Differences in Translating Foreign Operations of USD 2 Million

The assignment content discusses the financial performance of Amcor Ltd., Orora Ltd., and BHP Limited for the period ending June 30, 2018. It includes a review of other comprehensive income, accounting for corporate income tax, and cash tax rates. The report also provides an analysis of deferred tax assets and liabilities, cash flow statements, and income tax concepts. Additionally, it compares the financial performance of these companies in terms of debt-to-equity ratios and cash tax rates.

STUDENT NAME
STUDENT NUMBER

TABLE OF CONTENTS
S.No. Particulars
1. Executive Summary
2. Introduction – Amcor Limited, Orora Limited and BHP Limited
3. Equity & Liability
4. Cash Flow Statement
5. Other Comprehensive Income Statement
6. Accounting for Corporate Income Tax
7. Conclusion
8. References

EXECUTIVE SUMMARY OF THE REPORT
This report contains study on three public companies, Amcor Limited, Orora Limited and BHP
Limited listed on the Australian Securities Exchange that are engaged in Materials Industry. The
comparative analysis has been done on various aspects like changes in owner’s equity, position
of debt and equity, changes in cash flows of both the companies over the period, items shown in
comprehensive income statement of the above companies, etc.
INTRODUCTION- AMCOR LIMITED, ORORA LIMITED AND BHP LIMITED
Amcor Limited is one of the top companies which develops and produces packaging products
that are of excellent quality and responsible for packaging of wide variety of beverage, food,
personal-care, home, medical-device, pharmaceutical and some more products.
Orora Limited is the second largest public company listed on Australian Stock Exchange that is
manufacturing and supplying packaging products. Products in which Orora Limited deals
includes corrugated boxes, recycled paper linerboard, folding cartons, lass bottles and jars,
closures, beverage cans of aluminum.
BHP Limited in one of the largest public company listed on ASX in materials industry.. It
primarily deals in Coal, Copper, Iron Ore and Petroleum. It has mining operations in Australia,
North and South America, and petroleum operations in the U.S., Australia, Trinidad, Tobago, the
UK and Algeria.
EQUITY & LIABILTY:
(i) EQUITY:

Contributed Equity: Contributed Equity is the paid-up share capital of the company
that the shareholders have taken from the company in exchange of the cash or any
other asset. In simple terms the price paid by the shareholders for buying ownership
in the company is termed as Contributed Equity.
Reserves: Reserves are the amounts appropriated by the company from its profits to
meet expected and unexpected future payments.
Retained Earnings: Retained Earnings are the cumulative earnings that the company
retain over the period of years after paying out dividend.
a. Amcor Limited:
Change in items of equity over past year:
Contributed equity was USD 1,416.9 million as on 30th June 2017 (Annual Report
AMCOR, 2017) which has decreased to USD 1,400.7 in year 2018 (Annual Report
AMCOR, 2018). The reason behind this decrease is acquisition of shares by the
Amcor Employee Share Trust and settlement of forward contracts.
Reserves were having a debit balance of USD 881.7 million (Annual Report
AMCOR, 2017) at year end 2017 as compared to USD 907.1 million (Annual Report
AMCOR, 2018) at 30th June 2018. This increase in negative balance of reserves was
mainly because of Currency translation differences.
Retained earnings of Amcor Limited has increased by 163.2 million from 264.9
million (Annual Report AMCOR, 2017) to 528.1 million (Annual Report AMCOR,
2018) as compared to last year. Retained earnings of the company has increased as
the profits for the financial period ending 30th June 2018 were 778.7 million (Annual

Report AMCOR, 2018) and the company has paid dividends of 515.5 million (Annual
Report AMCOR, 2018).
b. Orora Limited:
Change in items of equity over past year:
Contributed equity was AUD 508.7million (Annual Report Orora, 2018) as on 30th
June 2017 which has decreased to AUD 499.7 in year 2018. The reason behind this
decrease is treasury shares of AUD 24.8 million (Annual Report Orora, 2018) has
been used for satisfying granst under Employee Share Plans.
Balance of reserves have increased from balance of AUD 144 million (Annual Report
Orora, 2018) at period ending 30th June 2017 to AUD 152.1 million (Annual Report
Orora, 2018) as on 30th June 2018. This increase balance of reserves was mainly
because of Cash flow hedge reserve.
Retained earnings of Orora Limited has increased by AUD 68 million from 930.5
million (Annual Report Orora, 2018) to 998.1 million (Annual Report Orora, 2018) as
compared to last year. Retained earnings of the company has increased as the profits
for the financial period ending 30th June 2018 were AUD 212.2 million (Annual
Report Orora, 2018) and the company has paid dividends of AUD 144.2 million
(Annual Report Orora, 2018).
c. BHP Limited:
Change in items of equity over past years:
Share Capital has been same in past years at $ 1186 million (Annual Report BHP,
2018) for BHP Bilton Limited and $ 1057 Million (Annual Report BHP, 2018) for
BHP Biliton PLC. There has been no major change in Treasury shares.

Reserves are decreasing from 30 June 2016 to 2018 from $ Million 2538 (Annual
Report BHP, 2018) to $ Million 2290 (Annual Report BHP, 2018) due to
comprehensive income/ loss and employee shares forfeited / awarded.
Retained earnings increased from $ Million 54290 in 2016 to $ Million 55592 in
2018. This increase is due to increase in profits and distribution of dividend by the
company.
(ii) LIABLITY:
Liabilities include following items:
Current liabilities: This include liabilities which are payable within one year or less
from end of financial year.
Non-Current liabilities: This include liabilities which are payable in one year or more
from end of financial year.
Trade Payables: It includes payables relating to main business i.e. payables relating to
purchases or any expenses.
Interest Bearing Liabilities: It includes liabilities relating to interest on loans taken by
company.
Tax payable: It includes payables relating to tax being payable to government for
profits earned during the year.
Provisions: Provisions are being made relating to any expenses which are being
incurred in current financial year but are being payable in next or future financial
years.

Other liabilities: All other payables not covered in above are given other liabilities
head.
a. Amcor Limited:
Change in items of liabilities over past year:
There has been no major change in trade payables. Interest bearing liabilities have
increased from $ Million 1124 in 2017 (Annual Report AMCOR, 2017) to $ Million
1822 (Annual Report AMCOR, 2018) in 2018 due to increase in loans taken by
company. Tax liabilities have increased from $ Million 86.5 in 2017 (Annual Report
AMCOR, 2017) to $ Million 139.9 (Annual Report AMCOR, 2018) in 2018 due to
increase in profits earned by the company. Provision have decreased from $ Million
170.9 (Annual Report AMCOR, 2017) to $ Million 91.7 (Annual Report AMCOR,
2018) due to less future expenses of company.
b. Orora Limited:
Change in items of liabilities over past year:
Trade payables have increased from $ Million 826.9 (Annual Report Orora, 2018) to
952.4 (Annual Report Orora, 2018) due to increase in purchases during the year.
Interest bearing liabilities have increased from $ Million 711 (Annual Report Orora,
2018)in 2017 to $ Million 753 (Annual Report Orora, 2018) in 2018 due to increase
in loans taken by company. Tax liabilities have increased from $ Million 2.8 (Annual
Report Orora, 2018) in 2017 to $ Million 8.7 in 2018 due to increase in profits earned
by the company. There has been no major change in provisions for the year.
c. BHP Limited:
Change in items of liabilities over past year:

Trade payables have increased from $ Million 5551 in 2017 (Annual Report BHP,
2018) to 5977 (Annual Report BHP, 2018) in 2018 due to increase in purchases
during the year. Interest bearing liabilities have increased from $ Million 1241
(Annual Report BHP, 2018) in 2017 to $ Million 2736 (Annual Report BHP, 2018) in
2018 due to increase in loans taken by company. Current tax payable has decreased
due to lower profits in 2018 as compared to 2017. Provision in total have decreased
due to lower expenses payable in future.
(iii) Comparative Analysis of Debt and Equity Position of Amcor Limited and Orora
Limited:
Particulars ( $
Million)
Amcor (Annual
Report AMCOR,
2018)
Orora (Annual
Report Orora,
2018)
BHP(Annual
Report BHP, 2018)
Debt: Includes
Current and Non-
Current Liabilities
for 2018
7956 1986 51323
Equity: 1090 1630 60670
Debt to Equity
ratio
7.2 1.2 0.84

Above table clearly shows that Amcor is heavily levered as compared to Orora and BHP
in financial year 2018.
CASH FLOW STATEMENT
(iv) Cash Flow Statement of any company is broadly categorized in three types viz. cash
flow from operating activities, cash flow from investing activities and cash flow from
financing activities.
Items reported under Cash Flow Statement and their understanding:
Items reported in the firm’s cash flow statement under cash flow from operating
activities are as under:
a) Profit for the financial period: In indirect method of preparing cash flow, we first
take profits earned by the firm as its cash inflow, then we do the adjustments for
non-cash items, changes in working capital, etc. to reach cash flow from
operations.
b) Depreciation, etc.: Depreciation is a non-cash expense, and while calculating
profits of the company it must have been deducted.
c) Finance Costs: Finance costs relates to financing activity, thus to nullify the its
effect from profits to calculate cash from operating activities, the same is added
here and will be subtracted in financing activity.
d) Profit or Loss on Disposal of Fixed Assets: Non-current assets sale and purchase,
and their profit/loss is part of investing activity.
e) Profits on Equity Accounted Investments: This relates to investing activity, thus
the effect of this is nullified here to reach operating cash flow. The same will be
shown under investing activity.

f) Share-based payments: This is a non-cash expense; thus it has been added back to
the profits so as to reach cash flow from operating activity.
g) Income Tax Expense: Actual income tax paid by the company in cash is deducted
to arrive at cash flow from operating activities.
h) Working capital changes: Increase in current assets is deducted and decrease is
added, while increase in current liabilities is added and decrease is deducted.
Items reported in the firm’s cash flow statement under cash flow from investing
activities are as under:
i) Loans to associated enterprises: The company grants loans to its associated
enterprises for which it receives interest. The same is recorded in investing
activity.
j) Acquisition or disposal of entities: This relates to the amount of investment made
or the disposal of investment by the company in other entities by purchasing
shares etc.
k) Purchase and sell of property plant and equipment: Purchasing or disposing fixed
asset by an entity will be considered as investing activity.
Items reported in the firm’s cash flow statement under cash flow from investing
activities are as under:
l) Issue and purchase of Shares: Company raises finance from many sources, equity
is one of them.
m) Borrowings: The loans taken by the company to finance its operations and
projects is reported under financing activity.

n) Dividend Paid: Dividend paid to equity shareholders is considered under
financing activity.
o) Cash and Cash Equivalents: Here cash includes currency notes and demand
deposits made by the company.
(v) Comparative analysis of cash flows from three broad categories and their comparative
evaluation over three years:
Amcor Limited
Amcor Limited
Category
Net cash flows from/(used in)
Total
2018 ($M)
(Annual
Report
AMCOR,
2018)
2017 ($M)
(Annual
Report
AMCOR,
2017)
2016 ($M)
(Annual
Report
AMCOR,
2017)
Operating Activity 937.1 1,027.4 1,099.4 3,064
Investing Activity (229.4) (632.6) (997.0) (1,859)
Financing Activity (715.5) (337.0) (126.9) (1,179)
Net increase/
(decrease) (7.8) 57.8 (24.5)
The cash inflows from operating activities is near about same in all three years, i.e.
cash flow from operating activity is decreasing slowly. While in investing activity,
cash outflows of Amcor Limited had decreased from $ 997 million in 2015-16
(Annual Report AMCOR, 2017) to $ 632.6 million in 2016-17 (Annual Report
AMCOR, 2017) and has further decreased to 229.4 million in 2017-18. While cash
outflows in Financing activity has increased from 126.9 million in year 2015-16
(Annual Report AMCOR, 2017) to 337 million In year 2016-17 (Annual Report
AMCOR, 2017) and then to 715.7 million in year 2017-18. Overall the company had

decrease in cash and cash equivalent in year 2015-16 and 2017-18 and net cash
inflow in year 2016-17.
Orora Limited
Orora Limited
Category
Net cash flows from/(used in)
Total2018 (AUD M)
(Annual Report
Orora, 2018)
2017 (AUD M)
(Annual Report
Orora, 2018)
2016 (AUD M)
(Annual Report
Orora, 2017)
Operating Activity 329.0 351.2 305.0 985
Investing Activity (156.2) (271.5) (199.7) (627)
Financing Activity (140.6) (91.5) (108.2) (340)
Net increase/
(decrease) 32.2 (11.8) (2.9)
The cash inflows from operating activities has increased from 305 million (Annual
Report Orora, 2017) in 2015-16 to 351.2 million (Annual Report Orora, 2018) in
2016-17 and then decreased to 329.0 million (Annual Report Orora, 2018) in year
2017-18. While in investing activity, cash outflows of Orora Limited had increased
from $ 199.7 million (Annual Report Orora, 2017) in 2015-16 to $ 271.5 million
(Annual Report Orora, 2018) in 2016-17 and then decreased to 156.2 million (Annual
Report Orora, 2018) in 2017-18. While cash outflows in Financing activity has
decreased from 108.2 million in year 2015-16 to 91.5 million (Annual Report Orora,
2018)in year 2016-17 but increased to 140.6 million (Annual Report Orora, 2018) in
year 2017-18. Overall the company has decrease in cash and cash equivalent in year
2015-16 and 2016-17 and net cash inflow in year 2017-18.

BHP limited:
BHP Limited
Category
Net cash flows from/(used in)
Total2018 (AUD M)
(Annual Report
BHP, 2018)
2017 (AUD M)
(Annual Report
BHP, 2018)
2016 (AUD M)
(Annual Report
BHP, 2017)
Operating Activity 18461 16804 10625 45890
Investing Activity (5921) (4161) (7245) (17327
)
Financing Activity (10891) (9133) 284 (19740
)
Net increase/
(decrease) 1650 3047 4138
The cash inflows from operating activities has increased from 10625 million (Annual
Report BHP, 2018) in 2015-16 to 16804 million (Annual Report BHP, 2018) in
2016-17 to 18461 million (Annual Report BHP, 2018) in year 2017-18. While in
investing activity, cash outflows of BHP Limited had decreased from $ 7245 million
in 2015-16 to $ 4161 million (Annual Report BHP, 2018) in 2016-17 and then
increased to 5921million in 2017-18. While cash changes in Financing activity has
changed from inflow of 284 million (Annual Report BHP, 2018) in year 2015-16 to
outflow of 9133 million (Annual Report BHP, 2018) in year 2016-17 and increased to
outflow of 10891million (Annual Report BHP, 2018) in year 2017-18. Overall the
company has decrease in cash and cash equivalent in year 2015-16 and 2016-17 and
net cash inflow in year 2017-18.
(vi) Comparative Analysis of Above companies:

The cash flow of from operating activities is near about stable for above companies.
If compared to each other, BHP has the highest inflows of cash among all the
companies. This is because the scale of operations is different for above companies.
The cash flow from investing activities is not stable in above companies. This is
because investing can be more in one year and less in other.
The cash outflow from financing activity is higher in BHP as compared to other
companies because of difference in scale of operations. In above companies, cash
outflow in financing activity is increasing year on year.
OTHER COMPREHENSIVE INCOME STATEMENT
In Other comprehensive income statement, gains and losses that have not yet been realized are
recorded.
(vii) Items that have been reported in OCI Statement: In OCI statement all the items are
categorized under two types viz. items that may be reclassified to profit or loss
subsequently and items which cannot be reclassified. Under items that may be
reclassified, items like cash flow hedges, share based payment, exchange difference
on translating foreign operations are covered. While in items that cannot be
reclassified includes actuarial gain/loss on defined benefit plans and their tax.
(viii) Why not reported in Profit Loss Statement?
These items are not reported as if they will be reported it will result in presenting
wrong figures of profits to the shareholders of the companies. These are unrealized
gains or losses the gain or loss on which are calculated just on the basis of fair value
of the asset or liability as on the balance sheet date. The actual gain or loss can be

different from the gain or loss calculated on balance sheet date. Thus reporting those
unrealized gains and losses with the normal gains and losses will not be appropriate.
(ix) Other Comprehensive Income of Amcor Ltd. includes Items that may be reclassified
subsequently to profit or loss and Items that will not be reclassified to profit or loss.
Under, ‘Items that may be reclassified subsequently to profit or loss’ loss on Cash
flow hedges amounting to USD 2 million (Annual Report AMCOR, 2018) is there
and Exchange differences on translating foreign operations resulting in loss of 19.8
million is included. Under items that will not be reclassified, gains on Actuarial gains
on defined benefit plans amounting to 56.6 million (Annual Report AMCOR, 2018) is
there.
Other Comprehensive Income of Orora Ltd. only includes Items that may be
reclassified subsequently to profit or loss. Under, ‘Items that may be reclassified
subsequently to profit or loss’ gains on Cash flow hedges amounting to ASD 7.8
million is there and Exchange differences on translating foreign operations resulting
in loss of 1.1 million is included.
Other Comprehensive Income of BHP Ltd. only includes Items that may be
reclassified subsequently to profit or loss. Under, ‘Items that may be reclassified
subsequently to profit or loss’ gains on Cash flow hedges amounting to $ 82 million
(Annual Report BHP, 2018) is there and Exchange differences on translating foreign
operations of 2 million (Annual Report BHP, 2018)is included in financial year
2018.

(x) Yes, other comprehensive income should be included in evaluating performance of
financial managers of the company. It’s the responsibility of the financial managers to
hedge the company against unexpected losses resulting from exchange differences
and actuarial gains and losses.
ACCOUNTING FOR CORPORATE INCOME TAX
(xi) Tax expense of Amcor Ltd. for the period ending 30th June 2018 is USD 145.3
million (Annual Report AMCOR, 2018), tax expense of Orora Ltd. is AUD 74.0
million (Annual Report Orora, 2018) for the period and that of bhp limited is $
million 6879 (Annual Report BHP, 2018).
(xii) Calculation of Effective tax rate:
Amcor Ltd.
Effective tax rate = income tax expense / earning before tax
= 145.3/880.7 (Annual Report AMCOR, 2018)
= 16.5 % Approx.
Orora Ltd.
Effective tax rate = 74/286.2 (Annual Report Orora, 2018)
= 25.85% Approx.
BHP Limited:
Effective Tax Rate = 6879/14751 (Annual Report BHP, 2018)
= 46.6 % Approx
(xiii) In Amcor Limited’s balance sheet deferred tax asset is reported at USD 65.5 million
while deferred tax liability has been reported at USD 162.5 million (Annual Report
AMCOR, 2018). While in Orora Limited’s balance sheet deferred tax liability has

been reported at AUD 83.3 million (Annual Report Orora, 2018). Orora shows its
Deferred tax asset or liability by netting off with each other. In BHP limited deferred
tax liabilities are shows at $ Million 3472 in year 2018 and DTA at $ Milllion 4041
(Annual Report BHP, 2018).
Deferred tax is recorded on the basis of temporary differences in the taxability of
some of the incomes and deductibility of some of the expenses.
Deferred tax asset (DTA) signifies that the company is paying taxes in advance
means it is paying tax on such incomes which are not yet recorded in books or such
expenses which have been incurred but not deducted while calculating taxable.
Deferred tax liability ( DTL) signifies that the company is paying less tax i.e. not
paying tax on some of the incomes recorded in the books or deducting some expenses
from taxable income which are not yet recorded in books.
(xiv) Increase / Decrease in Deferred Tax assets and liabilities reported by above
companies:
Particulars ( $
Million)
Amcor (Annual
Report AMCOR,
2018)
Orora (Annual
Report Orora,
2018)
BHP (Annual
Report BHP,
2017)
DTA from 2017 to
2018
66.7 to 65.5 None 5788 to 4041
DTL from 2017 to
2018
215 to 162 49.1 to 83.3 3765 to 3472

(xv) Cash tax amount is calculated using the formula as under:
Cash Tax = Book Tax+ Increase in Deferred tax liability – Increase in deferred tax
asset
Amcor Ltd.
Cash Tax = 145.3 – 52.9 + 1.2 (Annual Report AMCOR, 2018 )
= USD 93.6 million
Orora Ltd.
Cash Tax = 74 + 34.2 (Annual Report Orora, 2018)
= AUD 108.2 million
BHP Limited:
Cash Tax = 6879 - 222 – 25 (Annual Report BHP, 2018)
= $ Million 6632
(xvi) Cash Tax Rate = Cash Tax/ Earnings before tax
For Amcor Ltd.
Cash Tax Rate = 93.6/880.7 (Annual Report AMCOR, 2018)
= 10.63%
For Orora Ltd.
Cash Tax Rate = 108.2/286.2 (Annual Report Orora, 2018)
= 37.80 %
For BHP Limited
Cash Tax rate = 6632 /14751 (Annual Report BHP, 2018)
= 44.9 %
Thus we can see that BHP limited has highest cash tax rate.

(xvii) Cash tax rate does not consider the impact of deferred tax assets and deferred tax
liabilities or we can say the temporary differences. Whereas book tax rate is
calculated using book tax which takes into consideration temporary differences which
results in deferred tax assets and liabilities.
CONCLUSION
The report helps in understanding different financial statement items of the above
companies. It is very interesting to see how ratios like debt equity have huge variation
between two companies of the same industry. Moreover, the questions on Cash flow
statement helped to understand how cash flows in a company are reported. The concept
of Other comprehensive income statement was very interesting in itself. Concepts
relating to Income Tax were quite difficult to understand at the first place, but with the
in-depth research I got a good understanding of the same and I was very overwhelmed
with the understanding of the different concepts of income tax.

REFERNCES
Annual reports. (n.d.). Retrieved from https://www.ororagroup.com/investors/downloads/annual-
reports
Annual Reports. (n.d.). Retrieved September 23, 2018, from https://www.amcor.com/investors
Annual reports. (n.d.). Retrieved from https://www.bhp.com/investor-centre/annual-report-
2018#downloads

LINK OF ANNUAL REPORTS
1. Orora:
(2019). Retrieved from
https://www.ororagroup.com/system/downloads/files/000/000/198/original/
Orora_Annual_Report_2017_interactive.pdf?1505435145 (Annual Report Orora, 2017)
(2019). Retrieved from
https://www.ororagroup.com/system/downloads/files/000/000/264/original/
18.09.14_Orora_Annual_Report_2018_Interactive.pdf?1536879553 (Annual Report AMCOR,
2018)
2. Amcor:
(2019). Retrieved from
https://assets.ctfassets.net/f7tuyt85vtoa/Ry9ogH9cQemqGA800oiGE/cbcc6bef0d76b79be2a227d
fc13a7e87/Amcor_Annual_Report_2018.PDF (Annual Report AMCOR, 2018)
(2019). Retrieved from
https://assets.ctfassets.net/f7tuyt85vtoa/2ckiIO9GXymIqu6qi8Oo4s/6a9b62ee553e2af1e354e042
c6055d8a/Amcor_Annual_Report_2017.pdf (Annual Report AMCOR, 2017)
3. BHP:
(2019). Retrieved from
https://www.bhp.com/investor-centre/-/media/documents/investors/annual-
reports/2017/bhpannualreport2017.pdf (Annual Report BHP, 2017)