HI5020 Corporate Accounting Report: Mining Industry Analysis

This report offers a detailed financial analysis of three Australian mining companies: Rio Tinto, Altura Mining, and BHP Billiton. The analysis covers key aspects of corporate accounting, including equity and liabilities, with a comparative examination of share capital, reserves, retained earnings, borrowings, trade payables, and provisions. The report delves into the cash flow statements, examining operating, investing, and financing activities, followed by a comparative analysis to highlight financial trends. It further explores the other comprehensive income statements, identifying items not recognized under the income statement and reasons for their exclusion. The report concludes with an in-depth examination of accounting for corporate income tax, including tax expenses, effective tax rates, deferred tax assets and liabilities, and cash tax calculations. The comparative analysis across the three companies provides insights into their financial structures, leverage positions, and overall financial health, drawing from the companies' financial statements to support the analysis.

Running head: CORPORATE ACCOUNTING
Corporate accounting
Name of the student
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Executive summary
Purpose of the report is to analyse various financial aspects of 3 companies from mining
industry of Australia that is Rio Tinto, Altura Mining and BHP Billiton. It will focus on
equities and liabilities reported by the entities and changes in the amount thereon. It will
further highlight the capital structure of the companies and will also analyse the other
comprehensive income statement and cash flow statement. Moreover the report will focus on
accounting aspects of corporate income tax.

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Table of Contents
Introduction................................................................................................................................4
Equity and liabilities..................................................................................................................5
(i) Items of equity.............................................................................................................5
(ii) Items of liabilities........................................................................................................7
(iii) Comparative analysis of debt and equity...................................................................11
Cash flow statements................................................................................................................12
(iv) Items listed under cash flow statement......................................................................12
(v) Comparative analysis.................................................................................................13
(vi) Comparative analysis for explaining insights............................................................16
Other comprehensive income statement..................................................................................16
(vii) Items reported in other comprehensive income (OCI) statement..............................16
(viii) Reasons why the items not recognised under income statement...........................18
(ix) Comparative analysis.................................................................................................18
(x) Inclusion of comprehensive income for evaluation of manager’s performance.......18
Accounting for corporate income tax.......................................................................................19
(xi) Tax expenses.............................................................................................................19
(xii) Effective tax rate........................................................................................................19
(xiii) Deferred tax assets or liabilities.............................................................................19
(xiv) Increase or decrease in the deferred tax assets or liabilities..................................20

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(xv) Cash tax.....................................................................................................................20
(xvi) Cash tax rate...........................................................................................................20
(xvii) Difference among book tax rate and cash tax rate.................................................21
Conclusion................................................................................................................................21
References................................................................................................................................22
Appendix..................................................................................................................................24

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Introduction
Rio Tinto Plc. That was incorporated on 30th March 1962 is the leading metals and
mining entity in Australia. The major business of the entity is finding, processing and mining
of the mineral resources. Various segments of the entity includes Aluminium, Iron Ore,
Diamonds and copper, minerals and energy and different other operations. Materials from the
company are essential for making the modern life work and their economies assist the
communities to prosper and economies to grow. Further, through various innovations and
researches they help to meet the requirements of the society in changing as well as growing
the world. Moreover, they bring benefits to the people, to the communities under which it
operates and beyond (Riotinto.com 2018).
Altura Mining is the key player in the global market for lithium that is based in
Perth, Australia. It is leveraging the growing demand for the raw materials to manufacture
lithium ion batteries used in electric vehicles and for static usages. The entity is further
engaged in development and exploration activities and its segments include exploration
services, coal mining and exploration of minerals. Coal mining sector of the company is
involved in selling of coal. Further, the company is focussed on development and
construction of Pilgangoora Lithium project that is 100% owned by it and situated in Pilbara
region of Western Australia. Moreover, the company delivers drilling services to the
exploration and mining companies (Alturamining.com 2018).
BHP Billiton that was established in 2001 with the merger of Broken Hill, Proprietary
(BHP) and Billiton is one of the largest global resources and mining company that has more
than 100,000 employees in more than 25 nations. Headquarter of the company is in
Melbourne, Australia. It is among the largest producers for copper, aluminium, iron ore,
manganese, nickel, titanium, silver and uranium. Further, it is the 7th largest aluminium

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producer in the world. Aluminium portfolio of the entity includes bauxite refining for
producing alumina, bauxite production and smelting of the aluminium metal (BHP 2018).
Equity and liabilities
(i) Items of equity
Rio Tinto – listed equity items for the entity are as follows –
 Share capital – share capital is the fund that is raised by issuing shares for cash or
consideration. It is the long-term source for finance. Shareholders get share of
ownership in the company in return of their share holdings
 Share premium – it is the amount that is subscribed to for the new issue of shares
over and above its par value. It can be used only for specific purposes mentioned in
the bylaws of the entity (Marshall 2016).
 Other reserves – other reserves is the part of equity that excludes the basic share
capital part. Generally the other reserves includes specified part of the surplus fund
generated through various other sources like selling the shares at premium or upward
revaluation of fixed asset
 Retained earnings – it is the profit available with the company at the balance sheet
date and is decreased by the amount of any distribution made to the the stockholders
as a means of dividend. However, the amounts of retained earnings are also re-
invested in business or are maintained as reserve for particular purposes (Melloni, Lai
and Stacchezzini 2018).
Changes in the equity for Rio Tinto are shown as below –

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Retained earnings of the company have been changed owing to buyback of the shares
and payment of dividend from this amount. Share capital amount has been changed due to
share buyback.
Altura Mining – listed equity items for the entity are as follows –
 Contributed equity – contributed equity or the paid in capital is element of total equity
amount reported by the entity. However, it can be segregated as the separate account
under stockholder’s equity segment of balance sheet. In other words, it is the amount
contributed by the stockholders in return of ownership stake (Sarfaty 2015).
 Reserves – As described for Rio Tinto above
 Accumulated loss – retained earnings amount usually represent the credit balance
generated from the income accumulated over the specified time period. However, the
amounts of retained earnings are impacted by the amount of dividend distribution. If
the accumulated amount earning is in negative it decreases the amount of retained
earnings and make it negative which is also known as accumulated deficit or loss
(Reid and Myddelton 2017).
Changes in the equity for Altura Mining are shown as below –

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As shown above, amount of the issued capital has been increased due to equity
contribution and accumulated loss was due to dividend distribution made from retained
earnings.
BHP Billiton – listed equity items for the entity are as follows –
 Share capital – As described for Rio Tinto above
 Treasury shares – it is the share that is bought back by the company already issued
before. It lessens the outstanding shares of the entity in the open market. However,
there is no dividend right on the treasury shares and does not have any voting rights
(Sethi 2016).
 Reserves – As described for Rio Tinto above
 Retained earnings – As described for Rio Tinto above
Changes in the equity for BHP Billiton are shown as below –
Retained earnings of the company have been changed owing to the dividend payment
from this amount. Amount of reserves have been changed due to contribution from employee
and various other adjustments made for the employees.
(ii) Items of liabilities
Rio Tinto – listed Liability items for the entity are as follows –
 Borrowings and other financial liabilities – borrowing is raising money from another
party or financial institutions with the agreement that the money will be repaid at later

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date along with interest. Generally borrowings have specified maturity date based on
which it is classified as short term or long term.
 Trade and other payables – it is the amount billed to any entity by the suppliers for the
goods delivered or for the services consumed by it during the ordinary business
course (Titman, Keown and Martin 2017).
 Tax payable – it is the account recorded under current liabilities segment of the
balance sheet. It comprised of the taxes due to government within one year period of
time.
 Deferred tax liabilities – it is the tax assessed or due for current period but has not yet
been paid. It is recorded in the balance sheet if the company ensures that in future the
entity will pay more amount of of tax for any transaction taken place in the current
period.
 Provisions for post retirement benefits – it is related to the defined pension benefit and
various other post retirement benefits including the welfare and healthcare plans. It is
primarily based on the years of services provided by the employee and the
compensation he is entitled to (Waddock 2017).
Changes in the liability for Rio Tinto are shown as below –

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Borrowings have been reduced due to repayment of the amount and trade payables
amount have been changed due to payment of current portion of payables and accruals of
new payables. Further, provisions for the post retirement benefits have been increased due to
adjustments of currency translation and changes in the estimates.
Altura Mining - listed Liability items for the entity are as follows –
 Trade and other payables – As described for Rio Tinto above
 Borrowings – As described for Rio Tinto above
 Provisions – it is the amount that is set aside for possible but uncertain economic
liability of the company. It is the amount put aside for covering future liability.
 Liabilities classified under held for sale – generally sales are expected to be
completed within the time period of one year. Liabilities those are held for the
purpose of sale are generally measured at lower of carrying value of the proceedings
classified as held for sale and the fair value reduced by cost for sale (Warren and
Jones 2018).
Changes in the liability for Altura Mining are shown as below –

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Trade payables amount have been changed due to payment of current portion of
payables and accruals of new payables and borrowings have been reduced due to repayment
of the amount.
BHP Billiton - listed Liability items for the entity are as follows –
 Trade and other payable – As described for Rio Tinto above
 Interest bearing liabilities or borrowings – As described for Rio Tinto above
 Other financial liabilities – As described for Rio Tinto above
 Tax payable – As described for Rio Tinto above
 Provisions – As described for Altura Mining above
 Deferred income – it is the advance payment from the customers for services or goods
that have not yet been delivered. As per accrual basis of the accounting, recipient
reports this payment as liability (Watson 2015).
Changes in the liability for BHP Billiton are shown as below –

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Trade payables amount have been changed due to payment of current portion of
payables and accruals of new payables and borrowings have been reduced due to repayment
of the amount. Current tax payable has been increased due to increase in tax rate and
recognition of tax assets those were unrecognised during the previous year.
(iii) Comparative analysis of debt and equity
Debt equity are compared for analysing the leverage position of the company as it
determines the percentage of fund raised by the entity through borrowing and through own
fund that is equity. From the above table it can be determined that the debt equity position of
Rio Tinto and BHP Billiton is almost same as their capital structure are almost same.
However, debt component of Altura Mining in their capital structure is lower as compared to
other 2 companies. Hence, it can be stated that among the 3 companies Altura Mining is in
best position in leverage aspect (Maaloul and Zéghal 2015).