Slide 1: International Financial Reporting Standards
International Financial Reporting Standards Draft annual results – Year ended 30 June 2005 October 2005
Slide 2: IFRS for BHP Billiton
IFRS for BHP Billiton • International Financial Reporting Standards (IFRS) become applicable for year ending 30 June 2006 – First IFRS reporting period is half year ended 31 December 2005 and will include December 2004 comparatives • As a Dual Listed Company, both Australian and UK IFRS applies, whi
Slide 3: Disclaimer
Disclaimer The information provided in this presentation is our current best estimate of the consequences for BHP Billiton of adopting International Financial Reporting Standards (IFRS). Consequently the information provided remains subject to change. Continued development and interpretation of acco
Slide 4: Impact of IFRS for BHP Billiton
Impact of IFRS for BHP Billiton Application of IFRS does not impact: –BHP Billiton’s strategy and underlying business operations –Cash flows, the ability to borrow funds or pay dividends • Majority of International Financial Reporting Standards will have little or no impact on BHP Billiton results o
Slide 5: Consolidated Income Statement, Year ended 30 June 2005
Consolidated Income Statement 1 Year ended 30 June 2005 US$million UKGAAP 2 Measurement differences 4 Gross Other IFRS with Jointly AIFRS equity presentation consolidated controlled Pension & Goodwill/ Income Employee acc’g 5 differences 2 jointly entities6 medical Fair value tax share controlled sc
Slide 6: Consolidated Balance Sheet as at 30 June 2005
Consolidated Balance Sheet As at 30 June 2005 US$million UKGAAP Measurement differences1 Liquidity Other IFRS with Jointly AIFRS 2 2 consolidated controll- Pension & Goodwill Income Divi- Employee jointly ed medical / fair tax dend share controlled entities3 schemes value schemes entities 3 adjust’s
Slide 7: Customer sector group information – 30 June 2005
Customer sector group information – 30 June 2005 Total revenue EBIT 1 US$m UKGAAP2 IFRS with AIFRS UKGAAP IFRS with AIFRS consolidated consolidated jointly jointly controlled controlled entities 3 entities 3 Petroleum 5 967 5 967 5 967 2 020 2 018 2 018 Aluminium 5 265 4 610 4 530 977 972 936 Base M
Slide 8: Customer sector group EBIT information – 30 June 2005
Customer sector group EBIT information – 30 June 2005 Petroleum Aluminium Base Carbon Diamonds Energy Stainless Group & BHP Metals Steel and Coal Steel Unallocated Group Materials Specialty Materials Products UKGAAP 2 020 977 2 147 2 536 411 523 861 (313) 9 162 Pension & Medical (2) (5) 7 (3) (2) 11
Slide 9: Profit announcement information
Profit announcement information UK GAAP AIFRS US$m 2005 2004 Change 2005 2004 4 Change Turnover 1 31 804 24 943 27.5% 31 120 24 502 27.0% EBITDA 1 2 3 11 446 7 506 52.5% 10 916 7 059 54.6% EBIT1 2 3 9 330 5 488 70.0% 8 802 5 043 74.5% Attributable profit (excluding exceptional 6 512 3 510 85.5% 6 44
Slide 10: Other IFRS issues
Other IFRS issues • Resource rent taxes – Unresolved matter of interpretation as to whether such items should be treated as income tax – Currently treated as operating costs – Reclassification and remeasurement as income tax would change fundamentally the effective tax rate • Deferred tax on acquire
Slide 11: IFRS summary
IFRS summary Application of IFRS does not impact: –BHP Billiton’s strategy and underlying business operations –Cash flows, the ability to borrow funds or pay dividends • Volatility of earnings – Exchange fluctuation exposure related to deferred tax increases – Fair value measurement of financial ins
Slide 12: Ohpodilliton
6de Ohpodilliton
Slide 13: Appendix
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Slide 14: Contacts
Contacts Australia United Kingdom Jane Belcher, Investor Relations Mark Lidiard, Investor & Media Relations Tel: +61 3 9609 3952 Mobile: +61 417 031 653 Tel: +44 20 7802 4156 Mobile: +44 7769 934 942 email: Jane.H.Belcher@bhpbilliton.com email: Mark.Lidiard@bhpbilliton.com Alison Gilbert, Investor R
Slide 15: Consolidated Cash Flow Statement Year ended 30 June 2005
Consolidated Cash Flow Statement Year ended 30 June 2005 US$million UKGAAP 1 Jointly AIFRS US$million UKGAAP 1 Jointly AIFRS controlled controlled entities2 entities2 Cash generated from 10 628 (1 555) 9 073 Proceeds from issue of ordinary 66 - 66 operations shares Dividends received 3 292 710 1 002
Slide 16: Key ratios under IFRS vs UKGAAP
Key ratios under IFRS vs UKGAAP Year ended 30 June 2005 UKGAAP UKGAAP AIFRS IFRS with excluding including consolidated exceptionals exceptionals jointly controlled entities EBIT margin 1 37.1% 36.4% 34.3% 35.5% Basic earnings per share 106.4c 104.5c 104.0c 104.0c EBITDA interest cover 34.7 times 34.
Slide 17: Pension and medical schemes
Pension and medical schemes 1 • IAS 19 key concept: – Recognition on the basis of the underlying obligations and assets of the plans 2 – Election by BHP Billiton to take gains and losses associated with actuarial assumptions (either variations to actual outcomes or changes in future assumptions) dir
Slide 18: Goodwill and Fair value adjustments
Goodwill and Fair value adjustments • IFRS 3 key concept: – Goodwill is not amortised, but tested for impairment on an annual basis 1 – Inventory is valued, on acquisition, at net selling price less a reasonable profit allowance 2 • June 2005 impact: WMC impacts – US$1 601 million 3 goodwill acquire
Slide 19: Income tax
Income tax • IAS 12 key concepts: – Deferred taxes are measured using the balance sheet approach, being the difference between the carrying value of assets and liabilities and their tax base 1 – Where applicable, withholding taxes must be provided where distribution of retained profits is ‘probable’
Slide 20: Income tax cont.
Income tax cont. June 2005 impact cont: Footnote Tax benefit/ Tax asset/ (expense) (provision) US$m US$m Deferred tax on non depreciable assets acquired in business combinations 1 56 (549) Foreign exchange movements – tax provisions 2 172 434 Foreign exchange movements – USD debt 3 (261) (662) Withh
Slide 21: Worked Example – Non-tax depreciable assets (1)
Worked Example – Non-tax depreciable assets (1) Example: Acquisition with US$3bn of mineral rights (depreciable for book,not for tax) Balance Sheet Book Tax Diff. Tax@30% Mineral Rights 3,000 Nil 3,000 900 Book balance > Tax balance = PDIT Entries: Dr Goodwill 900 Cr PDIT 900 Page 21
Slide 22: Worked Example – Non-tax depreciable assets (2)
Worked Example – Non-tax depreciable assets (2) Example Year 2: Mineral rights to be amortised over 10 years Balance Sheet Book Tax Diff. Tax@30% Mineral Rights 3,000 Nil 3,000 900 Less amortisation (300) Nil (300) (90) Entries: Dr PDIT 90 Cr Tax expense 90 Page 22
Slide 23: Worked Example – FX on Non-monetary assets
Worked Example – FX on Non-monetary assets Example: Acquire fixed asset at 30 June 04 for A$1,450. No depreciation for purposes of example Exchange rates: 6/04 A$1=US$0.69 6/05 A$1=US$0.76 Book Tax June 04 A$ US$ A$ US$ Fixed asset 1,450 1,000 1,450 1,000 Book Value= Tax value ⇒ no deferred tax cons
Slide 24: Worked example – FX on USD Debt
Worked example – FX on USD Debt Example: US$1,000 loan made to Australian subsidiary at 30 June 2004 Exchange rates: 6/04 A$1=US$0.69 6/05 A$1=US$0.76 1. As Loan is in USD – no book implications on EBIT 2. Tax Values June 04 June 05 A$ US$ A$ US$ Debt 1,450 1,000 1,315 1,000 Tax entries: Dr Loan A$1
Slide 25: Employee share schemes
Employee share schemes • IFRS 2 key concept: – The cost of equity-based compensation is measured at fair value 1 – The cost is accrued over the vesting period • June 2005 impact: – BHP Billiton awards deferred shares, performance shares and/or options, to eligible employees under the Group Incentive
Slide 26: Dividend payable
Dividend payable • IAS 37 key concept: – A liability for a dividend payable can only be recognised when formally declared • June 2005 impact: – Under UK GAAP BHP Billiton recognises a dividend payable where it is declared after period end, but prior to the release of financial results – US$878 milli
Slide 27: Jointly controlled entities
Jointly controlled entities • IAS 31 key concept: – While IFRS allows a choice of proportionate consolidation or equity accounting, Australian IFRS mandates equity accounting • June 2005 impact: – Compliance with Australian IFRS requires equity accounting for interests in Escondida, Mozal and Valesu
Slide 28: Financial Instruments
Financial Instruments • IAS 39 key concepts: – Deferred application date – year ended 30 June 2006 for BHP Billiton – All derivative financial instruments must be recognised in the balance sheet and measured at fair value – Application of hedge accounting is only available where specific designation
Slide 29: Year ended 30 June 2005
Year ended 30 June 2005 Revenue US$m UKGAAP Other IFRS with Jointly AIFRS presentational consolidated controlled differences jointly entities 3 controlled entities Group production 24 859 (409) 24 450 - 24 450 Third party product 6 945 (275) 6 670 - 6 670 Gross revenue 31 804 (684) 1 31 120 - 31 120
Slide 30: As at 30 June 2005
As at 30 June 2005 Current Assets UKGAAP Liquidity Other Non-current UKGAAP Liquidity Other adjustments1 Assets US$m adjustments1 US$m Stocks 2 568 (103) - Stocks - 103 - Debtors - 2 068 - Debtors 5 679 (2 068) 39 3 Goodwill 17 - 354 4 Investments 212 - (167) 2 Tangible assets 30 347 - - Cash 1 418
Slide 31: Jointly controlled entities – Income Statement
Jointly controlled entities – Income Statement Year ended 30 June 2005 Jointly controlled entity 1 Intercompany Total adjustments 2 US$m Escondida Mozal Valesul Revenue 2 277 461 88 (553) 2 273 Other income (4) - 1 - (3) Expenses excluding finance costs (920) (296) (79) 553 (742) EBIT 1 353 165 10 -
Slide 32: Jointly controlled entities – Balance Sheet
Jointly controlled entities – Balance Sheet As at 30 June 2005 & 30 June 2004 US$m 30 June 2005 30 June 2004 Jointly controlled entity 1 Intercoy Total Jointly controlled entity 1 Intercoy Total Adj’s 2 Adj’s 2 Escondida Mozal Valesul Escondida Mozal Valesul Current Assets 457 135 31 - 623 370 113 2
Slide 33: Consolidated Balance Sheet As at 30 June 2004
Consolidated Balance Sheet As at 30 June 2004 US$m UKGAAP Measurement differences Other 1 Liquidity 1 IFRS with Jointly AIFRS consolidated controlled Pension Equity Income Dividend jointly entities2 & medical based tax controlled schemes employee entities costs Current Assets 8 151 - - - - (123) (1
Slide 34: As at 30 June 2004
As at 30 June 2004 Current Assets UKGAAP5 Liquidity Other Non-current UKGAAP5 Liquidity Other adjustments1 Assets US$m adjustments1 US$m Stocks - 45 - Stocks 1 760 (45) - Debtors - 1 482 - Debtors 4 406 (1 482) 30 3 Goodwill 34 - 388 4 Investments 167 - (153) 2 Tangible assets 20 945 - - Cash 1 818
Slide 35: Consolidated Income Statement – AGAAP vs UKGAAP
Consolidated Income Statement – AGAAP vs UKGAAP 1 Year ended 30 June 2005 US$million AGAAP 2 Gross Other Interest Goodwill Other tax Tax loss UKGAAP equity revenue income and fair adjustments 5 benefits6 acc’g 2 allocations 3 value adjust’s4 Revenue – excluding JV’s 29 649 (62) - - - - - 29 587 Othe