UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 20-F/A

Amendment No. 1

 

 

 

☐	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

 

☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED 30 JUNE 2016

OR

 

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

 

☐	SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report                     

For the transition period from                      to                     

 

Commission file number: 001-09526		Commission file number: 001-31714
BHP BILLITON LIMITED		BHP BILLITON PLC
(ABN 49 004 028 077)		(REG. NO. 3196209)
(Exact name of Registrant as specified in its charter)		(Exact name of Registrant as specified in its charter)
VICTORIA, AUSTRALIA		ENGLAND AND WALES
(Jurisdiction of incorporation or organisation)		(Jurisdiction of incorporation or organisation)
171 COLLINS STREET, MELBOURNE, VICTORIA 3000 AUSTRALIA (Address of principal executive offices)		NOVA SOUTH, 160 VICTORIA STREET LONDON, SW1E 5LB UNITED KINGDOM
		(Address of principal executive offices)

 

 

Securities registered or to be registered pursuant to section 12(b) of the Act.

 

Title of each class		Name of each exchange on which registered		Title of each class		Name of each exchange on which registered
American Depositary Shares*		New York Stock Exchange		American Depositary Shares*		New York Stock Exchange
Ordinary Shares**		New York Stock Exchange		Ordinary Shares, nominal value US$0.50 each**		New York Stock Exchange

 

*	Evidenced by American Depositary Receipts. Each American Depositary Receipt represents two ordinary shares of BHP Billiton Limited or BHP Billiton Plc, as the case may be.

**	Not for trading, but only in connection with the listing of the applicable American Depositary Shares.

Securities registered or to be registered pursuant to Section 12(g) of the Act.

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None

 

 

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

 

		BHP Billiton Limited		BHP Billiton Plc
Fully Paid Ordinary Shares		3,211,691,105		2,112,071,796

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☒    No  ☐

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    Yes  ☐    No  ☒

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☐    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer		☑		Accelerated filer		☐
Non-accelerated filer		☐		Emerging growth company		☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

 

U.S. GAAP  ☐		International Financial Reporting Standards as issued by the International Accounting Standards Board  ☒		Other  ☐

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17  ☐    Item 18  ☐

If this is an annual report, indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

 

 

 

 

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EXPLANATORY NOTE

This Amendment No. 1 to Form 20-F (this “Amendment” or “Form 20-F/A”) amends the annual report on Form 20-F for the fiscal year ended 30 June 2016 (the “Original Filing”) filed jointly by BHP Billiton Limited and BHP Billiton Plc with the Securities and Exchange Commission (the “SEC”) on 21 September 2016 (the “Original Filing Date”). As used in this Amendment, the terms BHP, the Company and the Group refer to the combined group, including BHP Billiton Limited and BHP Billiton Plc and their respective subsidiary companies.

BHP is filing this Amendment to revise (i) the Report of Independent Registered Certified Public Accounting Firms of KPMG and KPMG LLP appearing in Part III, Item 18, Financial Statements, regarding the effectiveness of the Group’s internal control over financial reporting as at 30 June 2016; and (ii) management’s assessment of the effectiveness of the Group’s internal control over financial reporting as at 30 June 2016 and the disclosure on the effectiveness of the Group’s disclosure controls and procedures in Part II, Item 15, Controls and Procedures. These revisions are to reflect management’s conclusion that there was a material weakness in the controls over the determination of which deferred income tax balances to include in the carrying values of the Onshore US assets and market participant assumptions used to measure fair value less costs of disposal (FVLCD) for impairment assessment purposes. While isolated to the Onshore US assets, this material weakness was identified subsequent to the Original Filing Date, and as a result the Group is amending its overall assessment of effectiveness of internal control over financial reporting and disclosure controls and procedures.

Management has concluded that, notwithstanding the identification of the material weakness, the Group’s financial position and the consolidated financial statements included in the Original Filing for the years ended 30 June 2016 and 30 June 2015 present fairly, in all material respects, the financial position of the Group as at such dates and the results of operations and cash flows for the periods presented.

Pursuant to Rule 12b-15 of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), the certifications required pursuant to Rule 13a-14 of the Exchange Act, and the consent of the independent registered public accounting firms that were included as exhibits to the Original Filing, have been re-executed as of the date of this Amendment and are included as Exhibits 12.1, 12.2, 13.1, 13.2 and 15.1, respectively.

This Amendment, including the exhibits, only describes events as at the Original Filing Date, and does not reflect events that may have occurred subsequent to the Original Filing Date. Other than as described above, this Amendment does not and does not purport to amend, update or revise in any way the disclosures made in the Original Filing, including, without limitation, the financial statements and accompanying notes. This Amendment should be read in conjunction with the Original Filing and other information that BHP has filed or furnished to the SEC subsequent to the Original Filing Date.

 

1

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PART II, ITEM 15. Controls and procedures

Management’s assessment of our internal control over financial reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act).

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and, even when determined to be effective, can only provide reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of our management, including our CEO and CFO, the effectiveness of the Company’s internal control over financial reporting had been evaluated based on the framework and criteria established in Internal Controls - Integrated Framework (2013), issued by the Committee of the Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management had previously concluded that internal control over financial reporting was effective as at 30 June 2016. Subsequent to that evaluation, management identified a failure in reviews performed to distinguish between entity specific assumptions and market participant assumptions, including the application of deferred income taxes, in determining impairment of the Onshore US assets. Based on this reassessment, management has concluded that, although the Group’s consolidated financial statements included in the Original Filing fairly present, in all material respects, the financial position of the Group as at 30 June 2016 and 30 June 2015 and the results of operations and cash flows for the periods presented, a material weakness in internal control over financial reporting existed as at 30 June 2016.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Group’s annual or interim financial statements will not be prevented or detected on a timely basis by the Group’s internal controls.

Management concluded that the controls over the determination of which deferred income tax balances to include in the carrying values of the Onshore US assets and market participant assumptions used to measure FVLCD were ineffective for impairment assessment purposes as at 30 June 2016 and 30 June 2015. The material weakness arose due to a lack of understanding, by both the process owner and control operator, of how to distinguish between assumptions specific to BHP and those of a market participant, including the application of deferred income taxes, in determining impairment of the Onshore US assets.

These control deficiencies did not result in a material misstatement to, or restatement of, the Company’s consolidated financial statements for the years ended 30 June 2016 and 30 June 2015. However, while isolated to the Onshore US assets, the control deficiencies created a reasonable possibility that a material misstatement to the Group’s consolidated financial statements would not have been prevented or detected on a timely basis. Therefore, management concluded that the deficiencies represented a material weakness in our internal control over financial reporting and that our internal control over financial reporting was not effective as at 30 June 2016.

Our independent registered public accounting firms, KPMG and KPMG LLP, have audited the effectiveness of internal control over financial reporting as at 30 June 2016 and have reissued an adverse report, which is included on pages F-97 and F-98 under Item 18.

Management’s assessment of our disclosure controls and procedures

Management, with the participation of our CEO and CFO, had performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as at 30 June 2016. Disclosure controls and

 

2

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procedures are designed to provide reasonable assurance that the material financial and non-financial information required to be disclosed by BHP, including in the reports that it files or submits under the Exchange Act, is recorded, processed, summarised and reported on a timely basis and that such information is accumulated and communicated to BHP’s management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.

Further, in the design and evaluation of our disclosure controls and procedures, management was required to apply its judgement in evaluating the costs benefit relationship of possible controls and procedures.

At the time of the Original Filing, the disclosure controls and procedures were considered effective as at 30 June 2016. Subsequent to that evaluation, management identified a material weakness due to a lack of understanding, by both the process owner and control operator, of how to distinguish between entity specific assumptions and market participant assumptions, including the application of deferred income taxes, in determining impairment of the Onshore US assets. Accordingly, our management, including the CEO and CFO have, after considering the existence of the material weakness described above, concluded that our disclosure controls and procedures were not effective as at 30 June 2016. Management has amended the Original Filing to give effect to this change in assessment.

Notwithstanding the material weakness in our internal control over financial reporting, BHP performed additional procedures that have allowed management to conclude that, the consolidated financial statements included in the Original Filing fairly present, in all material respects, the Group’s financial position, results of operations and cash flows for the periods presented in conformity with IFRS as issued by the IASB.

Changes in Internal Control over Financial Reporting

Except for the material weakness described above, there have been no changes in our internal control over financial reporting during the year ended 30 June 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Remediation of material weakness

The Group has initiated remediation efforts to address the abovementioned material weakness. The remediation steps include the following:

 

•

Strengthening of the underlying control procedures relating to the consideration of assumptions that determine FVLCD and input into the carrying value assessments;

 

•

Education and improved awareness of control owners and those charged with oversight to ensure consistent awareness and practices across all functions responsible for the inputs, processing and outputs associated with the carrying value assessment and impairment process; and

 

•

Enhancement of templates with additional guidance provided to assist in consistent consideration of factors in determining the appropriate carrying value of assets or cash generating units.

Management expects the remediation activities will be effective to remediate the material weakness. However, the material weakness in the Group’s internal control over financial reporting will not be considered remediated until management has concluded, through testing, that these controls operate effectively. Management expects

 

3

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that the remediation of this material weakness will be completed by the time of filing of the Group’s Form 20-F for the year ended 30 June 2017.

In addition, the Group has reviewed the wider impairment controls suite and underlying control procedures to enhance the design and documentation of controls and increase the precision at which the controls operate.

 

4

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PART III, ITEM 18. Financial Statements

5    Financial Statements

Contents of Financial Statements

 

About these Financial Statements					F-1
5.1 Consolidated Financial Statements					F-2
5.1.1 Consolidated Income Statement					F-2
5.1.2 Consolidated Statement of Comprehensive Income					F-3
5.1.3 Consolidated Balance Sheet					F-4
5.1.4 Consolidated Cash Flow Statement					F-5
5.1.5 Consolidated Statement of Changes in Equity					F-6
5.1.6 Notes to Financial Statements					F-12
5.1.6 Notes to Financial Statements					F-12
Performance					F-12
1.		Segment reporting			F-12
2.		Exceptional items			F-15
3.		Significant events – Samarco dam failure			F-17
4.		Expenses and other income			F-26
5.		Income tax expense			F-27
6.		Earnings per share			F-32
Working capital					F-33
7.		Trade and other receivables			F-33
8.		Trade and other payables			F-34
9.		Inventories			F-34
Resource assets					F-35
10.		Property, plant and equipment			F-35
11.		Intangible assets			F-40
12.		Impairment of non-current assets			F-41
13.		Deferred tax balances			F-45
14.		Closure and rehabilitation provisions			F-48
Capital structure					F-50
15.		Share capital			F-50
16.		Other equity			F-52
17.		Dividends			F-54
18.		Provisions for dividends and other liabilities			F-55
Financial management					F-56
19.		Net debt			F-56
20.		Net finance costs			F-59
21.		Financial risk management			F-59
Employee matters					F-68
22.		Key management personnel			F-68
23.		Employee share ownership plans			F-69
24.		Employee benefits, restructuring and post-retirement employee benefits provisions			F-72
25.		Pension and other post-retirement obligations			F-74
Group and related party information					F-76
26.		Discontinued operations			F-76
27.		Subsidiaries			F-77
28.		Investments accounted for using the equity method			F-78
29.		Interests in joint operations			F-83
30.		Related party transactions			F-84

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Unrecognised items and uncertain events					F-85
31.		Commitments			F-85
32.		Contingent liabilities			F-86
33.		Subsequent events			F-87
Other items					F-87
34.		Acquisitions and disposals of subsidiaries, operations, joint operations and equity accounted investments			F-87
35.		Auditor’s remuneration			F-89
36.		Not required for US reporting			F-89
37.		Deed of Cross Guarantee			F-89
38.		New and amended accounting standards and interpretations issued but not yet effective			F-92
39.		Reserve estimates			F-92
5.2		Not required for US reporting			F-94
5.3		Directors’ declaration			F-94
5.4		Statement of Directors’ responsibilities in respect of the Annual Report and the Financial Statements			F-95
5.5		Not required for US reporting			F-95
5.6		Reports of Independent Registered Public Accounting Firms			F-96
5.7		Supplementary oil and gas information – unaudited			F-99

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About these Financial Statements

Reporting entity

In 2001, BHP Billiton Limited (previously known as BHP Limited), an Australian-listed company, and BHP Billiton Plc (previously known as Billiton Plc), a UK listed company, ‘the Companies’, entered into a Dual Listed Company (DLC) merger. The Companies and their subsidiaries operate together as a single for-profit economic entity (referred to as ‘the Group’) with a common Board of Directors, unified management structure and joint objectives. In effect, the DLC structure provides the same voting rights and dividend entitlements from the Group irrespective of whether investors hold shares in BHP Billiton Limited or BHP Billiton Plc.

Group and related party information is presented in note 30 ‘Related party transactions’ detailing the Group’s subsidiaries, associates, joint arrangements and the nature of transactions between these and other related parties. The nature of the operations and principal activities of the Group are described in the segment information (refer to note 1 ‘Segment reporting’).

Presentation of the Consolidated Financial Statements

A review has been undertaken to identify opportunities to make the Financial Statements more user friendly, simpler and easier to understand, while complying with the financial reporting obligations.

This review included:

 

•

focusing disclosures on material items and important information;

 

•

reorganisation of the notes to the Financial Statements into sections that will assist users in understanding the Group’s financial performance and financial position;

 

•

integration of relevant accounting policies and information on key judgements within the notes to accompanying the financial information to enhance users understanding of key financial line items;

 

•

use of simplified language and explanations.

BHP Billiton’s Directors have included information in this report they deem to be material and relevant to the understanding of the Financial Statements. Disclosure may be considered material and relevant if the dollar amount is significant due to size or nature, or the information is important to understand the:

 

•

Group’s current year results;

 

•

impact of significant changes in BHP Billiton’s business; or

 

•

aspects of the Group’s operations that are important to future performance.

These Consolidated Financial Statements were approved by the Board of Directors on 8 September 2016. The Directors have the authority to amend the Financial Statements after issuance.

 

F-1

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5.1    Consolidated Financial Statements

5.1.1    Consolidated Income Statement for the year ended 30 June 2016

 

		Notes				2016				2015				2014
						US$M				US$M				US$M
Continuing operations
Revenue			1				30,912				44,636				56,762
Other income			4				444				496				1,225
Expenses excluding net finance costs			4				(35,487	)			(37,010	)			(36,523	)
(Loss)/profit from equity accounted investments, related impairments and expenses			28				(2,104	)			548				1,185
(Loss)/profit from operations							(6,235	)			8,670				22,649
Financial expenses							(1,161	)			(702	)			(995	)
Financial income							137				88				81
Net finance costs			20				(1,024	)			(614	)			(914	)
(Loss)/profit before taxation							(7,259	)			8,056				21,735
Income tax benefit/(expense)							1,297				(2,762	)			(6,266	)
Royalty-related taxation (net of income tax benefit)							(245	)			(904	)			(514	)
Total taxation benefit/(expense)			5				1,052				(3,666	)			(6,780	)
(Loss)/profit after taxation from Continuing operations							(6,207	)			4,390				14,955
Discontinued operations
(Loss)/profit after taxation from Discontinued operations			26				–				(1,512	)			269
(Loss)/profit after taxation from Continuing and Discontinued operations							(6,207	)			2,878				15,224
Attributable to non-controlling interests							178				968				1,392
Attributable to owners of BHP Billiton Group							(6,385	)			1,910				13,832
Basic (loss)/earnings per ordinary share (cents)			6				(120.0	)			35.9				260.0
Diluted (loss)/earnings per ordinary share (cents)			6				(120.0	)			35.8				259.1
Basic (loss)/earnings from Continuing operations per ordinary share (cents)			6				(120.0	)			65.5				256.5
Diluted (loss)/earnings from Continuing operations per ordinary share (cents)			6				(120.0	)			65.3				255.7
Dividends per ordinary share – paid during the period (cents)			17				78.0				124.0				118.0
Dividends per ordinary share – determined in respect of the period (cents)			17				30.0				124.0				121.0

The accompanying notes form part of these Financial Statements.

 

F-2

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5.1.2    Consolidated Statement of Comprehensive Income for the year ended 30 June 2016

 

		Notes				2016				2015				2014
						US$M				US$M				US$M
(Loss)/profit after taxation from Continuing and Discontinued operations							(6,207	)			2,878				15,224
Other comprehensive income
Items that may be reclassified subsequently to the income statement:
Available for sale investments:
Net valuation gains/(losses) taken to equity							2				(21	)			(15	)
Net valuation losses/(gains) transferred to the income statement							1				(115	)			(14	)
Cash flow hedges:
(Losses)/gains taken to equity							(566	)			(1,797	)			681
Losses/(gains) transferred to the income statement							664				1,815				(678	)
Exchange fluctuations on translation of foreign operations taken to equity							(1	)			(2	)			(1	)
Exchange fluctuations on translation of foreign operations transferred to income statement							(10	)			–				–
Tax recognised within other comprehensive income			5				(30	)			29				3
Total items that may be reclassified subsequently to the income statement							60				(91	)			(24	)
Items that will not be reclassified to the income statement:
Remeasurement (losses)/gains on pension and medical schemes							(20	)			(28	)			57
Tax recognised within other comprehensive income			5				(17	)			(17	)			12
Total items that will not be reclassified to the income statement							(37	)			(45	)			69
Total other comprehensive income/(loss)							23				(136	)			45
Total comprehensive (loss)/income							(6,184	)			2,742				15,269
Attributable to non-controlling interests							176				973				1,392
Attributable to owners of BHP Billiton Group							(6,360	)			1,769				13,877

 

The accompanying notes form part of these Financial Statements.

 

F-3

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5.1.3    Consolidated Balance Sheet as at 30 June 2016

 

		Notes				2016				2015
						US$M				US$M
ASSETS
Current assets
Cash and cash equivalents			19				10,319				6,753
Trade and other receivables			7				3,155				4,321
Other financial assets			21				121				83
Inventories			9				3,411				4,292
Current tax assets							567				658
Other							141				262
Total current assets							17,714				16,369
Non-current assets
Trade and other receivables			7				867				1,499
Other financial assets			21				2,680				1,159
Inventories			9				764				466
Property, plant and equipment			10				83,975				94,072
Intangible assets			11				4,119				4,292
Investments accounted for using the equity method			28				2,575				3,712
Deferred tax assets			13				6,147				2,861
Other							112				150
Total non-current assets							101,239				108,211
Total assets							118,953				124,580
LIABILITIES
Current liabilities
Trade and other payables			8				5,389				7,389
Interest bearing liabilities			19				4,653				3,201
Other financial liabilities			21				5				251
Current tax payable							451				207
Provisions			3, 14, 18, 24				1,765				1,676
Deferred income							77				129
Total current liabilities							12,340				12,853
Non-current liabilities
Trade and other payables			8				13				29
Interest bearing liabilities			19				31,768				27,969
Other financial liabilities			21				1,778				1,031
Deferred tax liabilities			13				4,324				4,542
Provisions			3, 14, 18, 24				8,381				7,306
Deferred income							278				305
Total non-current liabilities							46,542				41,182
Total liabilities							58,882				54,035
Net assets							60,071				70,545
EQUITY
Share capital – BHP Billiton Limited							1,186				1,186
Share capital – BHP Billiton Plc							1,057				1,057
Treasury shares							(33	)			(76	)
Reserves			16				2,538				2,557
Retained earnings							49,542				60,044
Total equity attributable to owners of BHP Billiton Group							54,290				64,768
Non-controlling interests			16				5,781				5,777
Total equity							60,071				70,545

The accompanying notes form part of these Financial Statements.

The Financial Statements were approved by the Board of Directors on 8 September 2016 and signed on its behalf by:

 

Jac Nasser AO		Andrew Mackenzie
Chairman		Chief Executive Officer

 

F-4

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5.1.4    Consolidated Cash Flow Statement for the year ended 30 June 2016

 

		Notes				2016				2015				2014
						US$M				US$M				US$M
Operating activities
(Loss)/profit before taxation from Continuing operations							(7,259	)			8,056				21,735
Adjustments for:
Non-cash or non-operating exceptional items							9,645				3,196				(551	)
Depreciation and amortisation expense							8,661				9,158				7,716
Impairments of property, plant and equipment, financial assets and intangibles							210				828				478
Net finance costs							1,024				614				914
Share of operating profit of equity accounted investments							(276	)			(548	)			(1,185	)
Other							459				503				95
Changes in assets and liabilities:
Trade and other receivables							1,714				1,431				(349	)
Inventories							527				151				(158	)
Trade and other payables							(1,661	)			(990	)			238
Provisions and other assets and liabilities							(373	)			(779	)			385
Cash generated from operations							12,671				21,620				29,318
Dividends received							301				740				1,264
Interest received							128				86				120
Interest paid							(830	)			(627	)			(915	)
Net income tax and royalty-related taxation refunded							641				348				1,064
Net income tax and royalty-related taxation paid							(2,286	)			(4,373	)			(7,211	)
Net operating cash flows from Continuing operations							10,625				17,794				23,640
Net operating cash flows from Discontinued operations			26				–				1,502				1,724
Net operating cash flows							10,625				19,296				25,364
Investing activities
Purchases of property, plant and equipment							(6,946	)			(11,947	)			(15,224	)
Exploration expenditure							(765	)			(816	)			(986	)
Exploration expenditure expensed and included in operating cash flows							430				670				698
Net investment and funding of equity accounted investments							40				117				(29	)
Proceeds from sale of assets							107				74				66
Proceeds from divestment of subsidiaries, operations and joint operations, net of their cash			34				166				256				812
Other investing							(277	)			144				(471	)
Net investing cash flows from Continuing operations							(7,245	)			(11,502	)			(15,134	)
Net investing cash flows from Discontinued operations			26				–				(1,066	)			(700	)
Cash disposed on demerger of South32			26				–				(586	)			–
Net investing cash flows							(7,245	)			(13,154	)			(15,834	)
Financing activities
Proceeds from interest bearing liabilities							7,239				3,440				6,000
Proceeds/(settlements) from debt related instruments							156				(33	)			37
Repayment of interest bearing liabilities							(2,788	)			(4,135	)			(7,048	)
Proceeds from ordinary shares							–				9				14
Contributions from non-controlling interests							–				53				1,435
Purchase of shares by Employee Share Ownership Plan (ESOP) Trusts							(106	)			(355	)			(368	)
Dividends paid							(4,130	)			(6,498	)			(6,387	)
Dividends paid to non-controlling interests							(87	)			(554	)			(119	)
Net financing cash flows from Continuing operations							284				(8,073	)			(6,436	)
Net financing cash flows from Discontinued operations			26				–				(203	)			(32	)
Net financing cash flows							284				(8,276	)			(6,468	)
Net increase/(decrease) in cash and cash equivalents from Continuing operations							3,664				(1,781	)			2,070
Net increase in cash and cash equivalents from Discontinued operations			26				–				233				992
Cash and cash equivalents, net of overdrafts, at the beginning of the financial year							6,613				8,752				5,667
Cash disposed on demerger of South32			26				–				(586	)			–
Foreign currency exchange rate changes on cash and cash equivalents							(1	)			(5	)			23
Cash and cash equivalents, net of overdrafts, at the end of the financial year			19				10,276				6,613				8,752

The accompanying notes form part of these Financial Statements.

 

F-5

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5.1.5    Consolidated Statement of Changes in Equity for the year ended 30 June 2016

 

		Attributable to owners of BHP Billiton Group
		Share capital								Treasury shares								Reserves				Retained earnings				Total equity attributable to owners of BHP Billiton Group				Non- controlling interests				Total equity
US$M		BHP Billiton Limited				BHP Billiton Plc				BHP Billiton Limited				BHP Billiton Plc
Balance as at 1 July 2015			1,186				1,057				(19	)			(57	)			2,557				60,044				64,768				5,777				70,545
Total comprehensive loss			–				–				–				–				60				(6,420	)			(6,360	)			176				(6,184	)
Transactions with owners:
Purchase of shares by ESOP Trusts			–				–				(106	)			–				–				–				(106	)			–				(106	)
Employee share awards exercised net of employee contributions			–				–				118				31				(193	)			46				2				–				2
Employee share awards forfeited			–				–				–				–				(26	)			26				–				–				–
Accrued employee entitlement for unexercised awards			–				–				–				–				140				–				140				–				140
Dividends			–				–				–				–				–				(4,154	)			(4,154	)			(172	)			(4,326	)
Balance as at 30 June 2016			1,186				1,057				(7	)			(26	)			2,538				49,542				54,290				5,781				60,071

 

F-6

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		Attributable to owners of BHP Billiton Group
		Share capital								Treasury shares								Reserves				Retained earnings				Total equity attributable to owners of BHP Billiton Group				Non- controlling interests				Total equity
US$M		BHP Billiton Limited				BHP Billiton Plc				BHP Billiton Limited				BHP Billiton Plc
Balance as at 1 July 2014			1,186				1,069				(51	)			(536	)			2,927				74,548				79,143				6,239				85,382
Total comprehensive income			–				–				–				–				(96	)			1,865				1,769				973				2,742
Transactions with owners:
Shares cancelled			–				(12	)			–				501				12				(501	)			–				–				–
Purchase of shares by ESOP Trusts			–				–				(232	)			(123	)			–				–				(355	)			–				(355	)
Employee share awards exercised net of employee contributions and other adjustments			–				–				264				99				(461	)			101				3				–				3
Employee share awards forfeited			–				–				–				–				(13	)			13				–				–				–
Accrued employee entitlement for unexercised awards			–				–				–				–				247				–				247				–				247
Distribution to option holders			–				–				–				–				(1	)			–				(1	)			(1	)			(2	)
Dividends			–				–				–				–				–				(6,596	)			(6,596	)			(639	)			(7,235	)
In-specie dividend on demerger – refer to note 26 ‘Discontinued operations’			–				–				–				–				–				(9,445	)			(9,445	)			–				(9,445	)
Equity contributed			–				–				–				–				1				–				1				52				53
Transfers within equity on demerger			–				–				–				–				(59	)			59				–				–				–
Conversion of controlled entities to equity accounted investments			–				–				–				2				–				–				2				(847	)			(845	)
Balance as at 30 June 2015			1,186				1,057				(19	)			(57	)			2,557				60,044				64,768				5,777				70,545

 

F-7

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		Attributable to owners of BHP Billiton Group
		Share capital								Treasury shares								Reserves				Retained earnings				Total equity attributable to owners of BHP Billiton Group				Non- controlling interests				Total equity
US$M		BHP Billiton Limited				BHP Billiton Plc				BHP Billiton Limited				BHP Billiton Plc
Balance as at 1 July 2013			1,186				1,069				(8	)			(532	)			1,970				66,982				70,667				4,624				75,291
Total comprehensive income			–				–				–				–				(24	)			13,901				13,877				1,392				15,269
Transactions with owners:
Purchase of shares by ESOP Trusts			–				–				(290	)			(78	)			–				–				(368	)			–				(368	)
Employee share awards exercised net of employee contributions			–				–				247				74				(221	)			(91	)			9				–				9
Employee share awards forfeited			–				–				–				–				(32	)			32				–				–				–
Accrued employee entitlement for unexercised awards			–				–				–				–				247				–				247				–				247
Distribution to option holders			–				–				–				–				(2	)			–				(2	)			(2	)			(4	)
Dividends			–				–				–				–				–				(6,276	)			(6,276	)			(252	)			(6,528	)
Equity contributed			–				–				–				–				989				–				989				477				1,466
Balance as at 30 June 2014			1,186				1,069				(51	)			(536	)			2,927				74,548				79,143				6,239				85,382

 

The accompanying notes form part of these Financial Statements.

 

F-8

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Basis of preparation

The Group’s financial report as at and for the year ended 30 June 2016:

 

•

is a consolidated general purpose financial report;

 

•

has been prepared in accordance with the requirements of the:

 

¡

Australian Corporations Act 2001;

 

¡

UK Companies Act 2006;

 

•

has been prepared in accordance with accounting standards and interpretations collectively referred to as ‘IFRS’ in this report, which encompass the:

 

¡

International Financial Reporting Standards and interpretations as issued by the International Accounting Standards Board;

 

¡

Australian Accounting Standards, being Australian equivalents to International Financial Reporting Standards and interpretations as issued by the Australian Accounting Standards Board (AASB);

 

¡

International Financial Reporting Standards and interpretations adopted by the European Union (EU);

 

•

is prepared on a going concern basis;

 

•

measures items on the basis of historical cost principles, except for the following items:

 

¡

derivative financial instruments and certain other financial assets, which are carried at fair value;

 

¡

non-current assets or disposal groups that are classified as held-for-sale or held-for-distribution, which are measured at the lower of carrying amount and fair value less cost to dispose;

 

•

includes significant accounting policies in the notes to the Financial Statements that summarise the recognition and measurement basis used and are relevant to an understanding of the Financial Statements;

 

•

applies a presentation currency of US dollars, consistent with the predominant functional currency of the Group’s operations. Amounts are rounded to the nearest million dollars, unless otherwise stated, in accordance with ASIC (Rounding in Financial/Directors’ Reports) Instrument 2016/191;

 

•

presents reclassified comparative information where required for consistency with the current year’s presentation;

 

•

adopts all new and amended standards and interpretations under IFRS issued by the relevant bodies (listed above), that are mandatory for application beginning on or after 1 July 2015. None had a significant impact on the Financial Statements;

 

•

has not early adopted any standards and interpretations that have been issued or amended but are not yet effective.

The accounting policies have been consistently applied by all entities included in the Financial Statements and are consistent with those applied in all prior years presented.

Principles of consolidation

In preparing the Financial Statements the effects of all intragroup balances and transactions have been eliminated.

A list of significant entities in the Group, including subsidiaries, joint arrangements and associates at year-end is contained in note 27 ‘Subsidiaries’, note 28 ‘Investments accounted for using the equity method’ and note 29 ‘Interests in joint operations’.

 

F-9

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Subsidiaries: The Financial Statements of the Group include the consolidation of BHP Billiton Limited, BHP Billiton Plc and their respective subsidiaries being the entities controlled by the parent entities during the year. Control exists where the Group is:

 

•

exposed to, or has rights to, variable returns from its involvement with the entity;

 

•

has the ability to affect those returns through its power to direct the activities of the entity.

The ability to approve the operating and capital budget of a subsidiary and the ability to appoint key management personnel are decisions that demonstrate that the Group has the existing rights to direct the relevant activities of a subsidiary. Where the Group’s interest is less than 100 per cent, the interest attributable to outside shareholders is reflected in non-controlling interests. The Financial Statements of subsidiaries are prepared for the same reporting period as the Group, using consistent accounting policies. The acquisition method of accounting is used to account for the Group’s business combinations.

Joint arrangements: The Group undertakes a number of business activities through joint arrangements, which exist when two or more parties have joint control. Joint arrangements are classified as either joint operations or joint ventures, based on the contractual rights and obligations between the parties to the arrangement.

The Group has two types of joint arrangements:

 

•

Joint operations: A joint operation is an arrangement in which the Group shares joint control, primarily via contractual arrangements with other parties. In a joint operation, the Group has rights to the assets and obligations for the liabilities relating to the arrangement. This includes situations where the parties benefit from the joint activity through a share of the output, rather than by receiving a share of the results of trading. In relation to the Group’s interest in a joint operation, the Group recognises: its share of assets and liabilities; revenue from the sale of its share of the output and its share of any revenue generated from the sale of the output by the joint operation; and its share of expenses. All such amounts are measured in accordance with the terms of the arrangement, which is usually in proportion to the Group’s interest in the joint operation.

 

•

Joint ventures: A joint venture is a joint arrangement in which the parties that share joint control have rights to the net assets of the arrangement. A separate vehicle, not the parties, will have the rights to the assets and obligations to the liabilities relating to the arrangement. More than an insignificant share of output from a joint venture is sold to third parties, which indicates the joint venture is not dependent on the parties to the arrangement for funding, nor do the parties have an obligation for the liabilities of the arrangement. Joint ventures are accounted for using the equity accounting method.

Associates: The Group accounts for investments in associates using the equity accounting method. An entity is considered an associate where the Group is deemed to have significant influence but not control or joint control. Significant influence is presumed to exist where the Group:

 

•

has over 20 per cent of the voting rights of an entity, unless it can be clearly demonstrated that this is not the case;

 

•

holds less than 20 per cent of the voting rights of an entity; however, has the power to participate in the financial and operating policy decisions affecting the entity.

The Group uses the term ‘equity accounted investments’ to refer to joint ventures and associates collectively.

Foreign currencies

Transactions related to the Group’s worldwide operations are conducted in a number of foreign currencies. The majority of operations have assessed US dollars as the functional currency; however, some subsidiaries, joint arrangements and associates have functional currencies other than US dollars.

 

F-10

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Monetary items denominated in foreign currencies are translated into US dollars as follows:

 

Foreign currency item		Applicable exchange rate
Transactions		Date of underlying transaction
Monetary assets and liabilities		Period-end rate

Foreign exchange gains and losses resulting from translation are recognised in the income statement, except for qualifying cash flow hedges (which are deferred to equity) and foreign exchange gains or losses on foreign currency provisions for site closure and rehabilitation costs (which are capitalised in property, plant and equipment for operating sites).

On consolidation, the assets, liabilities, income and expenses of non-US dollar denominated functional operations are translated into US dollars using the following applicable exchange rates:

 

Foreign currency amount		Applicable exchange rate
Income and expenses		Date of underlying transaction
Assets and liabilities		Period-end rate
Equity		Historical date
Reserves		Historical and period-end rate

Foreign exchange differences resulting from translation are initially recognised in the foreign currency translation reserve and subsequently transferred to the income statement on disposal of a foreign operation.

 

 

F-11

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5.1.6    Notes to Financial Statements

Performance

1.    Segment reporting

Reportable segments

The Group operated four reportable segments during FY2016 aligned with the commodities that are extracted and marketed, reflecting the structure used by the Group’s management to assess the performance of the Group.

 

Reportable segment		Principal activities
Petroleum		Exploration, development and production of oil and gas
Copper		Mining of copper, silver, lead, zinc, molybdenum, uranium and gold
Iron Ore		Mining of iron ore
Coal		Mining of metallurgical coal and thermal (energy) coal

The segment reporting information for comparative periods has been presented on a Continuing operations basis to exclude the contribution from assets that were demerged with South32.

Group and unallocated items includes functions, other unallocated operations including Potash (previously disclosed in the former Petroleum and Potash reportable segment), Nickel West and consolidation adjustments. Comparative information for the years ended 30 June 2015 and 30 June 2014 have been restated for the effects of the change in reporting related to Potash. Revenue not attributable to reportable segments comprises the sale of freight and fuel to third parties, as well as revenues from unallocated operations. Exploration and technology activities are recognised within relevant segments.

 

Year ended 30 June 2016 US$M		Petroleum				Copper				Iron Ore				Coal				Group and unallocated items/ eliminations				BHP Billiton Group
Revenue			6,776				8,249				10,516				4,518				853				30,912
Inter-segment revenue			118				–				22				–				(140	)			–
Total revenue			6,894				8,249				10,538				4,518				713				30,912
Underlying EBITDA			3,658				2,619				5,599				635				(171	)			12,340
Depreciation and amortisation			(4,147	)			(1,560	)			(1,817	)			(890	)			(247	)			(8,661	)
Impairment losses			(48	)			(17	)			(42	)			(94	)			(9	)			(210	)
Underlying EBIT			(537	)			1,042				3,740				(349	)			(427	)			3,469
Exceptional items			(7,184	)			–				(2,388	)			–				(132	)			(9,704	)
Net finance costs																							(1,024	)
(Loss)/profit before taxation																							(7,259	)
Capital expenditure (cash basis)			2,517				2,786				1,061				298				284				6,946
(Loss)/profit from equity accounted investments, related impairments and expenses			(7	)			155				(2,244	)			(9	)			1				(2,104	)
Investments accounted for using the equity method			280				1,388				–				901				6				2,575
Total assets			30,476				26,143				24,330				12,754				25,250				118,953
Total liabilities			5,308				2,299				3,789				2,103				45,383				58,882

 

F-12

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Year ended 30 June 2015 US$M Restated		Petroleum				Copper				Iron Ore				Coal				Group and unallocated items/ eliminations				BHP Billiton Group
Revenue			11,180				11,453				14,649				5,885				1,469				44,636
Inter-segment revenue			267				–				104				–				(371	)			–
Total revenue			11,447				11,453				14,753				5,885				1,098				44,636
Underlying EBITDA			7,201				5,205				8,648				1,242				(444	)			21,852
Depreciation and amortisation			(4,738	)			(1,545	)			(1,698	)			(875	)			(302	)			(9,158	)
Impairment losses			(477	)			(307	)			(18	)			(19	)			(7	)			(828	)
Underlying EBIT			1,986				3,353				6,932				348				(753	)			11,866
Exceptional items			(2,787	)			–				–				–				(409	)			(3,196	)
Net finance costs																							(614	)
Profit before taxation																							8,056
Capital expenditure (cash basis)			5,023				3,822				1,930				729				443				11,947
(Loss)/profit from equity accounted investments, related impairments and expenses			–				175				371				1				1				548
Investments accounted for using the equity method			287				1,422				1,044				956				3				3,712
Total assets			40,325				26,340				26,808				14,182				16,925				124,580
Total liabilities			6,722				2,639				2,854				2,413				39,407				54,035

 

Year ended 30 June 2014 US$M Restated		Petroleum				Copper				Iron Ore				Coal				Group and unallocated items/ eliminations				BHP Billiton Group
Revenue			14,571				12,789				21,143				6,563				1,696				56,762
Inter-segment revenue			262				–				213				–				(475	)			–
Total revenue			14,833				12,789				21,356				6,563				1,221				56,762
Underlying EBITDA			9,826				6,127				13,531				1,258				(450	)			30,292
Depreciation and amortisation			(3,945	)			(1,371	)			(1,464	)			(683	)			(253	)			(7,716	)
Impairment (losses)/reversals			(309	)			(88	)			35				–				(116	)			(478	)
Underlying EBIT			5,572				4,668				12,102				575				(819	)			22,098
Exceptional items			–				551				–				–				–				551
Net finance costs																							(914	)
Profit before taxation																							21,735
Capital expenditure (cash basis)			5,879				3,697				2,949				1,971				728				15,224
(Loss)/profit from equity accounted investments, related impairments and expenses			(4	)			438				607				140				4				1,185
Investments accounted for using the equity method			115				1,386				1,069				1,079				15				3,664
Total assets			44,576				24,255				27,412				14,919				40,251				151,413
Total liabilities			7,317				2,258				4,022				3,010				49,424				66,031

 

F-13

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Geographical information

 

		Revenue by location of customer
		2016				2015				2014
		US$M				US$M				US$M
Australia			1,846				2,205				3,106
Europe			1,161				2,465				3,436
China			13,177				16,337				21,873
Japan			2,941				4,863				6,305
India			1,478				1,680				2,009
South Korea			1,919				2,688				4,104
Rest of Asia			2,833				4,734				3,816
North America			4,470				7,990				9,607
South America			899				1,342				1,994
Rest of world			188				332				512
			30,912				44,636				56,762

 

		Non-current assets by location of assets
		2016				2015				2014
		US$M				US$M				US$M
Australia			49,465				52,109				60,408
North America			23,943				33,091				35,845
South America			15,965				15,831				15,926
Rest of world (a)			3,038				3,160				8,193
Unallocated assets (b)			8,828				4,020				8,745
			101,239				108,211				129,117

 

(a)	FY2014 includes US$4,570 million of Southern Africa non-current assets predominantly disposed as part of the South32 demerger.

 

(b)	Unallocated assets comprise deferred tax assets and other financial assets.

Underlying EBITDA

Underlying EBITDA is earnings before net finance costs, depreciation, amortisation and impairments, taxation expense, Discontinued operations and any exceptional items. Underlying EBITDA includes BHP Billiton’s share of (loss)/profit from investments accounted for using the equity method including net finance costs, depreciation, amortisation and impairments and taxation expense.

Underlying EBITDA is the key non-IFRS measure that management uses internally to assess the performance of the Group’s segments and make decisions on the allocation of resources and, in the Group’s view is more relevant to capital intensive industries with long-life assets. In past periods, the Group has reported Underlying EBIT as a key non-IFRS measure of operating results. Management believes focusing on Underlying EBITDA more closely reflects the operating cash generative capacity and hence the underlying performance of the Group’s business. Management also uses this measure because financing structures and tax regimes differ across the Group’s assets and substantial components of the Group’s tax and interest charges are levied at a Group level rather than an operational level. We exclude exceptional items from Underlying EBITDA in order to enhance the comparability of the measure from period-to-period and provide clarity to the underlying performance of the Group’s operations. Management monitors exceptional items separately.

 

F-14

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Segment assets and liabilities

Total segment assets and liabilities of reportable segments represents operating assets net of operating liabilities, including the carrying amount of equity accounted investments and predominantly excludes cash balances, loans to associates, interest bearing liabilities and deferred tax balances. The carrying value of investments accounted for using the equity method represents the balance of the Group’s investment in equity accounted investments, with no adjustment for any cash balances, interest bearing liabilities and deferred tax balances of the equity accounted investment.

Recognition and measurement

Revenue

Revenue is measured at the fair value of the consideration received or receivable.

Sale of products

Revenue is recognised when the risk and rewards of ownership of the goods have passed to the buyer based on agreed delivery terms and it can be measured reliably. Depending on customer terms this can be based on issuance of a bill of lading or when delivery is completed as per the agreement with the Group’s customers.

Provisionally priced sales

Revenue on provisionally priced sales is initially recognised at the estimated fair value of consideration receivable with reference to the relevant forward and/or contractual price and the determined mineral or hydrocarbon specifications. Subsequently, provisionally priced sales are marked to market at each reporting period up until when final pricing and settlement is confirmed with the fair value adjustment recognised in revenue in the period identified. Refer to note 21 ‘Financial risk management’ for details of provisionally priced sales open at reporting period-end. The period between provisional pricing and final invoicing is typically between 60 and 120 days.

2.    Exceptional items

Exceptional items are those items where their nature and amount is considered material to the Financial Statements. Such items included within the Group’s loss for the year are detailed below:

 

Year ended 30 June 2016		Gross				Tax				Net
		US$M				US$M				US$M
Exceptional items by category
Samarco dam failure			(2,450	)			253				(2,197	)
Impairment of Onshore US assets (a)			(7,184	)			2,300				(4,884	)
Global taxation matters			(70	)			(500	)			(570	)
Total			(9,704	)			2,053				(7,651	)

 

(a)	Includes amounts attributable to non-controlling interests of US$(51) million after tax benefit.

 

F-15

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Samarco Mineração S.A. (Samarco) dam failure

The exceptional loss of US$2,450 million (before tax) related to the Samarco dam failure in November 2015 comprises the following:

 

Year ended 30 June 2016		US$M
Share of loss relating to the Samarco dam failure			(655	)
Impairment of the carrying value of the investment in Samarco			(525	)
Samarco dam failure provision			(1,200	)
Costs incurred directly by BHP Billiton in relation to the Samarco dam failure			(70	)
Loss from equity accounted investments, related impairments and expenses (a)			(2,450	)

 

(a)

BHP Billiton Brasil Ltda has adjusted its investment in Samarco to US$ nil (resulting from US$(655) million share of loss from Samarco and US$(525) million impairment), recognised a provision of US$(1,200) million for potential obligations under the Framework Agreement and together with other BHP Billiton entities incurred US$(70) million of direct costs in relation to the Samarco dam failure. US$(572) million of the US$(1,200) million provision represents an additional share of loss from Samarco with the remaining US$(628) million recognised as provision expense. Refer to note 3 ‘Significant events – Samarco dam failure’ for further information.

Impairment of Onshore US assets

The Group recognised an impairment charge of US$4,884 million (after tax benefit) against the carrying value of its Onshore US assets in the year ended 30 June 2016. The impairment reflects changes to price assumptions, discount rates and development plans. This follows significant volatility and much weaker prices experienced in the oil and gas industry, which have more than offset the Group’s substantial productivity improvements.

Global taxation matters

Global taxation matters include amounts provided for unresolved tax matters and other claims for which the timing of resolution and potential economic outflow are uncertain.

 

Year ended 30 June 2015		Gross				Tax				Net
		US$M				US$M				US$M
Exceptional items by category
Impairment of Onshore US assets			(2,787	)			829				(1,958	)
Impairment of Nickel West assets			(409	)			119				(290	)
Repeal of Minerals Resource Rent Tax legislation (a)			–				(698	)			(698	)
Total			(3,196	)			250				(2,946	)

 

(a)	Includes amounts attributable to non-controlling interests of US$(12) million.

Impairment of Onshore US assets

The Group recognised an impairment charge of US$1,958 million (after tax benefit) in relation to its Onshore US assets. The gas-focused Hawkville field accounts for the substantial majority of this charge reflecting its geological complexity, product mix, acreage relinquishments and amended development plans. The remainder relates to the impairment of goodwill associated with the Petrohawk acquisition.

 

F-16

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Impairment of Nickel West assets

The Group announced on 12 November 2014 that the review of its Nickel West business was complete and the preferred option, the sale of the business, was not achieved on an acceptable basis. As a result of operational decisions made subsequent to the conclusion of this process, an impairment charge of US$290 million (after tax benefit) was recognised in the year ended 30 June 2015.

Repeal of Minerals Resource Rent Tax legislation

The legislation to repeal the Minerals Resource Rent Tax (MRRT) in Australia took effect on 30 September 2014. As a result, the Group derecognised a MRRT deferred tax asset of US$809 million and corresponding taxation charges of US$698 million related to Continuing operations and US$111 million related to Discontinued operations were recognised in the year ended 30 June 2015.

 

Year ended 30 June 2014		Gross				Tax				Net
		US$M				US$M				US$M
Exceptional items by category
Sale of Pinto Valley			551				(166	)			385
Total			551				(166	)			385

Sale of Pinto Valley

The Group announced on 11 October 2013 that it had completed the sale of its Pinto Valley mining operation for a cash consideration of US$653 million, after working capital adjustments. A gain on sale of US$385 million (after tax expense) was recognised in the year ended 30  June 2014.

3.    Significant events – Samarco dam failure

On 5 November 2015, the Samarco Mineração S.A. (Samarco) iron ore operation in Minas Gerais, Brazil, experienced a tailings dam failure that resulted in a release of mine tailings, flooding the community of Bento Rodrigues and impacting other communities downstream (Samarco dam failure). Refer to section 1.4 ‘Samarco’.

Samarco is jointly owned by BHP Billiton Brasil Ltda (BHP Billiton Brasil) and Vale S.A. (Vale). BHP Billiton Brasil’s 50 per cent interest is accounted for as an equity accounted joint venture investment. BHP Billiton Brasil does not separately recognise its share of the underlying assets and liabilities of Samarco, but instead records the investment as one line on the balance sheet. Each period, BHP Billiton Brasil recognises its 50 per cent share of Samarco’s profit or loss and adjusts the carrying value of the investment in Samarco accordingly. Such adjustment continues until the investment carrying value is reduced to US$ nil, with any additional share of Samarco losses only recognised to the extent that BHP Billiton Brasil has an obligation to fund the losses, or when future investment funding is provided. After applying equity accounting, any remaining carrying value of the investment is tested for impairment.

Any charges relating to the Samarco dam failure incurred directly by BHP Billiton Brasil or other BHP Billiton entities are recognised 100 per cent in the Group’s results.

 

F-17

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The financial impacts of the Samarco dam failure on the Group’s income statement, balance sheet and cash flow statement for the year ended 30 June 2016 are shown in the table below and have been treated as an exceptional item. The table below does not include BHP Billiton Brasil’s share of the results of Samarco prior to the Samarco dam failure, which is disclosed in note 28 ‘Investments accounted for using the equity method’, along with the summary financial information related to Samarco as at 30 June 2016.

 

Financial impacts of Samarco dam failure
Year ended 30 June 2016
						US$M
Income statement
Expenses excluding net finance costs
– Costs incurred directly by BHP Billiton Brasil and other BHP Billiton entities in relation to the Samarco dam failure (a)							(70	)
(Loss)/profit from equity accounted investments, related impairments and expenses
– Share of loss relating to the Samarco dam failure (b)							(655	)
– Impairment of the carrying value of the investment in Samarco (b)							(525	)
– Samarco dam failure provision (b)							(1,200	)
Loss before taxation							(2,450	)
Income tax benefit							253
Loss after taxation							(2,197	)
Balance sheet movement
Trade and other payables							(11	)
Investments accounted for using the equity method							(1,180	)
Deferred tax assets							(158	)
Provisions							(1,200	)
Deferred tax liabilities							411
Net liabilities							(2,138	)
Cash flow statement
Loss before taxation							(2,450	)
Comprising:
Costs incurred directly by BHP Billiton Brasil and other BHP Billiton entities in relation to the Samarco dam failure (a)			(70	)
Share of loss relating to the Samarco dam failure (b)			(655	)
Impairment of the carrying value of the investment in Samarco (b)			(525	)
Samarco dam failure provision (b)			(1,200	)
Non-cash items							2,391
Net operating cash flows							(59	)

 

(a)	Includes legal and advisor costs incurred.

 

(b)

BHP Billiton Brasil has adjusted its investment in Samarco to US$ nil (resulting from US$(655) million share of loss from Samarco and US$(525) million impairment) and recognised a provision of US$(1,200) million for potential obligations under the Framework Agreement (defined on page F-20). US$(572) million of the US$(1,200) million provision represents an additional share of loss from Samarco with the remaining US$(628) million recognised as provision expense.

 

F-18

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Equity accounted investment in Samarco

The following table details the movement in the carrying value of BHP Billiton Brasil’s equity accounted investment in Samarco:

 

Year ended 30 June 2016
		US$M
At the beginning of the financial year			1,044
Share of operating profit prior to the Samarco dam failure			136
Share of loss relating to the Samarco dam failure (a)			(655	)
Impairment of the carrying value of the investment in Samarco (a)			(525	)
Samarco dam failure provision (a)			(1,200	)
(Loss)/profit from equity accounted investments, related impairments and expenses			(2,244	)
Loss and expenses recognised as a provision for Samarco dam failure (b)			1,200
Dividends received (c)			–
Investment			–
At the end of the financial year			–

 

(a)

BHP Billiton Brasil has adjusted its investment in Samarco to US$ nil (resulting from US$(655) million share of loss from Samarco and US$(525) million impairment) and recognised a provision of US$(1,200) million for potential obligations under the Framework Agreement (defined below). US$(572) million of the US$(1,200) million provision represents an additional share of loss from Samarco with the remaining US$(628) million recognised as provision expense.

 

(b)

As the investment carrying value has been adjusted to US$ nil, additional share of Samarco losses US$(572) million and Samarco dam failure provision expense US$(628) million are included in the provision for Samarco dam failure. This reflects BHP Billiton Brasil’s US$(1,200) million potential legal funding obligation to the Foundation as a result of the Framework Agreement (defined below).

 

(c)	Samarco currently does not have profits available for distribution and is legally prevented from paying previously declared and unpaid dividends.

At the half year ended 31 December 2015, the Group assessed the recoverability of its investment in light of uncertainties surrounding the nature and timing of ongoing future operations. As a result, an impairment charge of US$525 million was recognised, reducing the investment balance to US$ nil.

As described below, the Group has recognised a provision of US$1,200 million at 30 June 2016 in respect of BHP Billiton Brasil’s potential obligation under the Framework Agreement (defined below). This reflects the ongoing uncertainty surrounding the nature and timing of a potential restart of Samarco’s operations. In doing so, the Group has recognised BHP Billiton Brasil’s share of all losses recognised by Samarco to 30 June 2016.

 

F-19

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Provision for Samarco dam failure

 

Year ended 30 June 2016
		US$M
At the beginning of the financial year			–
Provision recognition, comprising:
– Share of loss relating to the Samarco dam failure			572
– Samarco dam failure provision expense			628
At the end of the financial year			1,200
Comprising:
Current			300
Non-current			900

Dam failure provisions and contingencies

As at 30 June 2016, BHP Billiton Brasil has identified provisions and contingent liabilities arising as a consequence of the Samarco dam failure as follows:

Environment and socio-economic remediation

Framework Agreement

On 2 March 2016, BHP Billiton Brasil, together with Samarco and Vale, entered into a Framework Agreement (Agreement) with the Federal Attorney General of Brazil, the states of Espírito Santo and Minas Gerais and certain other public authorities to establish a Foundation that will develop and execute environmental and socio-economic programs to remediate and provide compensation for damage caused by the Samarco dam failure. On 5 May 2016, the Agreement was ratified by the Federal Court of Appeal suspending the public civil claim disclosed below.

The Federal Prosecutor’s Office appealed the ratification of the Agreement and on 30 June 2016, the Superior Court of Justice in Brazil issued a preliminary order (Interim Order) suspending the 5 May 2016 ratification of the Agreement.

Samarco, Vale and BHP Billiton Brasil have appealed the Interim Order before the Superior Court of Justice.

The term of the Agreement is 15 years, renewable for periods of one year successively until all obligations under the Agreement have been performed. Under the Agreement, Samarco is responsible for funding the Foundation with calendar year contributions as follows:

 

•

R$2 billion (approximately US$620 million) in 2016, less the amount of funds already spent on, or allocated to, remediation and compensation activity;

 

•

R$1.2 billion (approximately US$370 million) in 2017;

 

•

R$1.2 billion (approximately US$370 million) in 2018;

 

•

R$500 million (approximately US$155 million) for a special project to be spent on sewage treatment and landfill works from 2016 to 2018.

Annual contributions for each of the years 2019, 2020 and 2021 will be in the range of R$800 million (approximately US$250 million) and R$1.6 billion (approximately US$500 million), depending on the remediation and compensation projects which are to be undertaken in the particular year. Annual contributions may be reviewed under the Agreement. To the extent that Samarco does not meet its funding obligations under the Agreement, each of Vale and BHP Billiton Brasil has potential funding obligations under the Agreement in proportion to its 50 per cent shareholding in Samarco.

 

F-20

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Mining and processing operations remain suspended following the dam failure. Samarco is currently progressing plans to resume operations, however significant uncertainties surrounding the nature and timing of ongoing future operations remain. In light of these uncertainties and based on currently available information, BHP Billiton Brasil has recognised a provision of US$1,200 million before tax and after discounting at 30 June 2016, in respect of its potential obligations under the Agreement.

The measurement of the provision requires the use of estimates and assumptions and may be affected by, amongst other factors, potential changes in scope of work required under the Agreement including further technical analysis, costs incurred in respect of programs delivered, resolution of uncertainty in respect of operational restart, updates to discount and foreign exchange rates, resolution of existing and potential legal claims and the status of the Agreement. As a result, future actual expenditures may differ from the amounts currently provided and changes to key assumptions and estimates could result in a material impact to the amount of the provision in future reporting periods.

On 28 July 2016, BHP Billiton Brasil approved US$134 million to support the Foundation, in the event that Samarco does not meet its funding obligations under the Agreement. Any support to the Foundation provided by BHP Billiton Brasil will be offset against the provision for the Samarco dam failure recognised at 30 June 2016.

Legal

The following matters are disclosed as contingent liabilities:

BHP Billiton Brasil is among the companies named as defendants in a number of legal proceedings initiated by individuals, non-governmental organisations (NGOs), corporations and governmental entities in Brazilian federal and state courts following the Samarco dam failure. The other defendants include Vale and Samarco. The lawsuits include claims for compensation, environmental rehabilitation and violations of Brazilian environmental and other laws, among other matters. The lawsuits seek various remedies, including rehabilitation costs, compensation to injured individuals and families of the deceased, recovery of personal and property losses, moral damages and injunctive relief. These legal proceedings include civil public actions filed by state prosecutors in Minas Gerais (claiming damages of approximately R$7.5 billion, US$2.3 billion), public defenders in Minas Gerais (claiming damages of approximately R$10 billion, US$3.1 billion) and state prosecutors in Espírito Santo (claiming damages of approximately R$2 billion, US$620 million). Given the preliminary status of all these proceedings, and the duplicative nature of the damages sought in these proceedings and the R$20 billion (US$6.2 billion) and R$155 billion (US$48 billion) claims noted below, it is not possible at this time to provide a range of possible outcomes or a reliable estimate of potential future exposures for BHP Billiton Brasil.

In addition, government inquiries and investigations relating to the Samarco dam failure have been commenced by numerous agencies of the Brazilian government and are ongoing.

Public civil claim

Among the claims brought against BHP Billiton Brasil, is a public civil claim commenced by the Federal Government of Brazil, the states of Espírito Santo, Minas Gerais and other public authorities on 30 November 2015, seeking the establishment of a fund of up to R$20 billion (approximately US$6.2 billion) in aggregate for clean-up costs and damages.

On 2 March 2016, BHP Billiton Brasil, together with Samarco and Vale, entered into the Agreement. Ratification of the Agreement by the Federal Court of Appeal on 5 May 2016 suspended this public civil claim. However, it was reinstated on 30 June 2016 upon issue of the Interim Order by the Superior Court of Justice in Brazil. As noted above, BHP Billiton Brasil has recognised a provision as of 30 June 2016 of US$1,200 million after tax and discounting in respect of its potential obligations under the Agreement. While an appeal has been commenced against the Interim Order, given the status of the appeal it is not possible at this time to provide a range of possible outcomes or a reliable estimate of potential future exposures for BHP Billiton Brasil in relation to the R$20 billion (approximately US$6.2 billion) claim.

 

F-21

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Federal Public Prosecution Office claim

BHP Billiton Brasil is among the defendants named in a claim brought by the Federal Public Prosecution Office on 3 May 2016, seeking R$155 billion (approximately US$48 billion) for reparation, compensation and moral damages in relation to the Samarco dam failure. Given the preliminary status of these proceedings, it is not possible at this time to provide a range of possible outcomes or a reliable estimate of potential future exposures for BHP Billiton Brasil.

Class action complaint

In February 2016, a putative class action complaint (Complaint) was filed in the U.S. District Court for the Southern District of New York on behalf of purchasers of American Depository Receipts of BHP Billiton Ltd and Plc between 25 September 2014 and 30 November 2015 against BHP Billiton Ltd and Plc and certain of its current and former executive officers and directors. The Complaint asserts claims under U.S. federal securities laws and indicates that the plaintiff will seek certification to proceed as a class action.

The amount of damages sought by the plaintiff on behalf of the putative class is unspecified. Given the preliminary status of this matter, it is not possible at this time to provide a range of possible outcomes or a reliable estimate of potential future exposures to BHP Billiton.

Other claims

Additional lawsuits and government investigations relating to the Samarco dam failure may be brought against BHP Billiton Brasil and possibly other BHP Billiton entities in Brazil or other jurisdictions.

BHP Billiton’s potential liabilities, if any, resulting from other pending and future claims, lawsuits and enforcement actions relating to the Samarco dam failure, together with the potential cost of implementing remedies sought in the various proceedings, cannot be reliably estimated at this time and therefore a provision has not been recognised and nor has any contingent liability been quantified for such matters.

Ultimately, all the legal matters disclosed as contingent liabilities could have a material adverse impact on BHP Billiton’s business, competitive position, cash flows, prospects, liquidity and shareholder returns.

BHP Billiton Insurance

BHP Billiton has third party liability insurance for claims related to the Samarco dam failure made directly against BHP Billiton Brasil or other BHP Billiton entities. Such claims may be externally insured up to US$360 million (when adjusted for BHP Billiton Brasil’s interest in Samarco). External insurers have been advised of the Samarco dam failure although no formal claim has currently been made under the policy. At 30 June 2016, an insurance receivable has not been recognised for any potential recoveries under insurance arrangements.

Commitments

Under the terms of the Samarco joint venture agreement, BHP Billiton Brasil does not have an existing obligation to fund Samarco.

On 28 July 2016, BHP Billiton Brasil made available a short-term facility to Samarco of up to US$116 million to carry out remediation and stabilisation work and support Samarco’s operations. Funds will be released to Samarco only as required and subject to the achievement of key milestones.

Any additional requests for funding or future investment provided would be subject to a future decision, accounted for at that time.

 

F-22

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F-23

---

 

F-24

---

 

F-25

---

4.    Expenses and other income

 

		2016				2015				2014
		US$M				US$M				US$M
Employee benefits expense:
Wages, salaries and redundancies			3,414				4,537				4,799
Employee share awards			140				203				214
Social security costs			2				2				3
Pension and other post-retirement obligations			232				358				529
Less employee benefits expense classified as exploration and evaluation expenditure			(86	)			(129	)			(132	)
Raw materials and consumables used			4,063				4,667				5,540
Freight and transportation			2,226				2,644				3,119
External services			4,984				6,284				6,780
Third party commodity purchases			1,013				1,165				1,702
Net foreign exchange (gains)/losses			(153	)			(469	)			168
Government royalties paid and payable			1,349				1,708				2,412
Depreciation and amortisation expense			8,661				9,158				7,716
Exploration and evaluation expenditure incurred and expensed in the current period			430				670				698
Net impairments:
Property, plant and equipment			7,377				3,445				455
Goodwill and other intangible assets			17				570				17
Available for sale financial assets			–				9				6
Operating lease rentals			528				636				665
All other operating expenses			1,290				1,552				1,832
Total expenses			35,487				37,010				36,523
Gains on divestment of subsidiaries and operations			(14	)			(15	)			(673	)
Other income			(430	)			(481	)			(552	)
Total other income			(444	)			(496	)			(1,225	)

Other income is generally income earned from transactions outside the course of the Group’s ordinary activities and may include certain management fees from non-controlling interests and joint venture arrangements, dividends income, royalties, commission income and gains or losses on sale of property, plant and equipment.

Recognition and measurement

Income is recognised where it is probable that the economic benefits associated with a transaction will flow to the Group and they can be reliably measured. Dividends are recognised upon declaration.

 

F-26

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5.    Income tax expense

 

		2016				2015				2014
		US$M				US$M				US$M
Total taxation (benefit)/expense comprises:
Current tax expense			2,456				3,168				6,353
Deferred tax (benefit)/expense			(3,508	)			498				427
			(1,052	)			3,666				6,780

 

		2016				2015				2014
		US$M				US$M				US$M
Factors affecting income tax expense for the year
Income tax expense differs to the standard rate of corporation tax as follows:
(Loss)/profit before taxation			(7,259	)			8,056				21,735
Tax on (loss)/profit at Australian prima facie tax rate of 30 per cent			(2,178	)			2,417				6,521
Impact of tax rates applicable outside of Australia			(620	)			(301	)			49
Tax on remitted and unremitted foreign earnings			(376	)			58				169
Recognition of previously unrecognised tax assets			(36	)			(212	)			(45	)
Investment and development allowance			(36	)			(190	)			(223	)
Amounts (over)/under provided in prior years			(28	)			138				(147	)
Tax rate changes			14				137				20
Foreign exchange adjustments			125				339				(34	)
Tax effect of (loss)/profits from equity accounted investments, related impairments and expenses (a)			631				(164	)			(356	)
Non-tax effected operating losses and capital gains			671				143				11
Other			536				397				301
Income tax (benefit)/expense			(1,297	)			2,762				6,266
Royalty-related taxation (net of income tax benefit)			245				904				514
Total taxation (benefit)/expense			(1,052	)			3,666				6,780

 

(a)	The (loss)/profits from equity accounted investments, related impairments and expenses is net of income tax. This item removes the prima facie tax effect on such profits, related impairments and expenses.

 

F-27

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Income tax recognised in other comprehensive income is as follows:

 

		2016				2015				2014
		US$M				US$M				US$M
Income tax effect of:
Items that may be reclassified subsequently to the income statement:
Available for sale investments:
Net valuation gains/(losses) taken to equity			(1	)			1				2
Net valuation gains transferred to the income statement			–				34				2
Cash flow hedges:
(Losses)/gains taken to equity			170				539				(204	)
Losses/(gains) transferred to the income statement			(199	)			(545	)			203
Income tax (charge)/credit relating to items that may be reclassified subsequently to the income statement			(30	)			29				3
Items that will not be reclassified to the income statement:
Remeasurement (losses)/gains on pension and medical schemes			5				14				(6	)
Employee share awards transferred to retained earnings on exercise			(22	)			(31	)			18
Income tax (charge)/credit relating to items that will not be reclassified to the income statement			(17	)			(17	)			12
Total income tax (charge)/credit relating to components of other comprehensive income (a)			(47	)			12				15

 

(a)	Included within total income tax relating to components of other comprehensive income is US$(25) million relating to deferred taxes and US$(22) million relating to current taxes (2015: US$43 million and US$(31) million; 2014: US$(1) million and US$16 million).

 

F-28

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Recognition and measurement

Taxation on the (loss)/profit for the year comprises current and deferred tax. Taxation is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case the tax is recognised in equity.

 

Current tax		Deferred tax		Royalty-related taxation
Current tax is the expected tax on the taxable income for the year, using tax rates and laws enacted or substantively enacted at the reporting date, and any adjustments to tax payable in respect of previous years.		Deferred tax is provided in full, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the Financial Statements. Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised.   Deferred tax is not recognised for temporary differences relating to:   •       initial recognition of goodwill;   •       initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit;   •       investment in subsidiaries, associates and jointly controlled entities where the Group is able to control the timing of the reversal of the temporary difference and it is probable that they will not reverse in the foreseeable future.   Deferred tax is measured at the tax rates that are expected to be applied when the asset is realised or the liability is settled, based on the laws that have been enacted or substantively enacted at the reporting date.   Current and deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset and when the tax balances are related to taxes levied by the same tax authority and the Group intends to settle on a net basis, or realise the asset and settle the liability simultaneously.		Royalties and resource rent taxes are treated as taxation arrangements (impacting income tax expense/benefit) when they are imposed under government authority and the amount payable is calculated by reference to revenue derived (net of any allowable deductions) after adjustment for temporary differences. Obligations arising from royalty arrangements that do not satisfy these criteria are recognised as current provisions and included in expenses.

 

F-29

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Uncertain tax and royalty matters

The Group operates across many tax jurisdictions. Application of tax law can be complex and requires judgement to assess risk and estimate outcomes, particularly in relation to the Group’s cross-border operations and transactions. The evaluation of tax risks considers both amended assessments received and potential sources of challenge from tax authorities. The status of proceedings for these matters will impact the ability to determine the potential exposure and in some cases, it may not be possible to determine a range of possible outcomes or a reliable estimate of the potential exposure.

The Group presently has unresolved tax and royalty matters for which the timing of resolution and potential economic outflow are uncertain. Tax and royalty matters with uncertain outcomes arise in the normal course of business and occur due to changes in tax law, changes in interpretation of tax law, periodic challenges and disagreements with tax authorities, and legal proceedings.

Tax and royalty obligations assessed as having probable future economic outflows capable of reliable measurement are adequately provided for at 30 June 2016. Matters without a probable economic outflow and / or presently incapable of being measured reliably are contingent liabilities and disclosed in note 32 ‘Contingent liabilities’. Irrespective of whether the potential economic outflow of the matter has been assessed as probable or possible, individually significant matters are included below, to the extent that disclosure does not prejudice the Group.

 

Transfer pricing – Sales of commodities to BHP Billiton Marketing AG in Singapore		The Group is currently in dispute with the Australian Taxation Office (ATO) regarding the price at which the Group’s Australian entities sell commodities to the Group’s principal marketing entity in Singapore, BHP Billiton Marketing AG.   In April 2014, the Group received amended assessments for 2003 to 2008 totalling US$270 million (A$362 million) (inclusive of interest and penalties). In May 2016, the Group received further amended assessments totalling US$400 million (A$537 million) (inclusive of interest and penalties) for 2009 to 2013.   As a consequence of the finalisation of the transfer pricing audit for 2009 to 2013, the Group also received an amended assessment in relation to its 2013 MRRT return totalling US$87 million (A$117 million).   The Group has formally objected to the amended assessments. The ATO has yet to advise its decision on the objections to these amended assessments.   The Group has made payments of approximately US$221 million (A$276 million) to the ATO in relation to the assessments under dispute pending resolution of the matter.
Controlled Foreign Companies dispute		The Group is currently in dispute with the ATO regarding whether profits earned globally by BHP Billiton’s marketing organisation from the on-sale of commodities acquired from Australian subsidiaries of BHP Billiton Plc are subject to ‘top-up tax’ in Australia under the Controlled Foreign Companies rules.   The Group received amended assessments for 2006 to 2010 for primary tax of US$76 million (A$102 million), and interest of US$24 million (A$32 million) and penalties of US$19 million (A$26 million) on 7 June 2011 (2006 to 2008 income years) and 19 December 2014 (2009 and 2010 income years). The Group has objected to these amended assessments. On 30 June 2016, the Group received the ATO’s decision relating to the Group’s objection against amended assessments for the 2006 to 2010 income years. The objections were allowed in part by the ATO. The ATO also determined that the Group was not liable for any penalties for the 2006 to 2010 income years. As a result of the objections being determined, it is estimated the primary tax subject to dispute for the 2006 to 2010 income years will total US$32 million (A$43 million).   On 26 May 2016, the Group received amended assessments for primary tax of US$12 million (A$16 million) relating to the 2012 and 2013 income years, and interest of US$2 million (A$3 million) (with nil penalties).

 

F-30

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Royalty reassessments dispute with Queensland Office of State Revenue		The Group has lodged applications with the Supreme Court of Queensland pertaining to disputed royalty reassessments issued by the Queensland Office of State Revenue (OSR) in relation to its share of BHP Billiton Mitsubishi Alliance (BMA) coal.   The dispute relates to the basis for calculating the value of coal for royalty purposes under Queensland law. The reassessments relate to the period of 1 July 2005 to 30 September 2015. The reassessments total US$168 million (A$225 million) in royalties and US$78 million (A$104 million) in interest (BHP Billiton share).
Samarco tax assessments		Details of uncertain tax and royalty matters relating to Samarco are disclosed in note 3 ‘Significant events – Samarco dam failure’.

 

 

 

F-31

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6.    Earnings per share

 

		2016				2015				2014
(Loss)/earnings attributable to owners of BHP Billiton Group (US$M)
– Continuing operations			(6,385	)			3,483				13,648
– Total			(6,385	)			1,910				13,832
Weighted average number of shares (Million)
– Basic			5,322				5,318				5,321
– Diluted			5,322				5,333				5,338
Basic (loss)/earnings per ordinary share (US cents)
– Continuing operations			(120.0	)			65.5				256.5
– Total			(120.0	)			35.9				260.0
Diluted (loss)/earnings per ordinary share (US cents)
– Continuing operations			(120.0	)			65.3				255.7
– Total			(120.0	)			35.8				259.1

Refer to note 26 ‘Discontinued operations’ for basic earnings per share and diluted earnings per share for Discontinued operations.

Earnings on American Depositary Shares represent twice the earnings for BHP Billiton ordinary shares.

Recognition and measurement

Diluted earnings attributable to owners of the BHP Billiton Group are equal to the earnings attributable to owners of the BHP Billiton Group.

The calculation of the number of ordinary shares used in the computation of basic earnings per share is the aggregate of the weighted average number of ordinary shares of BHP Billiton Limited and BHP Billiton Plc outstanding during the period after deduction of the number of shares held by the Billiton Employee Share Ownership Plan Trust and the BHP Billiton Limited Employee Equity Trust.

The conversion of options and share rights would decrease the loss per share for the year ended 30 June 2016 and therefore its impact has been excluded from the diluted earnings per share calculation (2015: 160,116 antidilutive shares; 2014: 183,181 antidilutive shares).

For the purposes of calculating diluted earnings per share, the effect of 15 million of dilutive shares has been taken into account for the year ended 30 June 2015 and 17 million shares for the year ended 30 June 2014. The Group’s only potential dilutive ordinary shares are share awards granted under the employee share ownership plans for which terms and conditions are described in note 23 ‘Employee share ownership plans’.

 

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Working capital

7.    Trade and other receivables

 

		2016				2015
		US$M				US$M
Trade receivables			1,730				2,982
Loans to equity accounted investments			897				995
Other receivables			1,395				1,843
Total			4,022				5,820
Comprising:
Current			3,155				4,321
Non-current			867				1,499

Recognition and measurement

Trade receivables are recognised initially at fair value and subsequently at amortised cost using the effective interest method, less an allowance for impairment.

The collectability of trade receivables is assessed continuously and at reporting date specific allowances are made for any doubtful receivables based on a review of all outstanding amounts at reporting period-end. Individual receivables are written off when management deems them unrecoverable. The net carrying amount of trade and other receivables approximates their fair values.

Credit risk

Trade receivables generally have terms of less than 30 days. The Group has no material concentration of credit risk with any single counterparty and is not dominantly exposed to any individual industry.

Credit risk can arise from the non-performance by counterparties of their contractual financial obligations towards the Group. To manage credit risk, the Group maintains Group-wide procedures covering the application for credit approvals, granting and renewal of counterparty limits, proactive monitoring of exposures against these limits and requirements triggering secured payment terms. As part of these processes, the credit exposures with all counterparties are regularly monitored and assessed on a timely basis. The credit quality of the Group’s customers is reviewed and assessed for impairment where indicators of such impairment exist. The solvency of each debtor and their ability to pay on the receivable is considered in assessing receivables for impairment.

Receivables are deemed to be past due or impaired in accordance with the Group’s terms and conditions. These terms and conditions are determined on a case-by-case basis with reference to the customer’s credit quality, payment performance and prevailing market conditions. At 30 June 2016, trade receivables are stated net of provisions for doubtful debts of US$ nil (2015: US$6 million). As of 30 June 2016, trade receivables of US$12 million (2015: US$10 million) were past due but not impaired. The majority of these receivables were less than 30 days overdue. As at the reporting date, there are no indications that the debtors will not meet their payment obligations.

 

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8.    Trade and other payables

 

		2016				2015
		US$M				US$M
Trade creditors			3,662				4,857
Other creditors			1,740				2,561
Total			5,402				7,418
Comprising:
Current			5,389				7,389
Non-current			13				29

9.    Inventories

 

		2016				2015				Definitions
		US$M				US$M
Raw materials and consumables			1,394				1,683			Spares, consumables and other supplies yet to be utilised in the production process or in the rendering of services.
Work in progress			2,149				2,297			Commodities currently in the production process that require further processing by the Group to a saleable form.
Finished goods			632				778			Commodities held-for-sale and not requiring further processing by the Group.
Total (a)			4,175				4,758
Comprising:
Current			3,411				4,292			Inventories classified as non-current are not expected to be utilised or sold within 12 months after the reporting date.
Non-current			764				466

 

(a)	Inventory write-downs of US$118 million were recognised during the year (2015: US$182 million; 2014: US$95 million). Inventory write-downs of US$118 million made in previous periods were reversed during the year (2015: US$42 million; 2014: US$69 million).

Recognition and measurement

Regardless of the type of inventory and its stage in the production process, inventories are valued at the lower of cost and net realisable value. Cost is determined primarily on the basis of average costs. For processed inventories, cost is derived on an absorption costing basis. Cost comprises costs of purchasing raw materials and costs of production, including attributable mining and manufacturing overheads taking into consideration normal operating capacity.

Minerals inventory quantities are assessed primarily through surveys and assays, while petroleum inventory quantities are derived through flow rate or tank volume measurement and the composition is derived via sample analysis.

 

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Resource assets

10.    Property, plant and equipment

 

		Land and buildings				Plant and equipment				Other mineral assets				Assets under construction				Exploration and evaluation				Total
		US$M				US$M				US$M				US$M				US$M				US$M
Net book value – 30 June 2016
At the beginning of the financial year			8,762				48,361				21,069				14,502				1,378				94,072
Additions (a)			4				(89	)			750				5,337				344				6,346
Depreciation for the year			(574	)			(6,780	)			(1,090	)			–				4				(8,440	)
Impairments, net of reversals			(49	)			(2,892	)			(4,432	)			–				(4	)			(7,377	)
Disposals			(15	)			(64	)			(8	)			(13	)			(10	)			(110	)
Divestment and demerger of subsidiaries and operations			(39	)			(120	)			(5	)			(3	)			–				(167	)
Exchange variations taken to reserve			–				2				–				–				–				2
Transfers and other movements			916				9,348				(342	)			(10,262	)			(11	)			(351	)
At the end of the financial year			9,005				47,766				15,942				9,561				1,701				83,975
– Cost			12,425				98,688				30,924				9,562				2,612				154,211
– Accumulated depreciation and impairments			(3,420	)			(50,922	)			(14,982	)			(1	)			(911	)			(70,236	)
Net book value – 30 June 2015
At the beginning of the financial year			9,981				57,426				24,710				15,311				1,359				108,787
Additions (a)			–				(563	)			921				10,788				215				11,361
Depreciation for the year			(659	)			(7,443	)			(1,607	)			–				(1	)			(9,710	)
Impairments, net of reversals			(76	)			(2,632	)			(1,328	)			–				–				(4,036	)
Disposals			(10	)			(80	)			–				–				(1	)			(91	)
Divestment and demerger of subsidiaries and operations			(1,459	)			(7,703	)			(1,564	)			(1,001	)			(40	)			(11,767	)
Exchange variations taken to reserve			–				(8	)			–				–				–				(8	)
Transfers and other movements			985				9,364				(63	)			(10,596	)			(154	)			(464	)
At the end of the financial year			8,762				48,361				21,069				14,502				1,378				94,072
– Cost			11,689				90,571				30,814				14,502				2,630				150,206
– Accumulated depreciation and impairments			(2,927	)			(42,210	)			(9,745	)			–				(1,252	)			(56,134	)

 

(a)	Includes net foreign exchange gains/losses related to the closure and rehabilitation provisions. Refer to note 14 ‘Closure and rehabilitation provisions’.

 

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Recognition and measurement

Property, plant and equipment

Property, plant and equipment is recorded at cost less accumulated depreciation and impairment charges. Cost is the fair value of consideration given to acquire the asset at the time of its acquisition or construction and includes the direct costs of bringing the asset to the location and the condition necessary for operation and the estimated future costs of closure and rehabilitation of the facility.

Equipment leases

Assets held under lease, which result in the Group receiving substantially all of the risk and rewards of ownership are capitalised as property, plant and equipment at the lower of the fair value of the leased assets or the estimated present value of the minimum lease payments. Leased assets are depreciated on the same basis as owned assets or, where shorter, the lease term. The corresponding finance lease obligation is included within interest bearing liabilities. The interest component is charged to the income statement over the lease term to reflect a constant rate of interest over the remaining balance of the obligation.

Operating leases are not capitalised and rental payments are included in the income statement on a straight-line basis over the lease term. Ongoing contracted commitments under finance and operations leases are disclosed within note 31 ‘Commitments’.

Exploration and evaluation

Exploration costs are incurred to discover mineral and petroleum resources. Evaluation costs are incurred to assess the technical feasibility and commercial viability of resources found.

Exploration and evaluation expenditure is charged to the income statement as incurred, except in the following circumstances in which case the expenditure may be capitalised:

In respect of minerals activities:

 

•

the exploration and evaluation activity is within an area of interest that was previously acquired as an asset acquisition or in a business combination and measured at fair value on acquisition; or

 

•

the existence of a commercially viable mineral deposit has been established.

In respect of petroleum activities:

 

•

the exploration and evaluation activity is within an area of interest for which it is expected that the expenditure will be recouped by future exploitation or sale; or

 

•

exploration and evaluation activity has not reached a stage that permits a reasonable assessment of the existence of commercially recoverable reserves.

Initial payments for the acquisition of intangible lease assets are capitalised and amortised over the term of the permit.

A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area. Capitalised costs are only carried forward to the extent that they are expected to be recovered through the successful exploitation of the area of interest or alternatively by its sale. To the extent that capitalised expenditure is no longer expected to be recovered, it is charged to the income statement.

 

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Development expenditure

When proven mineral reserves are determined and development is sanctioned, capitalised exploration and evaluation expenditure is reclassified as assets under construction within property, plant and equipment (refer to the mineral reserves definition under note 39 ‘Reserve estimates’). All subsequent development expenditure is capitalised and classified as assets under construction, provided commercial viability conditions continue to be satisfied.

The Group may use funds sourced from external parties to finance the acquisition and development of assets and operations. Finance costs are expensed as incurred, except where they relate to the financing of construction or development of qualifying assets. Borrowing costs directly attributable to acquiring or constructing a qualifying asset are capitalised during the development phase. Development expenditure is net of proceeds from the saleable material extracted during the development phase. On completion of development, all assets included in assets under construction are reclassified as either plant and equipment or other mineral assets and depreciation commences.

 

Other mineral assets

Other mineral assets comprise:

 

•

capitalised exploration, evaluation and development expenditure for assets in production;

 

•

mineral rights and petroleum interests acquired;

 

•

capitalised development and production stripping costs.

Overburden removal costs

The process of removing overburden and other waste materials to access mineral deposits is referred to as stripping. Stripping is necessary to obtain access to mineral deposits and occurs throughout the life of an open-pit mine. Development and production stripping costs are classified as other mineral assets in property, plant and equipment.

 

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Stripping costs are accounted for separately for individual components of an ore body. The determination of components is dependent on the mine plan and other factors, including the size, shape and geotechnical aspects of an ore body. The Group accounts for stripping activities as follows:

Development stripping costs

These are initial overburden removal costs incurred to obtain access to mineral deposits that will be commercially produced. These costs are capitalised when it is probable that future economic benefits (access to mineral ores) will flow to the Group and costs can be measured reliably.

Once the production phase begins, capitalised development stripping costs are depreciated using the units of production method based on the proven and probable reserves of the relevant identified component of the ore body to which the initial stripping activity benefits.

Production stripping costs

These are interburden removal costs incurred during the normal course of production activity, which commences after the first saleable minerals have been extracted from the component. Production stripping costs can give rise to two benefits, the accounting for which is outlined below:

 

		Production stripping activity
Benefits of stripping activity		Extraction of ore (inventory) in current period.		Improved access to future ore extraction.
Period benefited		Current period		Future period(s)
Recognition and measurement criteria		When the benefits of stripping activities are realised in the form of inventory produced; the associated costs are recorded in accordance with the Group’s inventory accounting policy.		When the benefits of stripping activities are improved access to future ore; production costs are capitalised when all the following criteria are met:   –       the production stripping activity improves access to a specific component of the ore body and it is probable that economic benefit arising from the improved access to future ore production will be realised;   –       the component of the ore body for which access has been improved can be identified;   –       costs associated with that component can be measured reliably.
Allocation of costs		Production stripping costs are allocated between the inventory produced and the production stripping asset using a life-of-component waste-to-ore (or mineral contained) strip ratio. When the current strip ratio is greater than the estimated life-of-component ratio a portion of the stripping costs is capitalised to the production stripping asset.

 

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		Production stripping activity
Asset recognised from stripping activity		Inventory		Other mineral assets within property, plant and equipment.
Depreciation basis		Not applicable		On a component-by-component basis using the units of production method based on proven and probable reserves.

 

Where assets are dedicated to a mine or petroleum lease, the below useful lives are subject to the lesser of the asset category’s useful life and the life of the mine or petroleum lease, unless those assets are readily transferable to another productive mine or lease.

Depreciation

 

 

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11.     Intangible assets

 

		2016												2015
		Goodwill				Other intangibles				Total				Goodwill				Other intangibles				Total
		US$M				US$M				US$M				US$M				US$M				US$M
Net book value
At the beginning of the financial year			3,274				1,018				4,292				4,034				1,405				5,439
Additions			–				78				78				–				82				82
Amortisation for the year			–				(221	)			(221	)			–				(243	)			(243	)
Impairments for the year			(1	)			(16	)			(17	)			(542	)			(28	)			(570	)
Disposals			–				(10	)			(10	)			–				(8	)			(8	)
Divestment and demerger of subsidiaries and operations			–				–				–				(218	)			(190	)			(408	)
Other			–				(3	)			(3	)			–				–				–
At the end of the financial year			3,273				846				4,119				3,274				1,018				4,292
– Cost			3,273				1,813				5,086				3,274				2,262				5,536
– Accumulated amortisation and impairments			–				(967	)			(967	)			–				(1,244	)			(1,244	)

Recognition and measurement

 

Goodwill		Other intangibles
Where the fair value of the consideration paid for a business acquisition exceeds the fair value of the identifiable assets, liabilities and contingent liabilities acquired, the difference is treated as goodwill. Where consideration is less than the fair value of acquired net assets, the difference is recognised immediately in the income statement. Goodwill is not amortised and is measured at cost less any impairment losses.		The Group capitalises amounts paid for the acquisition of identifiable intangible assets, such as software and licences where it is considered that they will contribute to future periods through revenue generation or reductions in cost. These assets, classified as finite life intangible assets, are carried in the balance sheet at the fair value of consideration paid less accumulated amortisation and impairment charges. Intangible assets with finite useful lives are amortised on a straight-line basis over their useful lives. The estimated useful lives are generally no greater than eight years.

 

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12.    Impairment of non-current assets

 

Year ended 30 June 2016																Year ended 30 June 2015
Cash generating unit		Segment		Property, plant and equipment				Goodwill and other intangibles				Total				Cash generating unit		Segment		Property, plant and equipment				Goodwill and other intangibles				Total
				US$M				US$M				US$M								US$M				US$M				US$M
Fayetteville		Petroleum			1,913				–				1,913			Onshore US		Petroleum			–				500				500
Haynesville		Petroleum			2,585				–				2,585			Hawkville		Petroleum			2,287				–				2,287
Black Hawk		Petroleum			1,861				–				1,861			Other		Petroleum			435				42				477
Hawkville		Petroleum			825				–				825								2,722				542				3,264
					7,184				–				7,184
																Nickel West		Group and unallocated			409				–				409
Other		Various			193				17				210			Other		Various			318				28				346
Total impairment of non-current assets					7,377				17				7,394			Total impairment of non-current assets					3,449				570				4,019
Reversal of impairment					–				–				–			Reversal of impairment					(4	)			–				(4	)
Net impairment of non-current assets					7,377				17				7,394			Net impairment of non- current assets					3,445				570				4,015

Recognition and measurement

Impairment tests are carried out annually for goodwill. In addition, impairment tests for all assets are performed when there is an indication of impairment. If the carrying amount of the asset exceeds its recoverable amount, the asset is impaired and an impairment loss is charged to the income statement so as to reduce the carrying amount in the balance sheet to its recoverable amount.

Previously impaired assets (excluding goodwill) are reviewed for possible reversal of previous impairment at each reporting date. Impairment reversal cannot exceed the carrying amount that would have been determined (net of depreciation) had no impairment loss been recognised for the asset or CGU. There were no material reversals of impairment in the current or prior year.

How recoverable amount is calculated

The recoverable amount is the higher of an asset’s fair value less cost of disposal (FVLCD) and value in use (VIU). For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units (CGUs)).

Valuation methods

Fair value less cost of disposal

FVLCD is an estimate of the amount that a market participant would pay for an asset or CGU, less the cost of disposal. Fair value for mineral and petroleum assets is generally determined using independent market assumptions to calculate the present value of the estimated future cash flows expected to arise from the continued use of the asset, including the anticipated cash flow effects of any capital expenditure to enhance production or reduce cost, and its eventual disposal where a market participant may take a consistent view. Cash flows are discounted using an appropriate post-tax market discount rate to arrive at a net present value of the asset which is compared against the asset’s carrying value.

 

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Value in use

VIU is determined as the present value of the estimated future cash flows expected to arise from the continued use of the asset in its present form and its eventual disposal. VIU is determined by applying assumptions specific to the Group’s continued use and cannot take into account future development. These assumptions are different to those used in calculating fair value and consequently the VIU calculation is likely to give a different result (usually lower) to a fair value calculation.

Impairment of non-current assets (excluding goodwill)

 

Petroleum
What has been recognised?		At 31 December 2015, the Group recognised an impairment charge of US$7,184 million (US$4,884 million after tax benefit) against the carrying value of individual Onshore US CGUs. There has been no further impairment relating to Onshore US CGUs in the six months to 30 June 2016.
What were the drivers of impairment?		As a result of significant volatility and weaker prices experienced in the oil and gas industry, management adjusted its medium-term and long-term price assumptions and discount rates, which had a significant flow through impact on asset valuations.
How were the valuations calculated?		Using these updated assumptions, valuations of the relevant Onshore US CGUs were calculated using FVLCD methodology, applying discounted cash flow techniques. The recoverable amount in each instance is equal to its estimated FVLCD. Future cash flow information is based upon the Group’s latest budgets and project economic plans incorporating Level 3 fair value inputs as defined in note 21 ‘Financial risk management’.
What were the significant assumptions and estimates used in the valuations?		The valuations are most sensitive to changes in crude oil and natural gas prices, estimated future production volumes and discount rates. Key judgements and estimates used in determining FVLCD are disclosed below.

Impairment test for goodwill

The carrying amount of goodwill has been allocated to the CGUs, or groups of CGUs, as follows:

 

Cash generating units		2016				2015
		US$M				US$M
Onshore US			3,026				3,026
Other			247				248
			3,273				3,274

For the purpose of impairment testing, goodwill has been allocated to CGUs or groups of CGUs, that are expected to benefit from the synergies of previous business combinations, which represent the level at which management will monitor and manage goodwill. Onshore US goodwill is the most significant goodwill balance and has been tested for impairment after an assessment of the individual CGUs that it comprises.

 

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Onshore US goodwill
Carrying value		US$3,026 million (2015: $3,026 million).
Impairment test conclusion as at 30 June 2016		No impairment charge is required as at 30 June 2016 (30 June 2015: $500 million). The recoverable amount of Onshore US CGUs was determined to be US$14,967 million (30 June 2015: US$19,793 million).
How did the goodwill arise?		Goodwill arose on the Petrohawk acquisition in August 2011 and is attributable to synergies associated with the Group’s US unconventional petroleum assets (Onshore US). This comprises the Permian, Haynesville, Fayetteville, Black Hawk and Hawkville group of CGUs, which includes the Group’s natural gas and liquid reserves and resources, production wells and associated infrastructure, including gathering systems and processing facilities in Texas and Louisiana (US).
Segment		Onshore US is part of the Petroleum reportable segment.
How were the valuations calculated?		FVLCD methodology using discounted cash flow techniques has been applied in determining the recoverable value of the Onshore US business.
Level of fair value hierarchy		Calculations are based primarily on Level 3 inputs as defined in note 21 ‘Financial risk management’.
Significant assumptions and sensitivities		The calculation of FVLCD for Onshore US is most sensitive to changes in crude oil and natural gas prices, production volumes and discount rates. Key accounting judgements and estimates used in forming the valuations are disclosed below. The assumptions used are consistent with those underpinning the property, plant and equipment impairment calculations for Onshore US CGUs.   Reasonably possible changes in circumstances may affect significant assumptions and the estimated fair value. Isolated changes in these significant assumptions could result in the estimated recoverable amount being equal to the carrying amount of Onshore US, including goodwill. These reasonably possible changes include:   •       A production volume decrease of 13.3 per cent from estimates contained in management’s long-term plans;   •       A decrease in crude oil prices of 19.2 per cent from prices assumed in the valuations;   •       A decrease in natural gas prices of 37.9 per cent from prices assumed in the valuations.   Crude oil and natural gas price assumptions used in FVLCD impairment testing are within or lower than the range of prices published by market commentators, as set out within the following key judgements and estimates section.   Typically changes in any one of the aforementioned assumptions (including operating performance) would be accompanied by a change in another assumption which may have an offsetting impact. Action is usually taken to respond to adverse changes in assumptions to mitigate the impact of any such change.

Other goodwill

Goodwill held by other CGUs is US$247 million (2015: US$248 million). This represents less than one per cent of net assets at 30 June 2016 (2015: less than one per cent). This goodwill has been allocated across a number of CGUs in different reportable segments. There was no significant impairment of other goodwill in the year to 30 June 2016 (2015: US$ nil).

 

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13.    Deferred tax balances

The movement for the year in the Group’s net deferred tax position is as follows:

 

		2016				2015				2014
		US$M				US$M				US$M
Net deferred tax asset/(liability)
At the beginning of the financial year			(1,681	)			(670	)			(243	)
Income tax credit/(charge) recorded in the income statement			3,508				(864	)			(426	)
Income tax (charge)/credit recorded directly in equity			(25	)			9				(1	)
Exchange variation and other movements (a)			21				(156	)			–
At the end of the financial year			1,823				(1,681	)			(670	)

 

(a)	Includes deferred tax assets divested as part of the demerger of South32 for the year ended 30 June 2015.

For recognition and measurement refer to note 5 ‘Income tax expense’.

The composition of the Group’s net deferred tax assets and liabilities recognised in the balance sheet and the deferred tax expense charged/(credited) to the income statement is as follows:

 

		Deferred tax assets								Deferred tax liabilities								(Credited)/charged to the income statement
		2016				2015				2016				2015				2016				2015				2014
		US$M				US$M				US$M				US$M				US$M				US$M				US$M
Type of temporary difference
Depreciation			(3,223	)			(1,101	)			1,259				5,689				(2,282	)			204				495
Exploration expenditure			656				563				–				(91	)			(3	)			117				(4	)
Employee benefits			342				279				(6	)			(120	)			56				58				(32	)
Closure and rehabilitation			1,711				1,383				(177	)			(584	)			36				41				(353	)
Resource rent tax			661				679				1,905				1,931				(8	)			925				(506	)
Other provisions			145				143				(1	)			(12	)			8				103				(411	)
Deferred income			–				(51	)			(11	)			(13	)			(49	)			17				12
Deferred charges			(470	)			(419	)			372				362				62				66				226
Investments, including foreign tax credits			1,327				838				844				639				(284	)			(58	)			298
Foreign exchange gains and losses			(77	)			(383	)			156				160				(310	)			210				(158	)
Tax losses			5,006				1,069				–				(3,129	)			(809	)			(945	)			605
Other			69				(139	)			(17	)			(290	)			75				126				254
Total			6,147				2,861				4,324				4,542				(3,508	)			864				426

The Group recognises the benefit of tax losses amounting to US$5,006 million (2015: US$4,198 million) only to the extent of anticipated future taxable income or gains in relevant jurisdictions. The amounts recognised in the Financial Statements in respect of each matter are derived from the Group’s best judgements and estimates as described in note 5 ‘Income tax expense’.

 

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The composition of the Group’s unrecognised deferred tax assets and liabilities is as follows:

 

		2016				2015
		US$M				US$M
Unrecognised deferred tax assets
Tax losses and tax credits (a)			2,549				2,006
Investments in subsidiaries (b)			1,185				1,130
Deductible temporary differences relating to PRRT (c)			2,048				2,014
Mineral rights (d)			2,279				1,958
Other deductible temporary differences (e)			460				373
Total unrecognised deferred tax assets			8,521				7,481
Unrecognised deferred tax liabilities
Investments in subsidiaries (b)			2,615				2,553
Taxable temporary differences relating to unrecognised deferred tax asset for PRRT (c)			614				604
Total unrecognised deferred tax liabilities			3,229				3,157

 

(a)	Tax losses and tax credits

At 30 June 2016, the Group had income and capital tax losses with a tax benefit of US$1,781 million (2015: US$1,501 million) and tax credits of US$768 million (2015: US$505 million), which are not recognised as deferred tax assets.

The gross amount of tax losses carried forward that have not been tax effected expire as follows:

 

Of the US$768 million of tax credits, US$471 million expires later than five years and not later than 10 years, US$202 million expires later than 10 years and not later than 20 years. The remainder of the tax credits do not have an expiration date.

 

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(b)	Temporary differences associated with investments in subsidiaries

The Group had deferred tax assets of US$1,185 million at 30 June 2016 (2015: US$1,130 million) and deferred tax liabilities of US$2,615 million (2015: US$2,553 million) associated with undistributed earnings of subsidiaries that have not been recognised because the Group is able to control the timing of the reversal of the temporary differences and it is not probable that these differences will reverse in the foreseeable future.

 

(c)	Temporary differences relating to PRRT

The Group had US$2,048 million of unrecognised deferred tax assets relating to Australian Petroleum Resource Rent Tax (PRRT) at 30 June 2016 (2015: US$2,014 million relating to Australian PRRT), with a corresponding unrecognised deferred tax liability for income tax purposes of US$614 million (2015: US$604 million). Recognition of a deferred tax asset for PRRT depends on benefits expected to be obtained from the deduction against PRRT liabilities.

 

(d)	Mineral rights

The Group had deductible temporary differences relating to mineral rights for which deferred tax assets of US$2,279 million at 30 June 2016 (2015: US$1,958 million) had not been recognised because it is not probable that future capital gains will be available, against which the Group can utilise the benefits. The deductible temporary differences do not expire under current tax legislation.

 

(e)	Other deductible temporary differences

The Group had deductible temporary differences for which deferred tax assets of US$460 million at 30 June 2016 (2015: US$373 million) had not been recognised because it is not probable that future taxable profits will be available against which the Group can utilise the benefits. The deductible temporary differences do not expire under current tax legislation.

 

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14.    Closure and rehabilitation provisions

 

		2016				2015
		US$M				US$M
At the beginning of the financial year			6,701				9,295
Capitalised amounts for operating sites:
Change in estimate			(58	)			276
Exchange translation			(112	)			(1,009	)
Adjustments to closed sites charged/(credited) to the income statement:
Increases to existing and new provisions			18				74
Exchange translation			(8	)			(104	)
Released during the year			(81	)			(93	)
Other adjustments to the provision:
Amortisation of discounting impacting net finance costs			305				442
Expenditure on closure and rehabilitation activities			(111	)			(180	)
Exchange variations impacting foreign currency translation reserve			(1	)			(7	)
Divestment and demerger of subsidiaries and operations			(138	)			(1,993	)
Transfers and other movements			(13	)			–
At the end of the financial year			6,502				6,701
Comprising:
Current			171				193
Non-current			6,331				6,508
Operating sites			5,241				5,655
Closed sites			1,261				1,046

BHP Billiton is required to rehabilitate sites and associated facilities at the end of, or in some cases, during the course of production, to a condition acceptable to the relevant authorities, specified in license requirements and the Group’s environmental performance requirements as set out within Our BHP Billiton Charter.

The key components of closure and rehabilitation activities are:

 

•

the removal of all unwanted infrastructure associated with an operation;

 

•

the return of disturbed areas to a safe, stable, productive and self-sustaining condition, consistent with the agreed end land use.

Recognition and measurement

Provisions for closure and rehabilitation are recognised by the Group when:

 

•

it has a present legal or constructive obligation as a result of past events;

 

•

it is more likely than not that an outflow of resources will be required to settle the obligation;

 

•

the amount can be reliably estimated.

 

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Initial recognition		Subsequent remeasurement
Closure and rehabilitation provisions are initially recognised when an environmental disturbance first occurs. The individual site provisions are an estimate of the expected value of future cash flows required to rehabilitate the relevant site using current restoration standards and techniques and taking into account risks and uncertainties. Individual site provisions are discounted to their present value using country specific discount rates aligned to the estimated timing of cash outflows.   When provisions for closure and rehabilitation are initially recognised, the corresponding cost is capitalised as an asset, representing part of the cost of acquiring the future economic benefits of the operation.		The closure and rehabilitation asset, recognised within property, plant and equipment, is depreciated over the life of the operations. The value of the provision is progressively increased over time as the effect of discounting unwinds, resulting in an expense recognised in net finance costs.   The closure and rehabilitation liability is reviewed at each reporting date to assess if the estimate continues to reflect the best estimate of the obligation. If necessary the provision is remeasured to account for factors, including:   –       revisions to estimated reserves, resources and lives of operations;   –       developments in technology;   –       regulatory requirements and environmental management strategies;   –       changes in the estimated extent and costs of anticipated activities, including the effects of inflation and movements in foreign exchange rates;   –       movements in interest rates affecting the discount rate applied.   Changes to the closure and rehabilitation estimate are added to, or deducted from, the related asset and amortised on a prospective basis accordingly over the remaining life of the operation, generally applying the units of production method.   Costs arising from unforeseen circumstances, such as the contamination caused by unplanned discharges, are recognised as an expense and liability when the event gives rise to an obligation that is probable and capable of reliable estimation.

Closed sites

Where future economic benefits are no longer expected to be derived through operation, changes to the associated closure and remediation costs are charged to the income statement in the period identified. This amounted to US$18 million in the year ended 30 June 2016 (2015: US$74 million).

 

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Capital structure

15.    Share capital

 

		BHP Billiton Limited												BHP Billiton Plc
		2016 shares				2015 shares				2014 Shares				2016 shares				2015 shares				2014 shares
Share capital issued
Opening number of shares			3,211,691,105				3,211,691,105				3,211,691,105				2,112,071,796				2,136,185,454				2,136,185,454
Purchase of shares by ESOP Trusts			(6,538,404	)			(6,798,803	)			(8,621,160	)			(17,000	)			(3,623,582	)			(2,563,735	)
Employee share awards exercised following vesting			6,846,091				7,443,935				7,379,051				966,473				2,945,980				2,431,251
Movement in treasury shares under Employee Share Plans			(307,687	)			(645,132	)			1,242,109				(949,473	)			677,602				132,484
Treasury shares cancelled (a)			–				–				–				–				(24,113,658	)			–
Closing number of shares (b)			3,211,691,105				3,211,691,105				3,211,691,105				2,112,071,796				2,112,071,796				2,136,185,454
Comprising:
Shares held by the public			3,211,159,695				3,210,852,008				3,210,206,876				2,111,283,256				2,110,333,783				2,110,945,784
Treasury shares			531,410				839,097				1,484,229				788,540				1,738,013				25,239,670
Other share classes
Special Voting share of no par value			1				1				1				–				–				–
Special Voting share of US$0.50 par value			–				–				–				1				1				1
5.5% Preference shares of £1 each			–				–				–				50,000				50,000				50,000
DLC Dividend share			1				–				–				–				–				–

 

(a)	On 28 August 2014, BHP Billiton Plc cancelled 24,113,658 ordinary shares of US$0.50 each held as treasury shares.

 

(b)	During the period 1 July 2016 to 10 September 2016, no fully paid ordinary shares in BHP Billiton were issued on the exercise of Group Incentive Scheme awards.

 

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Recognition and measurement

Share capital of BHP Billiton Limited and BHP Billiton Plc is composed of the following classes of shares:

 

Ordinary shares fully paid		Special Voting shares		Preference shares
BHP Billiton Limited and BHP Billiton Plc ordinary shares fully paid of US$0.50 par value represent 99.99 per cent of the total number of shares. Any profit remaining after payment of preferred distributions is available for distribution to the holders of BHP Billiton Limited and BHP Billiton Plc ordinary shares in equal amounts per share.		Each of BHP Billiton Limited and BHP Billiton Plc issued one Special Voting share to facilitate joint voting by shareholders of BHP Billiton Limited and BHP Billiton Plc on Joint Electorate Actions. There has been no movement in these shares.		Preference shares have the right to repayment of the amount paid up on the nominal value and any unpaid dividends in priority to the holders of any other class of shares in BHP Billiton Plc on a return of capital or winding up. The holders of preference shares have limited voting rights if payment of the preference dividends are six months or more in arrears or a resolution is passed changing the rights of the preference shareholders. There has been no movement in these shares, all of which are held by JP Morgan Limited.

 

Equalisation share		DLC Dividend share		Treasury shares
An Equalisation share (US$0.50 par value) has been authorised to be issued to enable a distribution to be made by BHP Billiton Plc Group to the BHP Billiton Limited Group should this be required under the terms of the DLC merger. The Directors have the ability to issue the Equalisation share if required under those terms. The Constitution of BHP Billiton Limited allows the Directors of that company to issue a similar Equalisation share. No shares have been issued.		The DLC Dividend share supports the BHP Billiton Dual Listed Company (DLC) equalisation principles in place since the merger in 2001, including the requirement that ordinary shareholders of BHP Billiton Plc and BHP Billiton Limited are paid equal cash dividends per share. This share enables efficient and flexible capital management across the DLC and was issued on 23 February 2016 at par value of US$10. On 24 March 2016, BHP Billiton Limited paid a dividend of US$1,990 million under the DLC dividend share arrangements. This dividend is eliminated on consolidation.		Treasury shares are shares of parent entities and are held by the ESOP Trusts for the purpose of issuing shares to employees under the Group’s Employee Share Plans. Treasury shares are recognised at cost and deducted from equity, net of any income tax effects. When the treasury shares are subsequently sold or reissued any consideration received, net of any directly attributable costs and income tax effects, is recognised as an increase in equity. Any difference between the carrying amount and the consideration, if reissued, is recognised in retained earnings.

 

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16.    Other equity

 

		2016				2015				2014				Recognition and measurement
		US$M				US$M				US$M
Share premium account			518				518				518			The share premium account represents the premium paid on the issue of BHP Billiton Plc shares recognised in accordance with the UK Companies Act 2006.
Foreign currency translation reserve			41				52				54			The foreign currency translation reserve represents exchange differences arising from the translation of non-US dollar functional currency operations within the Group into US dollars.
Employee share awards reserve			293				372				599			The employee share awards reserve represents the accrued employee entitlements to share awards that have been charged to the income statement and have not yet been exercised.   Once exercised, the difference between the accumulated fair value of the awards and their historical on-market purchase price is recognised in retained earnings.
Hedging reserve			210				141				129			The hedging reserve represents hedging gains and losses recognised on the effective portion of cash flow hedges. The cumulative deferred gain or loss on the hedge is recognised in the income statement when the hedged transaction impacts the income statement, or is recognised as an adjustment to the cost of non-financial hedged items. The hedging reserve records the portion of the gain or loss on a hedging instrument in a cash flow hedge that is determined to be an effective hedge relationship.
Financial assets reserve			11				9				115