BHP Billiton Limited is a large mining company that is listed on the Australian Stock Exchange. The performance of BHP Billiton Limited during the past ten years has fluctuated from unsatisfactory to excellent. You have been approached by the Board Of Directors of one of your largest clients – Institutional Investors Pty Ltd. They have asked you to prepare a report which addresses certain important matters that need further clarification.
They have presented you with the following two documents, comprising of (1) an article that was published in the Australian Financial Review on the 8th May, 2012 by Tony Boyd titled “BHP gets gas over US assets” and (2) the 2011 Annual Report of BHP Billiton Limited. Although the 2011 Annual Report of BHP Billiton Limited is nearly 300 pages in length, your client- Institutional Investors Pty Ltd have asked you to focus on pages 160-200, when preparing your report.
(1) What is a write –down according to Australian Accounting Standards and how will the write-down of BHP Billiton’s US Shale Gas assets impact on their financial statements?
(2) How have the Current and Non-Current Assets of BHP Billiton been valued in the accounts? Briefly explain the different valuation methods that have been used.
(3) Explain what types of items make up the Current and Non-Current Liabilities of BHP Billiton. Does the current financial position of the company suggest that they have liquidity problems or that they have borrowed excessively?
(4) Identify whether BHP Billiton has any Reserves on its Balance Sheet and what is their impact on the size of the value of Equity? Discuss what purposes these Reserves can be used for in the future.