Corporate Accounting

The assessment evaluates the performance and financial position of BHP Billiton, Rio Tinto, and Fortescue Metal Group. It analyzes equity, liability, cash flow statement, comprehensive income statement, and corporate income tax. The selected companies are in the mining industry of Australia.

Running head: CORPORATE ACCOUNTING
Corporate Accounting
Name of the Student:
Name of the University:
Authors Note:

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Executive Summary:
The assessment directly evaluates the performance and financial position of BHP Billiton,
Rio Tinto, and Fortescue Metal Group for three fiscal years. The assessment has relatively
evaluated equity, liability, Cash flow statement, other comprehensive income statement, and
corporate income tax of the three companies. The selected companies mainly fall under the
mining industry of Australia, which helps in analysing their overall performance of the three
companies. The equity, liability, cash flow statement, comprehensive income statement and
corporate income tax of the selected companies are mainly analysed in the assessment for
detecting the level of income, which can be generated from an evaluation.

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Table of Contents
Introduction:...............................................................................................................................3
Equity & Liability:.....................................................................................................................3
Answer to i)................................................................................................................................3
Answer to ii)...............................................................................................................................4
Answer to iii)..............................................................................................................................5
Cash Flow Statement:................................................................................................................5
Answer to iv)..............................................................................................................................5
Answer to v)...............................................................................................................................7
Answer to vi)..............................................................................................................................8
Other comprehensive income statement:...................................................................................9
Answer to vii).............................................................................................................................9
Answer to viii)..........................................................................................................................10
Answer to ix)............................................................................................................................11
Answer to x).............................................................................................................................11
Accounting for Corporate income tax:.....................................................................................12
Answer to xi)............................................................................................................................12
Answer to xii)...........................................................................................................................12
Answer to xiii)..........................................................................................................................13
Answer to xiv)..........................................................................................................................14
Answer to xv)...........................................................................................................................14
Answer to xvi)..........................................................................................................................15
Answer to xvii).........................................................................................................................16
Conclusion:..............................................................................................................................16
Reference and Bibliography:....................................................................................................17

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Introduction:
The assessment aims in evaluating the overall financial performance of the
organisation selected for the analysis. BHP Billiton Limited, RIO Tinto Limited, and
Fortescue Metals Group is mainly selected for the assessment, which can eventually help in
evaluating different segments of the financial report. The selected companies mainly fall
under the mining industry of Australia, which helps in analysing their overall performance of
the three companies. The equity, liability, cash flow statement, comprehensive income
statement and corporate income tax of the selected companies are mainly analysed in the
assessment for detecting the level of income, which can be generated from an evaluation.
Equity & Liability:
Answer to i)
Share capital, Reserves, retained earnings, treasury shares, and non-controlling
interest are relatively listed in the equity section of the three-selected organization. The
components of the equity faction directly help in identifying the level of equity capital that is
being used by the organization. Share capital is the overall invested money of the investors,
which is traded in the security exchange. Moreover, reserves are the overall savings that has
been maintained by the organization over the period of its operations. The value of retained
earnings is relatively calculated after deducting the dividends and other expenses from the net
income. Lastly, the Non-controlling interest value is derived from the ownership position of
shareholders who has no control over the management’s decision (Kothari, Ramanna and
Skinner 2015).
Reserves, retained earnings, and non-controlling interest of BHP Billiton have fallen
from 2015 to 2017. However, Rio Tinto share capital, Reserves, and retained earnings have

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relatively increased, while the non-controlling interest has declined from 2015 to 2017.
Lastly, Fortescue Metals Group contributed equity, and reserves have declined from 2015 to
2017. On the other hand, the retained earnings and non-controlling interest has increased over
the period of three years.
Answer to ii)
The liability section of the three companies relatively holds current liabilities and
noncurrent liabilities, which comprises of several obligations that needs to be fulfilled by the
organization. The current liability section relatively comprises of trade payable, interest
bearing liabilities, current tax payables, provision, deferred income, and other financial
liabilities. On the other hand, non-current liabilities comprises of interest bearing liabilities,
deferred tax liabilities, deferred income, and other financial liabilities of the organization.
Trade payables are the overall payments that need to be conducted by the company
for the product that has been purchased on credit. Interest bearing liabilities are the overall
payments that need to be conducted on the loans that are acquired by the organization to
support with operation. Current tax payables are the tax obligations that need to be paid by
the organization. Provisions are the measures that have been taken by the company for
supporting their future payments. Deferred income is the overall revenues that have been
generated on accrual basis by the organization. Other financial liabilities are the relevant
expenses that have been conducted by the organization the period of time (Schaltegger,
Etxeberria and Ortas 2017).
Total current liabilities of BHP Billiton have declined, while values of Rio Tinto and
Fortescue Metal Group have increased from 2015 to 2017. In the similar instance, the overall
non-current liabilities of BHP Billiton have increased, while values of Rio Tinto and
Fortescue Metal Group have declined from 2015 to 2017.

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Answer to iii)
Debt to equity ratio 2017 2016 2015
BHP Billiton 0.51 0.64 0.46
Rio Tinto 0.31 0.40 0.54
Fortescue Metals Group 0.46 0.81 1.27
From the overall evaluation, it could be understood that the debt to equity position of
Rio Tinto has a relatively improved over the period of three years in comparison to BHP
Billiton and Fortescue Metals Group. The debt composition of Rio Tinto is at the levels of
0.31 in 2017, as it declined from the levels of 0.54, while other companies overall debt
positions has remained at the levels of 0.46 to 0.51 in 2017.
Cash Flow Statement:
Answer to iv)
Figure 1: Cash flow statement of BHP Billiton
(Source: Bhp.com 2018)

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Figure 2: Cash flow statement of Rio Tinto
(Source: Riotinto.com 2018)
Figure 3: Cash flow statement of Fortescue Metals Group
(Source: Fmgl.com.au 2018)

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The above figures directly indicate the overall price movement of the cash flows,
which comprises of operating activities, investing activities, and financing activities. The
operating activities relatively identify all the relevant cash inflows and outflows that have
been conducted by the company to support their operations. The investing activities relatively
rely on the oral property, plant and equipment that has purchased and sold by the organization
is relatively list in this section. The overall financing activities relatively rely on the financial
lease, share issue, Bond issue, dividend payments, and other finance cost that has been
incurred by the company during the first year. The cash equivalent of Fortescue metal group
has declined from 2015 to 2017, while both BHP Billiton and Rio Tinto cash position has
relatively increased during the same period. The changes in the values are due to the rising
investing activities and operating activities maintained by the companies (Domino, Wingreen
and Blanton 2015).
Answer to v)
BHP Billiton in Million 2017 2016 2015
Operating activities 16,804 10,625 19,296
Investing activities (4,161) (7,245) (13,154)
Financing activities (9,133) 284 (8,276)
Rio Tinto in Million 2017 2016 2015
Operating activities 13,884 8,465 9,383
Investing activities (2,373) (2,104) (4,600)
Financing activities (9,141) (7,491) (7,670)
Fortescue Metals Group in Million 2017 2016 2015
Operating activities 4,256 2,446 2,037
Investing activities (715) (358) (726)
Financing activities (3,282) (2,863) (1,235)

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From the evaluation of the above table, cash flow position of BHP Billiton, Rio Tinto,
and Fortescue Metal Group are relatively identified. The value of operating activities and
financing activities has been declined from 2015 to 2017, while the overall investing
activities have improved over the same period. On the other hand, the operating activities and
investing activities of Rio Tinto has improved during the period of 3 years, while its
financing activities have deteriorated. Furthermore, only the operating activities of Fortescue
Metal Group has increased in three years, while both investing activities and financing
activities has deteriorated during the period.
Answer to vi)
The analysis of the above company’s cash flow statement has relatively help in
identifying their cash position and capability to continue their operations. The analysis has
also helped in detecting that both Rio Tinto and BHP Billiton overall cash position has
relatively improved for the period of three years, while deterioration in Fortescue Metal
Group has been witnessed. The operating activities of Rio Tinto has relatively improved
exponentially in three years, while BHP Billiton overall expenses on net investing activities
has reduced exponentially which boosted its closing cash balance. Fortescue Metal Group as
a relatively increased the level of expenses on financing and investing activities, which is the
main reason behind its overall decline in cash and cash equivalent closing balance (Suzuk
2015).

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Other comprehensive income statement:
Answer to vii)
Figure 4: Other comprehensive income of Rio Tinto
(Source: Riotinto.com 2018)
The above figure indicates that Rio Tinto has other comprehensive income on
actuarial, return on assets and losses from application of asset celling. The overall other
comprehensive income Rio Tinto has mainly declined from the level of 619 million in 2015
to 6 million in 2017.
Figure 5: Other comprehensive income of BHP Billiton

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(Source: Bhp.com 2018)
The figure represents the other comprehensive income, which has been accumulated
by BHP Billiton during the period of three years. The major components of other
comprehensive income of the company are the cash flow hedges, tax recognition, exchange
fluctuations, and re-measurement on pension & medical schemes. The other comprehensive
income of BHP Billiton has improved from -139 million to -49 million in 2017.
Figure 6: Other comprehensive income of Fortescue Metals Group
(Source: Fmgl.com.au 2018)
The Fortescue Metals Group do not have not any kind of other comprehensive
income, as depicted in annual report, which can be seen from the above figure.
Answer to viii)
The items listed in other comprehensive income of the organisation are mainly
considered a secondary income or loss, which has been generated due to the measures taken
by the management in controlling the losses. Therefore, the other comprehensive income
mainly comprises of revenues, expenses, losses and gains, which is depicted in the financial
report and not in the net income. The major examples of other comprehensive income are
unrealised gains or losses, financial investments, foreign currency adjustments, sales of
securities, and losses or income in pension schemes. Hence, the items are not listed in the net

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income statement of the company, as it does not occur in day-to-day operations of the
business, while it mainly occurs once in the financial year. This is the main reason why the
other comprehensive income of the company is not listed in the overall income statement.
Thus, the comprehensive income statement comprises of activities and discloses the
expenses, which is incurred to generate the adequate income from operations (Roy 2015).
Answer to ix)
The comparative analysis evaluates other comprehensive income of BHP Billiton, Rio
Tinto and Fortescue Metals Group other the period of three years. In addition, from the
evaluation it can be detected that Fortescue Metals Group does not have any kind of other
comprehensive income listed in their annual report, as the company does not conduct other
incomes. Moreover, the comprehensive income of BHP Billiton has mainly improved, where
the losses incurred from the operations has mainly declined to -49 million. Furthermore, the
other comprises income of Rio Tinto has declined exponential from 619 million to 6 million
only in 2017. From the relevant evaluation, it can be detected that the other comprehensive
income of Rio Tinto has mainly increased in value to other companies selected for analysis.
Answer to x)
Other comprehensive income of the organization is a relatively the measures that has
been taken by the managers for reducing the overall losses from alternative operations.
Moreover, other comprehensive income can be used for analyzing the performance of the
managers, as a positive value would indicate the adequate measures that have been used in
curbing the risk. Other comprehensive income comprises of activities such as hedging
measures or abnormal gains that has been generated by the manager. The activities of the
manager in reducing the negative impact of external factors on the revenue generation
capability of the organization are relatively evaluated with the help of other comprehensive

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income. The manager’s performance is relatively evaluated by the measures that have been
taken in currency conversion by utilizing adequate currency hedge. Hence, it could be
identified that other comprehensive income adequate performance of the managers are
detected where their capability to minimize the risk and maximize income from operations is
analyzed (Epstein 2018).
Accounting for Corporate income tax:
Answer to xi)
From the overall evaluation of the annual report, adequate tax expense of BHP
Billiton, Rio Tinto, and Fortescue Metals Group is detected. This evaluation directly helps in
detecting that the income tax expense of BHP Billiton is relatively at the levels of 4,100
million for 2017, while the expenses for Rio Tinto is 3,965 million. However, Fortescue
Metal Group has incurred the lowest tax expense, which is only 874 million for 2017. The tax
expense of all the three companies is a relatively supported by the incomes that has been
generated during the face value of 2017. These tax expenses are relatively based on the
overall tax rates, which are mentioned in the annual report and are depicted in the income
statement of organization. Agrawal and Cooper (2017) stated that the corporate income tax
rate and the actual Income Tax expense that is conducted by the organizations are relatively
different due to the tax liabilities that are maintained by the company during the fiscal year.
Answer to xii)
BHP Billiton in
Million 2017
Income tax expense 4,100
Earnings before tax 6,222
Effective tax rate 65.90%

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Rio Tinto in Million 2017
Income tax expense 3,965
Earnings before tax 12,816
Effective tax rate 30.94%
Fortescue Metals Group in
Million 2017
Income tax expense 874
Earnings before tax 2,967
Effective tax rate 29.46%
The above table relatively represents the overall calculation for effective tax rate of
BHP Billiton, Rio Tinto, and Fortescue metals group. From the evaluation, it can be
identified that the overall effective tax rate of BHP Billiton is the highest in value in
comparison to the other companies. This is relatively due to the high Income Tax expense
that has been incurred by the company during 2017. The company generator we have the
lowest effective tax rate, which is at the levels of 30.94% for Rio Tinto and 29.46% for
Fortescue Metal Group. The difference in effective tax rate is due to the overall tax liability
of the organization, which needs to be conducted during the fiscal year in accordance with the
laws and regulations of Australian taxation authority (Balakrishnan, Watts and Zuo 2016).
Answer to xiii)
BHP Billiton has both deferred tax asset and deferred tax liabilities listed in their
financial report, which has been used for deriving the overall financial performance of the
organization. The deferred tax liability is relatively at the levels of 3,765 million in 2017,
while the deferred tax asset is at the levels of 5,788 million in 2017. On the other hand, Rio
Tinto has the overall deferred tax liability at the levels of 3,628 million for 2017 and deferred
tax assets at 3,395 million. However, the annual report of Fortescue Metals depicted only
deferred tax liability, which was at the levels of 685 million for 2017. From the overall

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evaluation, it could be identified that BHP Billiton has the highest level of deferred tax
liability and deferred tax assets for the fiscal year of 2017 in comparison to other
organizations. This high-deferred tax Assets and deferred tax liability would directly affect
net cash flow of the organization, as payments are due to the tax authorities.
Answer to xiv)
From the evaluation of Fortescue Metal Group annual report, the alterations in the
overall deferred tax liability can be identified. The deferred tax liability has relatively
increased from the levels of 167 million in 2016 to 685 million in 2017, as depicted in the
annual report. In the annual report of Rio Tinto, the overall alterations are deferred tax
liability have relatively increased by 507 million in 2017 as compared to 2016. However, the
decline in overall deferred tax Assets of Rio Tinto is a relatively witnessed 2017 as compared
to 2016 by the values of 333 million. Furthermore, BHP Billiton deferred tax assets have
relatively declined by the levels of 359 million in 2017, while the overall deferred tax liability
has declined by 559 million. From the relevant evaluation it could be understood that the
deferred tax asset and deferred tax liability of BHP Billiton has declined exponentially in
2017 as compared to 2016.
Answer to xv)
Computation of Book Tax Amount: -
Particulars
BHP Billiton in
Million
Rio Tinto in
Million
Fortescue Metals
Group in Million
Taxation
4,100
3,965 874
Add: Increase in Deferred
Tax Liabilities
(559)
507 57
Less: Increase in Deferred
Tax Assets
(359)
(333) -
Add: Taxes on Finance
Costs
429
497 145
Book Tax amount 4,329 5,302 1,076

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EBIT 11,753 14,474 3,450
Book Tax Rate 36.84% 36.63% 31.19%
The above calculation as a relatively indicated the overall book tax rate of BHP
Billiton, Rio Tinto, and Fortescue Metals Group. The overall books tax rate of BHP Billiton
is a relatively at the levels of 36.84%, while the actual tax rate that is imposed by the
Australian taxation authorities is at 30%. Furthermore, the book tax rate of Rio Tinto is at the
levels of 36.63%, while the book tax rate of Fortescue Metal Group is at 31.19%. From the
evaluation, BHP Billiton is considered to have the highest book tax rate in comparison to
other companies.
Answer to xvi)
Computation of Cash Tax Amount: -
Particulars
BHP Billiton in
Million
Rio Tinto in
Million
Fortescue Metals
Group in Million
Taxation
4,100
3,965 874
Add: Increase in Deferred
Tax Liabilities
(559)
507 57
Less: Increase in Deferred
Tax Assets
(359)
(333) -
Add: Taxes on Finance
Costs
943
513 142
Cash Tax amount 4,843 5,318 1,073
EBIT 11,753 14,474 3,450
Cash Tax Rate 41.21% 36.74% 31.11%
The above table calculates the overall cash tax rate that has been conducted by BHP
Billiton, Rio Tinto, and Fortescue Metals for the financial year of 2017. The calculation has
been detected that the cash tax rate of BHP Billiton is mainly at the levels of 41.21%, which
is relatively higher in comparison to other companies. Rio Tinto has the cash tax rate of
36.74%, while the cash tax rate of Fortescue metal is at 31.11%.

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Answer to xvii)
The above calculations have a directly indicated that the book tax rate and cash tax
rate of the three companies are relatively different in value. This is reference and value is
relatively due to the overall calculations and the measures that have been taken to derive the
tax rate of the organizations. The book tax rate is relatively valued at the levels of 30% tax
rate that is issued by the Australian taxation authority, which is a relatively indicated, a
higher value for book tax rate for each and every organization. On the other hand, the cash
tax rate is relatively calculated with the help of the effective tax rate of the organization.
Hence, cash tax rate derives the actual tax that has been paid by the organization during the
fiscal year after conducting its operations (Stiglitz and Rosengard 2015).
Conclusion:
The assessment directly evaluates the performance and financial position of BHP
Billiton, Rio Tinto, and Fortescue Metal Group for three fiscal years. The assessment has
relatively evaluated equity, liability, Cash flow statement, other comprehensive income
statement, and corporate income tax of the three companies. This evaluation has relatively
conducted for 3 fiscal years for deriving the overall financial viability and capability of the
organization to continue the operation. From the evaluation it has been detected that all the
three organizations has the relatively followed the overall Corporation Act in formulating
their annual report, where all the relevant information has been depicted.

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