Analysis of Corporate and Financial Accounting: HA2032 Report, T2 2019

This report analyzes the financial performance of two ASX-listed companies, Deloitte Limited and BHP Billiton, over a three-year period, utilizing data from their financial statements. It examines the components of owner's equity, including share capital, treasury shares, reserves, and retained earnings, and discusses their movements. The report also details the liabilities, such as trade payables, interest-bearing liabilities, and current tax payable, explaining their fluctuations. Furthermore, it explores the sources of funds for both companies, highlighting their advantages and disadvantages. The analysis covers the impact of currency risk and interest rate fluctuations on owner's equity and provides insights into the companies' financial positions. This report is a comprehensive analysis of corporate and financial accounting practices.

Running head: CORPORATE AND FINANCIAL ACCOUNTING
Corporate and Financial Accounting
Name of the Student
Name of the University
Author’s Note

1CORPORATE AND FINANCIAL ACCOUNTING
Executive Summary
The report has been prepared to analyse the performances of the two ASX listed
companies that are Deloitte Limited and BHP Billiton for the past three years based on
the data obtained from the financial statements of the companies. The items that have
been recorded under the section of owner’s equity have been explained. The movement
of the items under the section of owner equity has been discussed. The items that have
been recorded in the section of liabilities have also been explained for each item. The
relevant movement in the items of this section has been highlighted with appropriate
reasons. The explanation of the sources of fund of the selected companies and their
relative advantage and disadvantage has been emphasized.

2CORPORATE AND FINANCIAL ACCOUNTING
Table of Contents
Introduction........................................................................................................................3
Part A.................................................................................................................................3
Items that have been recorded in the owners’ equity section and explaining each item
that are recorded in owners’ equity section.......................................................................3
Explaining the movement of each item recorded under the section of owner equity along
with reasons.......................................................................................................................4
Items that have been recorded under the section of liabilities along with explanation.....4
Explaining the movement of each items recorded under liabilities along with reasons....5
Explaining the advantages and disadvantages of each sources of fund for each
companies..........................................................................................................................6
Part B.................................................................................................................................6
Conclusion.........................................................................................................................7
References.........................................................................................................................8

3CORPORATE AND FINANCIAL ACCOUNTING
Introduction
Corporate accounting and financial accounting are vital for an organisation as the
accounting methods deals with preparation of financial reports along with financial
statement. The analysis and interpretation of financial result points out the specific
events of accounting which mainly deals with amalgamation and preparation of
consolidated statement. In this study, two ASX listed companies have been chosen
which are BHP Billiton and Deloitte Australia that have considered. The items that are
recorded in the section of owner’s equity have been analysed along with movement of
each item of this particular section. It also includes the items in the liabilities section and
the benefits and limitations of each source of funds for both of the companies.
Part A
Items that have been recorded in the owners’ equity section and explaining each
item that are recorded in owners’ equity section
Owners’ equity is the section that is present in the balance sheet of the company
and the statement generally consist of the assets and liabilities of the company. This
particular section mainly consists of funds that are invested in the company and it is
viewed as the residual claim on the assets of the business firm (Watson 2015). The total
assets of the company are derived from adding up the total liabilities and owners’ equity
and the equation is as follows. Assets = Liabilities + Owner’s Equity. The following part
points out the items in the section of owners’ equity of both companies that are BHP
Billiton and Deloitte Australia.
BHP Billiton
BHP Billiton is the Australian multinational mining company that provides their
products and services all around the world. The items that are recorded in the section of
owners’ equity are mentioned as follows.
Share capital – Share capital is the amount of funds that is mainly gathered from
the issue of shares to the public (Maas, Schaltegger and Crutzen 2016). Share capital is
divided in to two different parts which are common stock and preferred stock.
Treasury shares – These are the type of share that are generally bought back
by the issuing the business along with reducing the number of shares that are
outstanding in the open market (Atanasov and Black 2016). It is the item which are to
be issued by the company each year of operation.
Reserves – It is the certain amount of money that are kept as reserve from
previous fiscal year and this would assist in current year’s working capital of the
company.
Retained earnings – These are the profit that are earned to date and the
dividends are deducted from it along with any other distributions that are paid to the
investors.
Deloitte Australia

4CORPORATE AND FINANCIAL ACCOUNTING
Deloitte Australia is a multination company that provides services like audit,
economics, financial advisory and others. The items that are recorded in the section of
owners’ equity are mentioned as follows.
Share capital – It is the amount of capital that is derived from issue of shares to
the public and provides support in total capital of the company (Kravet 2014).
Retained earnings – It is the amount of fund from profit that is accumulated at a
particular point of time.
Explaining the movement of each item recorded under the section of owner
equity along with reasons
The owner’s equity represents the investment done by an owner in the business
less the money withdraws by the owner from the business. The net income from the
business is also a part of it from the date of the business came to existence. The
owner’s equity is one main section from the three main section of a balance sheet (Fox
and Overton 2015). The firm view owner’s equity as a residual claim on the assets of a
particular business, this is because liabilities has a higher claim. According to the 2018
annual report of Deloitte Australia the owner’s equity portion of the firm is increasing
such as in the year 2016 was 487, in the financial year 2017 was 518 and in the
financial year it is 547 (Deloitte 2018). The share capital and the retained earnings is
involved in the owners’ equity section of the firm. According to the annual report the
profit and the comprehensive income for the year 2016 is 85.8 and the dividend paid by
the firm is 55.1. The profit and the comprehensive income for the firm for the year 2017
is 87.3333 and the dividend paid by the firm is 57.7. The share capital was 42.0 for the
last three years. The relevant changes in the owner’s equity have been occurred due to
the existence of risk in the currency. The firm operates in the financial services and the
firm often gets exposed to the interest rate fluctuations in Denmark (Drees, Mietzner
and Schiereck 2013). The net interest bearing debt at the balance sheet date consists
of the floating rate liquid assets.
This is also a reason in the change of the equity and if the rate increases more
by more 0.5% then it will effect equity by 1.6 million. The second firm that is BHP Billiton
is an Australian firm which operates in the metals and mining company. The retained
earnings, reserves, non-controlling interest and the shares of the company are all
involved in the owner’s equity (Bhp.com 2019). The owner’s equity for the year 2016
was 60,071 in the year 2017 was 62,726 in the year 2018 was 60670. The retained
earnings was 49,542 the reserves was 2,538 and the non-controlling interest was 5781
for the year 2016. For the financial year 2017 the retained earnings was 52,618 reserve
was 2400 and the non-controlling interest was 5,468. The data that have been found
from the last year is 51,064 of retained earnings, 2290 of reserves and the 5078 of non-
controlled earnings. These amounts and the value for both company have been found
from the annual report of the respective company and the amounts are in million. The
reason for the movement in each item is due to change in the rate of interest and
change in currency. There is a high risk associated with these changes and it also
creates an effect in the owner’s equity of the firm. The dividends that have been paid
during the year has also affected the equity of the firm.

5CORPORATE AND FINANCIAL ACCOUNTING
Items that have been recorded under the section of liabilities along with
explanation
Liabilities refer to that part of the money that is payable by a company. The
company owes money to its outside parties which includes payment to the suppliers
and creditors, interest on bonds. Payments like rents and salaries are also included in
the liability section of a balance sheet. On the other hand, non-current liabilities refer to
those items which are due at any time after a year (Capponi, Chen & Yao 2015).
The items included in liabilities section-
 Trade payables- The amount that is paid by a company to the suppliers for
consuming their goods and services in the normal course of business. The
amount that is paid on credit terms comes under the trade payable category until
the amounts are being paid (Bauman & Shaw 2016). The examples of trade
payables are trade creditors and other creditors.
 Interest bearing liabilities- Sometimes a company collects funds other than
issuing share capitals in the form of bonds, bank loans, debentures and it has to
pay a fixed rate of interest along with the principal amount. These are called
interest bearing liabilities (Capponi, Chen & Yao 2015).
 Other financial liabilities- Financial liabilities are referred to the future sacrifices
that a company has to undertake as a result of some of its past transactions or
activities. The transactions can be in terms of money or services. Usually they
are legally enforceable due to a signed agreement. It includes debt payable and
interest payable (Bauman & Shaw 2016).
 Current tax payable- A certain amount of tax is payable by a company to the
local government for operating its business and it is termed as tax payable. It is
based on the company’s profitability during a given period of time. It is
considered as current liability since it needs to be settled within the next one year
(Capponi, Chen & Yao 2015).
 Provisions- Provisions are defined as an account where all the present liabilities
of an entity is recorded. A provision can be termed as liability of certain uncertain
amount or timings and it is never considered as a form of savings (Bauman &
Shaw 2016). Few instances of provisions are provisions for employee benefits,
provision for other dividends and liabilities.
 Deferred Income-There are certain goods or services that are provided by a
company which gets delivered to the customer after a certain time period and
such income is termed as deferred income. It is recorded as a liability until the
goods get delivered (Bauman & Shaw 2016).
Explaining the movement of each items recorded under liabilities along with
reasons
The movement trend of the liabilities of BHP for the years 2016,2017 and 2018
indicates that the liabilities has decreased with the change in years showing that the
financial position of the company is stable as per the external auditors (www.bhp.com,
2019). The liability section of the balance sheet of a company is can be divided into two
parts, namely Current Liabilities and Non-Current Liabilities. The term current liability
refers to those payments whose due date are within a year. On the other hand, the

6CORPORATE AND FINANCIAL ACCOUNTING
balance sheet of Deloitte shows that there is a decreasing trend in the liabilities but the
current liabilities has increased over the years which indicates the decreasing working
capital making the firm less liquid (www2.deloitte.com/au, 2019).
Explaining the advantages and disadvantages of each sources of fund for each
companies
The relative advantages or disadvantages of the sources of fund for Deloitte
Limited and BHP Billiton has been explained. The financial services of Deloitte Limited
prioritize on its trust and conduct, growth and regulation along with customer outcomes.
It is working on its clients who provide financial services (Kim, Li and Li 2014). It focuses
on the innovations that help to reshape the financial services as consumed, provisioned
and structured. The innovation in the services are predictable and deliberate. The
nature of disruption in technology in the barriers of investment is removed by the
process of global funding. The primary financing of the company has been through the
overdraft facilities that it has from the credit institutions relating to the undrawn facilities
of credit and other short-term liabilities. They are not exposed to any specific liquidity
risk (Chen et al. 2018). The categories of financial instruments used by the company
are receivables from its associates, trade receivables and other sources. The trade
receivables are exposed to the risk of credit risk including bank deposits and contracts
that are work in progress (Allen, Carletti and Marquez 2015). The bank deposits are
placed with renowned credit institutions, therefore they are not subject to any specific
credit risk. The receivables are also monitored based on the assessment of the risk of
its bad debts.
The funding sources adopted by BHP Billiton are mostly external sources. The
debt funding is obtained by the Treasury companies from its external market along with
marketing assets and businesses that are received from the sale proceeds to its
customers (Bhp.com 2019). In the financial year 2018, the company did not issue any
new debt and the debt that matured during that year was not again financed. The funds
are deployed into the different ways of capital investment like dividends or capital
expenditures and operations to its shareholders. The experienced team of people
amplified by the global participating experts provide the company with clear insights and
helps to combat its complex business challenges. The effective and efficient cash flow
management is achieved by deposits and loans between BHP entities (Imbierowicz and
Rauch 2014). The Group makes use of financial instruments for hedging the exposure
to the market risks which would arise from its investing, operational and financing
activities. The company is a party that revolves around the credit facility. The current
liabilities are owed to its Group undertakings that are interest free, repayable on
demand and unsecured.
Part B
A proprietary company are those companies which are formed in Australia and
South Africa that can a limited or unlimited company. In Australia and South Africa
companies are either public or proprietary (Ahamed, Almsafir and Al-Smadi 2014).
Proprietary Company are dependent on the jurisdiction and has some restrictions.
Proprietary company consist of some elements like
 They are not permitted to have members more than 50.

7CORPORATE AND FINANCIAL ACCOUNTING
 They cannot raise fund from public without disclosing the prospectus.
 Partnership firms are restricted to 20 shareholders.
 They cannot sales share to the public but can sale share to the existing
shareholders.
 One director has to be the resident of Australia.
Proprietary company can be a large or small company (Francis et al., 2015). Proprietary
company considered as small if it satisfy the two requirements out of the three following
requirements:
 Total operating revenue in a financial year is less than $10 million.
 Total asset of the company for a particular year is less than $5 million.
 Number of employees are less than 50.
Small company has tax advantage as they does not need to provide their audited
financial statement.
Large proprietary companies has to provide there audited financial statement and
directors report for each financial year. If the company does not fulfil two condition then
it will be called as small company (DiSegni, Huly and Akron 2015). A proprietary
company can be considered as a large company if it satisfy the two condition out of the
three as follows:
 Total revenue of the financial year is more than $50 million.
 Total value of assets holding by the company for a particular year is more than or
equal to $25 million.
 Number of employee is more than or equal to 100.
Reporting entity are those entities whose users depends on the general purpose
financial report to understand the financial position of the entity and for decision making
purpose. User of the financial report can be both internal and external. Reporting entity
has been employed in the private sectors which is required to report legal status and in
public sector it is required report the accountability (Ntim, Lindop and Thomas 2013).
Reporting entity identify and defines the boundary of the entity by the following:
 Adopting reporting entity by identifying the class of legal entity.
 Identifying the reporting entity by applying the fund concept.
Conclusion
In today’s competitive business world company cannot use the retained earnings
to grow. It need money for expanding in the market by developing new products and
services. A company cannot function without money. Funds are the lifeblood for every
business from the beginning till the last day of the business life. It need funds from
outside to continue the business. So company need to evaluate itself to look at the
major funding sources. Sources of fund is the most explore able and toughest part for a
company. Different source of fund are used in different situation. So choosing the right
source of fund at the right time for a company is important. This process requires in
depth analysis of each and every source of funds available in the market.

8CORPORATE AND FINANCIAL ACCOUNTING
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