Analysis of Financial Reporting: Rio Tinto and BHP Billiton Comparison

This report presents a comparative analysis of the financial performance of Rio Tinto and BHP Billiton, two leading global mining companies. It begins by outlining the core business operations of each company, emphasizing their involvement in exploring and processing mineral resources, and their dual-listing structures. The report then delves into the types of funding employed by both companies, distinguishing between internal sources like reserves and retained earnings, and external sources such as share capital and borrowings. Key elements of financial performance are examined, drawing from the directors' reports, including earnings, shareholder returns, and changes in net debt and free cash flow. The report also addresses events occurring after the reporting date, providing insights into the companies' future financial expectations and productivity gains. Furthermore, it explores the changes in accounting policies adopted by Rio Tinto and BHP Billiton, highlighting their adherence to IFRS and AASB standards. The analysis provides a comprehensive understanding of the financial reporting practices and performance of these major players in the mining industry.

Contemporary Financial and Integrated Reporting
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Core Business of the Company
Rio Tinto is recognized to be a leading global mining and metal
company that is actively involved in the exploration and processing of
the mineral resources of the earth. The company has a dual listing on
the New York Stock Exchange, as well as ASX
BHP Billiton, that is recognized to be the major competitor of Rio
Tinto that is also an Anglo-Australian mining company operating at a
global scale. The company also possesses a dual-listed structure and
The major business segments of the company include petroleum,
copper, iron ore and coal

industry of the above mentioned companies
Rio Tinto operates within the mineral industry similar to that of BHP
Billiton.
The mining sector contributes largely to promoting the GDP growth
of Australia and is estimated that account for about69% of the
nation’s exports.
The growth of the industry has been declined in the past but is
expected to depict growth in the future context.
It has been predicted by the forecasters for mining that the
production of mining is expected to grow in the coming years with
strong investment and increase in the production efficiency

Type s of Funding & Analysis of Financial Structure
Rio Tinto is funded both by external and internal sources of finance. The
internal sources of finance include reserves and retained earnings while
external sources include share capital, borrowings and other financial
liabilities
BHP Billiton has also adopted the use of internal as well as external
sources of finance in its capital structure. The internal sources include
reserves and retained earnings while external source includes debt, share
capital, treasury shares

Key elements of financial performance reported
in the Director’s report
As analyzed from the director’s report of Rio Tinto, the company has realized
enhanced earnings during the financial year 2018 of $8.8 billion as compared
with that of the financial year 2017 of $8.6 billion. The company has provided
the highest returns to the shareholders in its history of $13.5 billion. The
company’s balance sheet has also remained strong with the depiction of
reduction in the net debt by $14.1 billion and delivered an increment of $0.6
billion in free cash flow in the year 2019

It has been analyzed from the director’s report of BHP Billiton that it has
realized a loss of about $5.2 billion on account of impairment of its
onshore US assets. However, the company has depicted a strong
operational performance with a reduction in net debt of US $10.9 billion
and free cash flow of about US $12.5 billion

Event Occurred After the Reporting Date
Rio Tinto
It has provided a depiction of its expected free cash flow in the year 2019
of $ 0.6 billion in free cash flow.
The expected cash outflows in the year 2019 as depicted in the director’s
report of the company for the financial year 2019 is $0.3 billion.
 The expected net debt for the company is expected to increase in the
financial year 2019 due to an increase in expected cash outflows and
dividend provided to the shareholders
BHP Billion
It has also provided some additional financial information in regard to its
expected future outcomes.
The productivity gains of the company are expected to reach about US$1
billion reported in its annual report.
The company has reported about its future productivity in the annual
report as compared with providing information about the expected free cash
flows as stated by Rio Tinto

Changes in Accounting Policies
Rio Tinto has applied the accounting policies for developing the
financial statements in accordance with IFRS (International Financial
Reporting Standards). The company previously sued to report its
financial information by the application of UK GAAP. However, it has
applied AASB equivalent to IFRS in Australia for the development of
its financial statements after the year 2005 and Australian
Corporations Act
BHP Billiton has also adopted changes in its accounting policies as
per the new accounting standards of AASB. The changes are
applicable from the financial year 2018 that includes the application
of IFRS 9 for reporting of financial instruments and IFRS 15 for
reporting of revenue from contracts with customers similar to that of
Rio Tinto

BHP Billiton: Annual Report. 2018. [Online]. Available at:
https://www.bhp.com/-/media/documents/investors/annual-reports/2018/b
hpannualreport2018.pdf
[Accessed on: 10 April 2019].
BHP Billiton: Our Business. 2018. [Online]. Available at:https://
www.bhp.com/our-businesses[Accessed on: 10 April 2019].
Rio Tinto: Annual Report. 2018. [Online]. Available at:
http://www.riotinto.com/documents/RT_2018_annual_report.pdf
[Accessed on: 10 April 2019].
Rio Tinto: Our Business. 2018. [Online]. Available at:https://
www.riotinto.com/japan/our-business-19788.aspx[Accessed on: 10 April
2019].
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