HI5020 Corporate Accounting: ASX Company Financial Analysis Report

This report provides a comprehensive analysis of the financial statements of two Australian Securities Exchange (ASX) listed companies, BHP Billiton Limited and CSR Limited, both operating in the mining and materials industry. The report examines key financial elements, including owners' equity, cash flow statements, other comprehensive income, and corporate income tax. The analysis of owners' equity covers share capital, reserves, and retained earnings, with a comparative review of changes over the years. The cash flow statement analysis delves into operating, investing, and financing activities, highlighting significant changes and trends. The report also assesses the debt and equity positions of the companies, calculating capital gearing ratios to evaluate their financial stability. The study aims to provide a detailed understanding of the financial performance and position of these entities, offering valuable insights into their financial reporting practices.

Running head: CORPORATE ACCOUNTING
Corporate Accounting
Name of the Student:
Name of the University:
Authors Note:

1CORPORATE ACCOUNTING
Executive Summary:
Australian Accounting Standards (AASBs) issued by the Australian Accounting
Standards Board have formulated in accordance with the International Financial Reporting
Standards issued by the International Accounting Standards Board (IASB). Entities operating in
Australia are under an obligation to accommodate mandatory AASBs in accounting and financial
reporting. Financial reporting provides financial statements to the stakeholders of an entity to
inform them about the position such entity and its performance as on a particular date and period
respectively. Having basic knowledge of the items reported in financial statements is essential to
understand the financial position and performance of an entity. Taking examples of two
Australian Securities Exchange (ASX) entities various items reported in financial statements
shall be discussed here with the objective of imparting significant knowledge on these items.

2CORPORATE ACCOUNTING
Contents
Executive Summary:........................................................................................................................1
Introduction:....................................................................................................................................3
Owners’ equity reported in statement of financial position:...........................................................3
Cash flow statement analysis of two companies:............................................................................7
Other Comprehensive Income Statement Analysis of two companies:.........................................18
Corporate income tax of two companies:......................................................................................21
References:....................................................................................................................................27

3CORPORATE ACCOUNTING
Introduction:
BHP Billiton Limited and CSR Limited are two listed entities of ASX. Both are in the
mining and materials industry of Australia.
BHP Billiton (BHP) is one of the large multi-national company founded and established in
Australia and operates in mining and materials industry. The company was founded way back in
1885 in New South Wales (NSW). The company has extensive operations in all over the world
including Indonesia, Netherlands, Brazil, Thailand, China, and US along with the domestic
market in Australia. CSR Limited, a listed entity in Australia (ASX), the company’s primary
business operation include manufacturing and supplying building products. Annual reports of the
two companies shall be evaluated to provide important information about the different financial
elements reported by the two companies in their respective financial reports.
Owners’ equity reported in statement of financial position:
(i) Both BHP and CSR have reported identical items under owners’ equity with different
nomenclatures thus, a brief description about these items would be helpful to evaluate the
changes in balances of each of these items over the past few years.
BHP Billiton:
Share capital BHP Billiton Limited: Amount of share capital issued and paid by the
shareholders. Only the face value of shares are included in contributed equity of the
company.

4CORPORATE ACCOUNTING
Share capital of BHP Billiton PLC: This amount is the face value of shares issued by the
company as an entity of London Stock Exchange.
Reserves: Specific reserves have been created out of profit and loss account of the company
over the years to meet future contingencies.
Treasury shares: It is the amount of shares brought back by the company over the years.
Retained earnings: Accumulated profits transferred after declaring dividend and providing
for all specific reserves.
CSR Limited:
Issued capital: Amount of face value received from issuing ordinary shares to the
shareholders has been stated in the issued capital account.
Reserves: To meet future obligations specific reserves have been created and stated under
reserves.
Retained earnings: The Company over the years have earn profits from business. After
providing for all reserves and payment of dividend the balance profit has been transferred to
retained earnings. Hence, retained earnings show the accumulated profits over the years
(Minnis and Sutherland, 2017).
Changes in items:
Changes in items of equity of BHP are enumerated below:
US $ millions 2017 2016 Increase /
(decrease)

5CORPORATE ACCOUNTING
Share capital BHP Billiton Limited 1,186.0
0
1,186.0
0
-
Share capital BHP Billiton PLC 1,057.0
0
1,057.0
0
-
Treasury shares (3.0
0)
(33.0
0)
30.00
Reserves 2,400.0
0
2,538.0
0
(138.00
)
Retained earnings 52,618.0
0
49,542.0
0
3,076.00
Note: In analysis m denotes millions.
Share capital has remained unchanged in 2017 as the company has not issued any additional
shares during 2017. Reserves balances have changed as specific reserves have been utilized in
2017 resulting reduction of reserves. Increase in retained earnings is due to profits earned by the
company in 2017 and transferred to retained earnings (Brigham et. al. 2016).
Changes in these items are recorded in the tabular format below for CSR Limited:
$’ millions 2017 2016 Change
increase /

6CORPORATE ACCOUNTING
(decrease)
Issued capital 1,036.8
0
1,041.1
0
(4.30)
Reserves (73.4
0)
20.4
0
(93.80)
Retained earnings 191.6
0
123.2
0
68.40
In 2017 the company has brought back shares with face value of $4.30m hence, the
issued capital has decreased by such amount. Decrease in reserves is due to the utilization of
specific reserve in 2017 to the extent of net 93.80m. Increase in retained earnings of $68.4m is
due to the transfer of net profit after tax and creation reserves to retained earnings in 2017 (Cao,
Chychyla and Stewart, 2015).
(ii)
Debt and equity position of two companies as on June 30, 2017:
US$ millions 2017
BHP CSR
Owners’ equity 57,258.
00
1,155
.00
Long term debt fund 29,233. 3

7CORPORATE ACCOUNTING
00 0.50
Capital gearing ratio (Owners' equity / Fixed interest bearing fund)
1.96
3
7.87
In assessing debt to equity position of an entity, capital gearing ratio calculated by dividing the
owners’ equity by fixed interest bearing funds of an entity is very useful.
BHP has used long term borrowings so has CSR. Hence, in case of BHP there the capital gearing
ratio is 1.96 times and for CSR it is 37.87 times. Debt and equity position indicates the long term
solvency position of an entity. It is always encouraged to have majority portion of total funds as
owners’ equity. Thus, a 1.96 capital gearing ratio of BHP indicates that the company has a stable
debt and equity position. The use of debt fund is very less for CSR as it has 37.87 capital gearing
ratio. It is recommended to the company to use additional funds from long term debt to use the
financial and operating leverage. Hence, the debt and equity position of CSR minerals is not
suitable for the expansion of the business (Henderson et. al. 2015).
Cash flow statement analysis of two companies:
(iii)
Operating activities:
CSR Limited:

8CORPORATE ACCOUNTING
Cash receipts from customers: CSR has reported amount of cash receipts form customers under
operating activities cash flows. Amount received from customers are the revenue generated from
business.
Payment to suppliers and employees: In order to run business an organization needs raw
materials and employees. Payment to the suppliers are for raw material and employees are paid
for their hard work to help the companies to achieve their operational objectives.
Dividend received:CSR Limited has showed amount of dividend received as operating activities
as the company considers such investment in equity as operating investment (Patelli, L. and
Pedrini, 2015).
Interest received: Interest received from operating investments other than equity has shown
under interest received by CSR (Francis et. al. 2015).
Income tax: payment of income tax in cash is part of operating activities. Hence, deducted from
operating cash flows to calculate net cash flows from operating activities of CSR.
BHP Billiton:
BHP has used indirect method to calculate cash flows from operating activities hence, it has
adjusted the profit before tax by adjusting non-cash items such as depreciation, amortization;
non-operating items such interest income and interest expenditures.
Investing and financing activities:
Both BHP and CSR have reported identical items under investing and financing activities. Brief
description about these items are provided below:

9CORPORATE ACCOUNTING
Acquisition of property, plant and equipment, purchase of intangibles, acquisition of business
interests in associates and joint ventures are the items included in investing activities of BHP and
CSR Limited. Proceeds from disposal of non-current assets, sale of business interests are cash
inflows from investing activities of both these companies (Tassadaq and Malik, 2015).
In financing activities capital raised from issue of shares represent the amount received from
ordinary shares of the company. In addition proceeds received from loans and borrowings are
inflow of cash from financing activities. Repayments of loans, buy-back of shares and payment
of dividends are the main outflow of cash under financing activities (Hoyle, Schaefer and
Doupnik, 2015).
Changes in items of cash flows of BHP is provided in a tabular format below:
US$ millions 2,017.0
0
2,016.0
0
2,015.0
0
Cash Flows From Investing Activities
Investments in property, plant, and equipment (4,252.0
0)
(6,946.0
0)
(11,947.00
)
Property, plant, and equipment reductions
exploitation expenses (968.0
0)
(765.0
0)
(816.
00)

10CORPORATE ACCOUNTING
exploitation expenses included in operating cash flows 612.0
0
43
0.00
670
.00
Investments in equity (234.0
0)
40.0
0
117.0
0
Proceeds from sale of assets 648.0
0
1,047.0
0
74.0
0
Proceed from divestment of subsidiaries 186.0
0
16
6.00
256.0
0
Others (153.0
0)
(277.
00)
144.0
0
Net cash flow / (used) from investment activities (4,161.0
0)
(6,305.0
0)
(11,502.00
)
The net cash used in investing activities in 2017 has reduced with net use of $4,161m. In 2016
the net use of cash in investing activities was $6,305m. The decrease in investment activities is
due to reduction in exploitation expenses and increase in proceeds from sale of non-current
assets.

11CORPORATE ACCOUNTING
Financing activities of BHP:
US$ millions 2,017.0
0
2,016.0
0
2,015.0
0
Financing activities
Proceeds from issue of interest bearing securities 1,577
.00
7,239
.00
3,44
0.00
Proceeds from debt 3
6.00
15
6.00
(33
.00)
Repayment of interest bearing liabilities (7,120.
00)
(2,788.
00)
(4,135.
00)
Issue of ordinary shares
9.00
Non-controlling interests (16
.00)
5
3.00
Shares buy back (108.
00)
(106.
00)
(355
.00)
Payment of dividend (2,921. (4,130. (6,498.