Financial Accounting and Reporting - Rio Tinto Group

Running head: FINANCIAL ACCOUNTING AND REPORTING
Financial Accounting and Reporting
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1FINANCIAL ACCOUNTING AND REPORTING
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

2FINANCIAL ACCOUNTING AND REPORTING
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