Financial Accounting and Reporting - Rio Tinto Group

This article discusses the financial accounting and reporting of Rio Tinto Group, a multinational corporation of metals and mining. It covers topics such as subsidiaries, non-controlling interest, goodwill, intra-group transactions, currency conversion, accounting disclosure, and director's report.

Running head: FINANCIAL ACCOUNTING AND REPORTING
Financial Accounting and Reporting
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Memorandum
To: Board of Directors
From: Rio Tinto Group
Date: 12.09.2018
Subject: Financial Accounting and Reporting
1. Tinto Group is an Anglo Australian started in year 1873 by multinational consortium
of investors. It is known as the largest corporation of metals and mining. It has 37
subsidiary companies among them some are Rio Alcan, Alcan Lynemouth Aluminum
Smelter, Boyne Smelters, Energy Resource of Australia and many more. It had joint
ventures as Bao –HI with China`s Baosteel and as Channar Mining with China`s
Sinosteel. It had significant shareholdings in Capital Research Management Co.,
Shining Prospect Pte.Ltd and Barclays PLC, AXA S.A.
2. A subsidiary is a company, which is possessed and meticulous by another company
known as parent company. A subsidiary may have one or more than one owner. If a
subsidiary has, one owner it is known as wholly owned subsidiary. A difference
based on operations is there between holding and subsidiary company. A parent
company is that company who inns the business and that owns other business. Parent
Company has to prepare consolidated financial statement though subsidiary be a legal
separate entity because the creditors and bondholders of subsidiary usually have no
entitlement on the parent company. In addition, bondholders do not share the part of
profits with the parent company. However, consolidated financial statement are of
importance for those who are interested in gaining the material about income, capital

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liabilities and assets. It is a legal requirement of group companies to present
consolidated financial statement and its disclosures are made at the footnotes of the
statements.
3. Non – controlling or minority shareholders are referred to those shareholders who are
shareholders of the subsidiary company other than being shareholder of a parent
company. Non – controlling interest is referred as the entitlement of subsidiary
shareholder on the revenue and net assets of the subsidiary. The non-controlling
interest on assets is recorded in the consolidated shareholders’ equity and the
entitlement on net income is recorded at the time of apportionment of consolidating
net income. The share of the subsidiary net income allocated to the non-controlling
interest usually is deducted from earnings available to entire shareholders to attain the
figure if consolidated net income under the head consolidated net income. Non-
controlling interest is placed at the consolidated balance sheet commonly between the
liabilities and the shareholder`s equity. A direct non- controlling interest is inclusive
of pre and post-acquisition figure of equities. Indirect non-controlling interest are
those interests that are received after the acquisition. It is adjusted while calculating
the figures for preparing consolidated financial statement. Rio Tinto Group non-
controlling interest amounted to US$6404 million. (Gluzova 2016).
4. Goodwill is referred as the difference among the tangible and intangible asset share of
the balance sheet of acquiring firm. The procurer company in the consolidated
balance sheet records the acquisition and the adjustments related to this is shown
under notes to accounts. There was impairment of assets during the financial year

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2017 (Lee and Parker 2014).Rio Tinto Group has impairment of US$53796 million
and Goodwill of US$1037 million. (Riotinto.com, 2018)
5. Intra- group transactions are known as monetary or commercial transactions where
two companies are involved in the group simultaneously (Allen and Kowalewski
2013).Intragroup balance is, in substantial share of the Rio Tinto Group’s net
investment in a body. Exchange gains and fatalities on that balance are taken to the
coinage conversion reserve. The intra group balance for Rio Tinto Group is US$1154
million. AASB 10 is related to Intra group transaction. (Riotinto.com, 2018)
6. The currency at which each entity of the Group functions even for associates and
joint arrangement is the coinage of initial monetary environment at which entity
operates. Rio Tinto Group financial statement is present in US dollars because it is
considered as the reliable present. (Riotinto.com, 2018) Foreign subsidiaries provide
their statement according to their country`s currency. Transactions that are
denominated in other monies are altered according to the practical currency according
to the exchange rate present at the date of transaction. Rio Group fiscal assets and
liabilities denominated at other currency are transformed to the functional currency
according to the ruling exchange rate. At the usual rate on the transaction date are
converted to Us dollars from functional currency for each entity`s consolidated
income statement. At the end of period exchanged balance sheet items are translated
into US dollars, Exchange variances arising on the conversion of the net assets of
bodies with functional currencies other than the US dollar are expected straight in the
currency translation replacement. These conversion variances are shown in the
statement of comprehensive income, with the exclusion of conversion adjustments

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relating to Rio Tinto Limited’s share capital that are presented in the statement of
alterations in equity. (Allegrini and Greco 2013).
7. An “accounting disclosure” is a declaration that distinguishes the financial policies of
a firm or commercial. This statement shows expenditures and proceeds over a period.
Accounting polices is disclosed for both the investors present and the potential. These
policies are the plans and procedures of accounting that are trailed in the business.
This disclosure also comprises Financial Statements that encompass of balance
sheets, cash flows statement of stakeholder`s equity and income statements. The
purpose of disclosing of accounting policies is disclosing any affair or event having
an influence on any of the financial statement. The annual report contains all polices
regarding Corporate Governance, Audit Committee and the Sustainability under the
different heads. It is presented before the financial statements. These statements are
compulsory to be involved in the annual report as stated in the Accounting Standards.
The yearly report of Rio Tinto`s states in the sustainable report that the company is
approaching for the consistency for the overall development. (Riotinto.com, 2018)
8. Director`s Report is a must for a company to be presented in the annual report. Name
of all the directors, special responsibilities, experiences, and qualifications. Every
director needs attain the board meetings. A statement stating the reason of director
being satisfied that the directors are contented that the providing of non-audit
facilities is companionable with the overall normal of individuality for auditors forced
by the Corporations Act 2001. Under the director`s declaration director shall put its
declaration regarding its opinion that he or she believes that the company is
competent to pay of its arrears at the time of it payment. The director is supposed to

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declare that the financial statements and transcripts are in agreement with the
Corporations Act 2001, as well as compliance with the accounting standards and
providing a true and fair view. Rio Tinto has covered all the aspects that is essential
that would help the public and investors to be assisted in understanding the financial
statement of the group. It could specific the modifications require for right and bonus
issues.

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