Accounting Theory and Corporate Governance: BHP Billiton Analysis

This report provides a comprehensive analysis of BHP Billiton's accounting theory, corporate governance, and sustainability practices. It examines the recognition and measurement of property, plant, and equipment, comparing accounting policies using relevant accounting theories. The report also delves into the company's governance mechanisms addressing sustainability, ethical and social responsibilities, and risk management systems. It explores the guidance BHP Billiton uses for environmental and social performance reporting, and discusses the variations in CSR voluntary disclosure across different companies and industries. The analysis incorporates insights from the company's annual and sustainability reports, as well as references to academic journal articles, offering a detailed overview of BHP Billiton's financial and non-financial performance and its approach to corporate social responsibility. The report highlights the company's commitment to sustainability and its efforts to align with international standards and frameworks.

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ACCOUNTING THEORY

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Executive summary
BHP Billiton is the company that is involved in the business of mining, metals, and the
petroleum dual listed company. In this report a detailed analysis of the application of the
sustainability and the corporate governance has been analyzed and this was helpful in deriving
the overall assessment of how risk management systems were analyzed in the company.

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Table of Contents
Executive summary.....................................................................................................................................2
Overview.....................................................................................................................................................4
I) Recognition and measurement of Property, Plant and Equipment.......................................................4
Equipment...............................................................................................................................................5
Exploration and evaluation......................................................................................................................5
Depreciation............................................................................................................................................6
II) Other intangibles.................................................................................................................................6
III) Company’s governance mechanisms in place on the board of directors to address sustainability. . .6
IV) Ethical and social responsibility, how company’s risk management systems are addressed and
incorporated in their sustainability reporting...............................................................................................7
V) Any guidance company used in implementing environmental and social performance and
reporting systems.........................................................................................................................................8
VI) Discuss how CSR voluntary disclosure varies across different companies and industries/sectors. 10
Conclusion.................................................................................................................................................10
References.................................................................................................................................................11

Running Head: ACCOUNTING THEORY
Overview
Sustainability and the Corporate governance is the key element in the today’s scenario as each of
the organization are evaluated not just on the basis of the figures and the facts but also on the
basis of the sustainability and the corporate governance mechanisms followed by the company.
This is also in relation with regards to the reporting and presenting the financial statements in the
proper manner (Bellis, 2016). Sustainability and corporate governance are the key drivers that
rule the performance of the company and this will again be helpful in evaluating the position
with respect to the competitors.
I) Recognition and measurement of Property, Plant and Equipment
IAS 1 Presentation of financial statements determines the overall measures in which the financial
statements must be prepared and this also defines the manner in which the financial statements
must be structured. The possible requirements for the content and the overriding concepts such
as going concern and as per the required standard it is mandatory for the company to record all
the financial statements properly (Erkayaoğlu & Demirel, 2016). In case of the selected company
like BHP Billiton, each class of the property plant and equipment have been recognized at the
cost less accumulated depreciation and the impairment charges. Cost is the measure that is
considered over the given time frame at the time of the acquisition of the plant, property and
equipment (Perrott, 2015).
The recognition of the non-current asset in case of the BHP Billiton the impairment tests are
carried out on all the assets, where there is a proper indication of the impairment also when the
intangible assets like goodwill are tested on the annual basis. In case there are nay previously
impaired assets, the reversal of the impairment is any will not be cannot exceed the carrying

Running Head: ACCOUNTING THEORY
amount. The impairment loss if any shall be recorded as a loss and the reduction in the carrying
amount is shown in the balance sheet (BHP Billiton, 2018).
The constant review of each and every sector has been taken so that the appropriateness can be
measured in detail. Further the costs are mandatorily capitalized and the same are carry
forwarded to the extent that they are expected to be recovered through the successful exploitation
of the area of interest or alternatively by its sale. This cost has been recognized in the income
statement for the financial year 2019. In the process of the current year, the accounting policies
which have been aligned with the reports of the firm in case of the plant property and equipment
the different polices have been used in case of the measurement of the plant property and
equipment (Erkayaoğlu & Demirel, 2016).
Equipment
In terms of the equipment lease which results in the cluster bound by all of the risk and the
rewards of ownership are definitely capitalized as property, plant and equipment. These are
valued at the lower of the fair value of the leased assets. The depreciation method that has been
used in case of the leased assets is equivalent to the method of owned assets, or shorter assets or
the estimated present value (Erkayaoğlu & Demirel, 2016).
Exploration and evaluation
These kind of the expenses are charged to income and the expenditure statement as and when
incurred except in few circumstances. The development expenses are reclassified as under the
assets under the construction and the rest of the subsequent expenditures are classified (BHP
billiton, 2018S).

Running Head: ACCOUNTING THEORY
Depreciation
The depreciation is a measure of the normal, wear and tear of the organization and it is a method
of deducting the value of the assets over their useful life of assets. The depreciation of the assets,
other than land, assets under construction and capitalization exploration and evaluation that are
not depreciated, is simply calculated on the basis of the straight line method or on the basis of the
unit’s production method over the useful life of the assets (Erkayaoğlu & Demirel, 2016).
II) Other intangibles
The overall BHP Group recognizes the amount and then overall amount is being recorded under
the head of the capitalization, after taking into consideration the assets of intangible nature, such
as acquisition of mineral lease assets, software, licenses and initial payments for the, as they are
considered to provide the contribution on the basis of the future potentiality and the overall
sustainability. These assets are further classified as finite life intangible assets and they are
recorded at the fair value in the financial statement like balance sheet and on the other hand the
accumulated amortization and impairment charges are deducted out of it. In case of the
intangible assets with finite useful lives, the same are charged on a straight-line basis over their
useful lives. The life of an asset tends to be within the time frame of 8 years (Erkayaoğlu &
Demirel, 2016).
III) Company’s governance mechanisms in place on the board of directors to
address sustainability
According to the sustainability governance and the approach towards the sustianability, with the
Board’s sustainability Committee assisting with the governance and the entire corporate
reporting and monitoring. The committee organized by the government has the basic assumption

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of health safety and the environment community. In the view of BHP on Corporate and social
responsibility provides us with the authorization to lead the sustainability issues (Hubbard &
Moore, 2017). The directors of the company have the core responsibility to ingrain the
sustainability in every action that has been taken across the business. The directors are also
careful about the performance with hardly considering the performance on the environmental
front and this was the major priority for BHP, with regards to the sustainability and the corporate
governance (Schoenberger, 2016). Globally, Bhp Billiton communicates via their Annual
General Meetings. At times the publications also help in reporting the information and these are
produced in the market for special briefing. The impact of the mechanism was so strong that the
Sustainability Report of BHP Billiton literally aligns with the International Council on Mining
and Metals’ Sustainable Development Framework and it is also measured in the preparation of
the Global Reporting
The correct standards as well as initiatives are taken by the company to improve the aspect at the
global level. Therefore, in order to create the long term shareholder value it was necessary for
BHP to inculcate the medium of the corporate governance and a reporting framework to address
the BHP Billiton (Erkayaoğlu & Demirel, 2016).
IV) Ethical and social responsibility, how company’s risk management systems are
addressed and incorporated in their sustainability reporting
From the ethical perspective the risk management systems are addressed and incorporated in
their sustainability reporting in the following manner. In terms of the health, the company is
well aware of the health effects and the future issues and therefore a healthy system has been
created for the employees to protect and manage the health and the well-being of the workforce.

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The issues are constantly being made aware to the employees through the membership of the
industry associations. Periodic medical surveillance is one of the technologies that is being
required or conducted to detect various signs of potential illness at the primary stage and assist
the employees of the organization for the purpose of the management and recovery that is a
result of exposure at our workplace. The review of the medical test programs has also been taken
into consideration. By making aware about the constant reporting and discussions of the issues
the risk management system has been analyzed efficiently (BHP Billiton, 2018).
In relation to the occupational exposures, the company has made commitments over the period of
the five years for almost 505 reductions in the potential exposure of the workers. With the help
of the field leadership and the engagement and formal awareness program, these issues are being
resolved and this can be seen in terms of the figures where the Minerals America saw a reduction
in 18% in TRIF (Total recoverable injury frequency) performance to level less than two.
Mitigating the social risks and the overall, impact on the society, BHP recognizes the concerns
associated with the business. Aligned with the principles of UN guiding principles and business
as well as Human rights, the local support is being given to the team and the overall community.
With the help of the open channel communication, a development of the trust is built to gain the
common understanding and also to build and strengthen the operational activities of the business
(Bellis, 2016).
V) Any guidance company used in implementing environmental and social
performance and reporting systems
As per the reports it is evident that BHP Billiton has taken enough measures, and the
sustainability that has been reported has been initiated only for the self-benefit of the company.

Running Head: ACCOUNTING THEORY
Secondly the sustainability is the key parameter that is used to evaluate the overall performance
of the company. For the purpose of the stakeholders and the investors it is necessary to formulate
the corporate social responsibility and the correct reporting framework in the organization (Price,
2015). The guidance helped the company achieve few United Nations Sustainable development
goals in order to revamp the present as well as the future generations of BHP. The major
attention of the company as depicted by for the FY2018 is relevant for the promotion of building
the strong and the robust culture in order to promote valuable and trustful relationships and care.
This will also help in enhancing the overall capacity of the leaders such as directors and the
management of the company for the purpose of recruiting a diverse workforce. The guidance
taken by BHP can also be reflected in terms of the ideas and the thoughts that are portrayed in
the sustainability report of the company (Bellis, 2016).

Running Head: ACCOUNTING THEORY
VI) Discuss how CSR voluntary disclosure varies across different companies and
industries/sectors
The CSR policies that are disclosed by the other companies and the industry sectors in
comparison to the BHP Billiton can be observed in the following manner. In case of the BHP
Billiton the company voluntary discloses the wide range of the information over the different
programs such as health, safety and the environmental as well as community measures. The
sustainability report is created in the digital format in the first time and this initiative has been
taken by the company to embed the overall sustainability. Secondly, the other companies have
already been disclosing the sustainability report in the digital mode for the ease of the investors
and the shareholders (Paul, 2016). Stakeholder engagement and understanding and addressing
stakeholders’ CSR concerns have been prevailing in the market at the prospective rates and the
fro the point of view of the shareholders and eligible investors the overall potential and the future
growth of the CSR is constantly increasing when taking the strategic business decisions. Under
sustainable and responsible investing the sustainability principles that are followed by BHP, are
used by the investors investing in BHP, so that the overall decisions are taken (Erkayaoğlu &
Demirel, 2016).
Conclusion
Hence forth from the overall analysis it can be concluded that the sustainability and the corporate
framework is required for the future growth and development of BHP Company. This will allow
BHP Billiton to gain an in-depth-knowledge and will attract more number of the customers and
clients. The global profile of the company will be ranked to the higher level and will provide the
competitive advantage over the competitors.

Running Head: ACCOUNTING THEORY
References
Bellis, J. F. (2016). The iron ore production joint venture between Rio Tinto and BHP Billiton:
The European angle of a multinational antitrust review. In Emerging Issues in Sustainable
Development (pp. 221-243). Springer, Tokyo.
BHP billiton, (2018). Annual Report. Retrieved from
https://www.bhp.com/investor-centre/annual-report-2018
BHP billiton, (2018S). Sustainability Report. Retrieved from https://www.bhp.com/investor-
centre/sustainability-report-2018
Erkayaoğlu, M., & Demirel, N. (2016). A comparative life cycle assessment of material handling
systems for sustainable mining. Journal of environmental management, 174, 1-6.
Hubbard, T. N., & Moore, M. J. (2017). Bhp billiton: Mining potash. Kellogg School of
Management Cases, 1-13.
Lodhia, S. K. (2018). Sustainability reporting in the mining industry: Current status and future
research directions. In Mining and Sustainable Development (pp. 158-175). Routledge.
Paul, S. (2016). BHP Billiton reviews Indonesian coal assets. Australia's Paydirt, 1(238), 83.
Perrott, B. E. (2015). Building the sustainable organization: an integrated approach. Journal of
Business Strategy, 36(1), 41-51.
Price, G. (2015). Spotlight on seeds for BHP Billiton Iron Ore. AusIMM Bulletin, (Jun 2015), 76.
Schoenberger, E. (2016). Environmentally sustainable mining: The case of tailings storage
facilities. Resources Policy, 49, 119-128.