Financial Reporting: BHP's Acquisition of Fayetteville Oil and Gas

Running head: FINANCIAL REPORTING
Financial Reporting
Name of the Student
Name of the University
Author Note

2FINANCIAL REPORTING
Table of Contents
Introduction................................................................................................................................4
Part A.........................................................................................................................................5
Answer 1...............................................................................................................................5
Answer 2................................................................................................................................5
Answer 3................................................................................................................................7
Part B..........................................................................................................................................8
Answer 4................................................................................................................................8
Answer 5..............................................................................................................................10
Conclusion................................................................................................................................10
References:...............................................................................................................................11

3FINANCIAL REPORTING
Executive Summary
The main purpose of this study is to evaluate the case scenario of the world’s largest mining
company and the acquisition of Fayetteville oil and gas in 2011. It attempts to understand the
implications of various accounting standards in relation to this case . It also makes a case for
understanding the impairment losses and the acquisition values of the proposed acquisition. It
makes a full study of the related accounting standards and attempts to link these standards
with the given set of situations that we need to address in respect of this case study. Finally
this is the study, the accounting treatments have also been discussed with reference to the
standards,.

4FINANCIAL REPORTING
Introduction
The following report deals with the company BHP and its acquisition of US Fayetteville oil
and gas in 2011. BHP acquired shale assets in 2011 for around $ 4.75 billion in a bid to boost
their US operations. However it did not gone according to plan when gas prices collapsed in
early 2016, forcing the company to book massive losses. Those declining natural gas price
led BHP to take a pre tax impairment charge of nearly $ 7.2 billion against the carrying value
of its assets and onshore gas interests.In the first part, the case analyses case scenario of
BHP with the linkage of various accounting standards ( AASB) to highlight some of the
various concepts related to acquisition . The next section deals with the concept of
impairment loss and its treatment in this case. BHP acquired this deal to have a foothold in
the hydraulics sector, which is a new source of unearthing oil and natural gas from those
oilfields in Arkansas. They wanted to implement this technology, which could help the grow
in this sector.