Corporate Accounting Report: Rio Tinto and Boral Analysis

This report provides a comprehensive analysis of corporate accounting practices, focusing on the financial statements of Rio Tinto Ltd and Boral Ltd, two companies in the mining industry. The report examines key components such as owner's equity, capital structure decisions, and cash flow statements, offering a comparative study to highlight differences and similarities. It delves into the reporting of comprehensive items and the accounting for taxes, including effective tax rates, deferred tax assets and liabilities, and cash tax rate computations. Numerical calculations and graphical representations are used to enhance the analysis, providing insights into the financial performance and operational structures of both companies. The report concludes with a detailed discussion of the findings, offering a valuable resource for understanding corporate accounting principles and financial statement analysis.

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

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CORPORATE ACCOUNTING
Executive Summary
The assessment considers two company which are engaged in mining business for the purpose of
identifying the operational structure if the business and also look into the sources of funds which
are used by the business. Rio Tinto Ltd and Boral Ltd are considered on the basis of which
significant items of the financial statements are considered. The assessment deals with the
disclosure requirements of complex items which are generally shown in the financial statements
of the company. The assessment effectively sets up a comparative analysis of financial
information which is presented in the annual reports of the business and covers the above
mention items which are shown in the annual reports of the business. The quality of the report is
further enhanced with the help of numerical calculations of taxation for the month.

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Table of Contents
Introduction......................................................................................................................................3
Discussions......................................................................................................................................4
Owner’s Equity............................................................................................................................4
Capital Structure Decisions.........................................................................................................5
Analysis of Cash Flow Statement................................................................................................6
Comparative Study of Cash Flow Statement...............................................................................7
Insights of Cash flow Statement................................................................................................11
Reporting for Comprehensive Items..........................................................................................11
Disclosures of Comprehensive Items........................................................................................11
Comparative Analysis of Comprehensive Items.......................................................................12
Accounting for Taxes................................................................................................................12
Effective Tax Rate.....................................................................................................................12
Deferred Tax Assets and Liabilities..........................................................................................13
Cash Tax Rate Computation......................................................................................................13
Difference between Cash Tax rate and Book Tax Rate.............................................................13
Conclusion.....................................................................................................................................14
Reference.......................................................................................................................................15

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CORPORATE ACCOUNTING
Introduction
The role of accounting has enhanced with the changes in the financial structure and
competitiveness in business environment. Most of the business follow a reporting framework
which is approved by one or more accounting bodies such as IASB or ASSB. An ideal reporting
framework consist of all relevant information with appropriate disclosures for the same (Gitman,
Juchau and Flanagan 2015). The assessment proceeds with significant items reported in annual
reports of the companies considered and comment on the changes which have taken place in the
same (Henderson et al. 2015). A brief background of the companies considered is given below
Boral Ltd is engaged in the productions of materials which are used in construction
projects. The company has its headquarters and foundation in Australia however, the business
has expanded and penetrated the markets of Asia and USA (Boral. 2018). The company is
known to supply important building materials which are concrete placings, asphalt, cement to the
customers of the business. The company operates at a large scale and employ around 16000
employees who are working at different operational sites off the business.
Rio Tinto Ltd is one of the largest metal and mining business which has its operations in
Australia and is also listed in ASX. The company was founded in 1873 and has its headquarters
situated in London and therefore the company is also known to be an Anglo-Australian business.
The operations of the company are far and wide spread but the major areas of operations for the
business is in Australia and Canada (Riotinto.com. 2018). The company produces numerous
metals such as aluminum, copper, bauxite, iron ore.

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The report shows computations of tax rates for both companies and analyzes the changes
which have take place in the same. The report also shows contrast between different items which
are shown in the annual reports of both the companies.
Discussions
Owner’s Equity
The owner’s equity is shown in the balance sheet of the company and is considered to be
an important part of the annual report of the business. The components of owner’s equity which
is reflected in the annual report of both the companies are share capital balance, reserves and
retained earnings of the business. The item retained earnings is made out of excessive profits
which are made by the business over the shares and the same represent internal source of finance
for the business. The reserve of the business is made up of accumulated profits which is made on
year to year basis and the same funds can be used by business for specific purpose or even
general purpose. The share capital reflects the capital which is raised by the management of the
company with the help of issue of shares of the business.
Boral ltd ‘s annual report shows that the share capital of the business has increased during
the year and the same is shown to be $ 2361.5 million. The share capital is raised following the
capital requirements of the business for the year. The reserve balance of the company for the
year has shown a decline in value which may be due to set off of previous losses or application
of the reserve amount for a specific purpose which can be purchase of assets of the business. The
retained earnings of the business shows improvement in balances which is due to accumulation
of profits of the business.

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In case of Rio Tinto Ltd, the share capital which is shown in the balance sheet is provided
under the breakup of share capital of Rio Tinto Plc and Rio Tinto limited. The management of
the Rio Tinto ltd has issued new shares which causes to increase the capital of the business. The
reserve of the business is shown to have increased during the year and the retained earnings of
the business has also increased during the period. The increase in retained earnings and reserves
demonstrate that the business has financial strength and good financial performance for the year.
The share capital of the business $ 4,140 million for the year 2017. This figure has increased
from previous year analysis.
Capital Structure Decisions
Capital Structure refers to the application of equity and debt capital in handling the
management of the business and also the various operations which are undertaken by the
company during the period. The management of Boral ltd uses an optimal capital structure which
is made up of both share capital and capital accumulated from loans (Dalal 2013). The
management of Boral ltd shows an appropriate capital structure which is made of equity and debt
capital used for financing the activities of the business. The policy and goals of the business is to
attain further expansion and attain sustainable growth in the business which requires the amount
of capital which is raised by Boral Ltd for the year. The debt capital of the business is shown to
be $ 2163.7 million in 2017 which has tremendously increased and the notes to account section
confirms that the business has taken additional loans during the year.
The balance sheet which is prepared by the management of Rio Tinto ltd for the year
2017 shows that the management of the companies utilizes both equity and debt capital for the
purpose of financing the different projects of a business (Jain, Singh and Yadav 2013). The debt
balance of the business for the year 2017 has reduced which is due to the management has repaid

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a part of loan of the business during the year. The debt balance for the year 2017 is shown to be
$15,148 million which forms a major part of capital structure and the business rarely uses equity-
based capital for the purpose of financing the activities of the business.
The analysis shows that Boral ltd believes in balanced debt equity capital mix as the
business is trying to get the debt capital up to equity standards in order to achieve an optimal
capital structure. The capital structure analysis of Rio Tinto ltd reveals that the debt capital is
used mostly by the business and the management prefers application debt capital for financing
the activities of the business.
Analysis of Cash Flow Statement
The cash flow statement forms a part of the financial reports and the same shows cash
position of the business. The cash flow statement only considers the cash items during the period
and non-cash items of the business are not considered (Call, Chen and Tong 2013). The purpose
of cash flow statement is to evaluate the net cash and cash equivalent balance of the company
which is shown in the balance sheet of the business. The cash flow statement considers the three
main activities of the business which forms part of annual report.
The cash flow statement of the Boral ltd shows cash receipts of the business is through
receipts from sales which is included in the operating activities of the business. The business also
has interest income which is part of the other income of the business. The cash from operating
activities is shown to be positive but the same has reduced from the analysis which is shown for
previous year. The cash from investing activities of the business shows that the business has
purchased entities and business and also properties during the year which is the main reason as to
why cash outflow is more than cash inflow in this section (Mohanram 2014). The cash from

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fining activities of the business comprise of net capital which is raised by the business and also
the debt capital which is taken by the company for the year 2017. The net cash from financing
activities of the business is shown to be positive which is due to the excessive cash which has
entered the business during the period.
The cash from operations of Rio Tinto Ltd for the year 2017 is shown to have increased
and the enhanced figure is shown to be $ 16670 million for the year 2017. The increase in cash
flow from operating activities shows strength of the business in managing expenses of the
business. The operating activities of the business comprises of the core business activities related
to the business. The cash from operations of the business mainly comprises of operating
activities of the business and the major cash flows which can be recognized from the cash flow
statement is dividend from equity accounts and tax expenses which are incurred during the year.
The investing activities of the business shows the purchases which is undertaken by the
management of the business (Farshadfar and Monem 2013). The purchases are shown in the
notes to account section of the annual report which comprise of property, plant and equipment
and also intangible assets. This is the major reason for the excessive cash outflow. The cash from
financing activities of the business show that the major cash outflows is from buyback of shares
loan repayments and also dividend which is paid to the investors of the business. The financing
activities of the business represent the loans and share buyback and loan repayment which is
made by the business during the year.
Comparative Study of Cash Flow Statement
The comparative analysis of the cash flow statement which is porepared by both the
companies is effectively presented with the help of graphical presentation of the cash flow
statement is shown in the figure below. The net cash flow of Boral ltd is shown in the annual

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reports of the business and the breakup for the same is shown in a table below for which a graph
is presented. This net cash flow from operating activities is shown to be $ 413.30 million which
is lower than the amount which is incurred by the business in investing and financing activities
undertaken by the business during the period.
Particular 2015 2016 2017
Net cash flows from operating
activities
$
418.30
$
477.50
$
413.30
Net cash flows used in investing
activities
-$
55.70
-$
259.50
-$
3,731.30
Net cash flows used in financing
activities
-$
251.60
-$
273.40
$
3,107.00
2015 2016 2017
$(5,000.00)
$(4,000.00)
$(3,000.00)
$(2,000.00)
$(1,000.00)
$-
$1,000.00
$2,000.00
$3,000.00
$4,000.00
$418.30 $477.50 $413.30
$(55.70) $(259.50)
$(3,731.30)
$(251.60) $(273.40)
$3,107.00
Comparati ve analysis of cash fl ow categories of oralB
tdL
et cash fl ows from operating activitiesN et cash fl ows used in investing activitiesN et cash fl ows used in fi nancing activitiesN

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The above graph shows the cash flow of Boral ltd for the 3 years period. The financing
activities of business for the 2017 is shown to be positive due to the significant amount of capital
which is raised by the business during the period. The investing activities of the business is
shown to be negative for all the years.
The cash flow statement of Rio Tinto ltd shows that cash from operating activities of the
business has increased significantly during the year in comparison to previous year analysis
which is shown to be $ 13,884 million. The increase in sales is the main driving force behind the
increased cash from operating activity of the business (Bilinski 2014). The cash from financing
activities of the business reveals items such as repayments of loans by the management of the
business during the period. The cash from investing activities of the business is shown to be
negative which is mainly due to purchases of property, plant and equipment which is undertaken
by the business during the period. A graphical presentation of the cash flow statement is shown
in the figure below:
Particular 2015 2016 2017
Net cash flows from operating
activities
9383 8465 13884
Net cash flows used in investing
activities
-4600 -2104 -2373
Net cash flows used in financing
activities
-7670 -7491 -9141

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2015 2016 2017
-15000
-10000
-5000
0
5000
10000
15000
20000
9383 8465
13884
-4600
-2104 -2373
-7670 -7491
-9141
Comparati ve analysis of cash fl ow categories of Rio
into imitedT L
The above graph shows that cash from financing activities of the business which is shown
to be in negative which is mainly due to the dividend s which is paid by the business during the
year (Radhakrishnan and Wu 2014). The cash from investing activities of the business is shown
to in negative as well which is mainly due to the significant investments which is undertaken by
the business in assets acquisition. The cash generated from operating activities of the business is
shown to have increased during the period which is due to the high sales which is achieved by
the business.

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Insights of Cash flow Statement
The cash position of Rio Tinto ltd for the year 2017 is shown to be favorable which
shows that business has operational strength. On the other hand, the operating activities of the
Boral ltd shows that cash generated from operating activities has slightly decreased which needs
to be considered by the management and appropriate strategies needs to be formulated. The cash
from investing activities reveal that Boral ltd has acquired another business in 2017 which is
mainly the reason for the more of cash outflows during the year. On the other hand, the
management of Rio Tinto ltd has purchased significant amount of assets which is the reason for
the negative cash from investing activities of the business. In an overall estimate, it is evident
that cash position of Rio Tinto ltd is much better than the cash position of Boral ltd.
Reporting for Comprehensive Items
The comprehensive items are extraordinary items which are shown in the financial
statements of the business and the annual report of Boral ltd and Rio Tinto ltd show that the
financial statement include comprehensive items. The annual report of Boral ltd shows hedge
contracts and fluctuation of exchange rates of the business. The annual reports of Rio Tinto ltd
also shows the same element and the only addition is the revaluation of assets which is shown in
the annual report of the business.
Disclosures of Comprehensive Items
The extraordinary nature of comprehensive items are important as they determine
whether the same is to be shown in the financial statements or separately in another segment
(Papanikolaou and Wolff 2014). The items are also no-recurring in nature and not regular and
therefore the same is not included in the financial statement of the business.