: Given the circumstances that during the date of
acquisition, the subsidiary company paying the dividends and in such a situation it is
noticed that the dividends are declared and the same is included with the final sum in
the books of accounts of the company (Ioannou and Serafeim 2017). In the event of
cum dividend, even though the dividend is paid on the acquisition date, it is held for
deductions from the total amount of procurement worth of the merger. This results in
the acceptance of the dividends during the date of such acquisition (Dumay 2016). If
it is found that during the middle of the year, the procedure is repeated again then a
customary procedure is employed by the company to take the dividend and these
dividends are adjusted with the consolidated monetary reports at the end of the
financial year.
b. Payment of Ex-Dividend: On noticing that the subsidiary company is making
payment of the ex-dividend during the acquisition date, then such dividend is not
included into the financial statement the company and as a result this dividends are
not accounted into the while preparing the financial reports (Jin, Shan and Taylor
2015).

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Answer to question 3:
The difference between the pre dividends and the post dividends are considered to be
the significant part of the financial report from the viewpoint of company (Perera and Chand
2015). When the dividend is declared by the company originating from the pre-acquisition
profits and then it is received by the purchaser then the sum of investment is entirely
subtracted from the total investment costs. Any form of dividend that is received from the
pre-acquisition profit is referred as the pre-acquisition dividend (Chand, Patel and White
2015). In the statement of profit and loss account the post dividends are credit and as a result
the dividends that are received obtained the profits of the post-acquisition it is defined as the
post-acquisition dividend. As a result of this differentiating between the origination sources is
necessary resulting the two dividends to be suffixes of pre and post.
Answer to question 4:
During the acquisition analysis procedure, the financial consideration that is
transferred is compared with several types of assets of the subsidiary company that is
acquired. However, the goodwill that is present in the books of accounts of the company is
not accounted as the identifiable assets (Newberry 2015). While in the subsidiary company
accounting books, the goodwill entirely omitted and does not forms the part of the books of
accounts of the subsidiary company.
There are namely two procedure of computing the value of goodwill. This includes
namely the partial goodwill method and the full goodwill method. Under each of the
identified procedure goodwill that is received on the date of acquisition by the subsidiary
company is treated separately (Cho et al. 2015). Under the partial goodwill method, goodwill
that are received from the transaction is recorded into the company’s books of accounts.
While in the full goodwill method there are certain reservations. Under the full goodwill
method the company takes into the consideration that goodwill that is received from the

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subsidiary company together with the goodwill that is earned during the company transaction.
The differences between such goodwill is computed and the difference is taken into the
consideration as the parent company goodwill.
Answer to question 5:
When a controlling interest is acquired by the parent company into the subsidiary then
the carrying value of the subsidiary assets is not equivalent to the fair value. Therefore, there
are certain adjustments that is required to be made (Chand, Patel and White 2015). An
important factor governing the adjustment is that there are net fair value of the assets that is
acquired in the amalgamation and consolidation procedure. When an organization obtains any
kind of assets during the acquisition procedure from the large pool of assets of other firm,
there requires a certain forms of adjustments.
The primary reason behind this is that when an asset is acquired by the company in
the acquisition procedure the asset possess certain specific sum of fair worth along with
certain market worth. There always prevails a differences between the two assets and this
results in providing true and fair view of the financial books of accounts since the assets is
reflected at the current net value in the consolidated financial reports (Jin, Shan and Taylor
2015). If the company fails to records these assets then they might have to pay higher amount
of taxes given that the market value of the assets is considered by ignoring the assets net
current worth. This would ultimately contribute to the loss of the company.
Conclusion:
The most important aspects of the corporate accounting is the existence of disclosure
reports of an organization activities. Corporate accounting is held as the significant tool of
measuring performance and it is associated with the numerous forms of operations that is

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performed by the company along with the numerous aspects of operations that are performed
during the accounting year.
An organization usually gains value when in the disclosure report of the company
contains both the financial as well as the non-financial parameters. Likewise for the BHP
Billiton, the company has upheld the standards of disclosing both the financial and non-
financial information. The report also provides a discussion of pre and post-acquisition
entries and their overall adjustment. The report accordingly displays the corporate accounting
as the important tool of accounting in the modern world of financial disclosure.

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BHP Billiton. (2018). BHP Annual Reporting 2017. [online] Available at:
https://www.bhp.com/investor-centre/annual-reporting-2017 [Accessed 31 May 2018].