Financial Report: Comparative Analysis of Income Tax - Westpac & BHP

This report provides a comparative analysis of the income tax information presented in the 2017 annual report of Westpac Banking and the 2018 annual report of BHP Billiton. It examines key aspects such as income tax expense, highlighting the differences in marginal tax rates between the two companies and potential reasons for these variations. The report also explores the treatment of income tax in other comprehensive income, noting differences in disclosure practices. Furthermore, it analyzes the composition of current and deferred tax components of income tax expense, detailing the proportions attributable to each. Finally, the report assesses the presence and magnitude of deferred tax assets and liabilities for both companies, providing a comprehensive overview of their tax positions.

COMPANY ACCOUNTING
Westpac & BHP Billiton Limited
STUDENT ID:
[Pick the date]

The two companies selected for this task are Westpac Banking and BHP Billiton. For the
former company, the latest annual report corresponds to FY2017 while for the latter, the
latest annual report corresponds to FY2018. The various aspects are as addressed below.
Income Tax Expense
The income tax expense for Westpac Banking for FY2017 is $ 3,518 million in comparison
to US $ 6.879 million income tax expense for BHP Billiton for FY2018 (Westpac, 2017;
BHP Billiton, 2018). It is interesting to note that the marginal tax rate is higher for BHP
Billiton in comparison to Westpac which may be attributed to higher taxation burden in
certain countries where BHP has operations.
Other Comprehensive Income Tax
For Westpac, tax is levied on the various items indicated in the comprehensive income
statement. However, instead of representing the tax expense related to various items
separately, the items are represented net of tax only (Westpac, 2017). Unlike, Westpac which
does not highlight the tax implications of the various items in the other comprehensive
income separately, BHP Billiton does highlight the tax implications of the various items in
the comprehensive income which for the year ending on June 30, 2018 stands at US $ 36
million (BHP Billiton, 2018).
Current & Deferred Tax
With regards to BHP Billiton for the year ending on June 30, 2018, the break-up of the tax
expense is indicated as shown below (BHP Billiton, 2018)
From the above, it is apparent that more than 70% of the tax expense is on account of the
current year business transactions while about 28% of the income tax expense arises on
account of deferred tax.
In regards to Westpac, for the year ending on June 30, 2018, the break-up of the tax expense
is indicated as shown below (Westpac, 2017).

From the above, it is apparent that more than 95% of the tax expense is on account of the
current year business transactions while about 3% of the income tax expense arises on
account of deferred tax.
Deferred Tax Asset or Liability
With regards to BHP Billiton annual report for year ending June 30, 2018, there are both
deferred tax assets to the extent of US $ 4,041 million but there are deferred tax liabilities to
the extent of US $ 3,472 million (BHP Billiton, 2018). In comparison, for Westpac for the
corresponding period, deferred tax assets exist to the tune of A $ 1,112 million and deferred
tax liabilities exist to the tune of $ 10 million (Westpac, 2017).

References
BHP Billiton (2018) Annual Report FY2018, [online] Available at
https://www.bhp.com/-/media/documents/investors/annual-reports/2018/
bhpannualreport2018.pdf (Accessed on October 18, 2018)
Westpac (2017) Annual Report FY2017, [online] Available at
https://www.westpac.com.au/content/dam/public/wbc/documents/pdf/aw/ic/
2017_Westpac_Annual_Report_Web_ready_&_Bookmarked.pdf (Accessed on October 18,
2018)