BHP Billiton Ltd. (BHP) | Goodwill and Intangible Assets

Goodwill and Intangible Assets Accounting Policy

Goodwill

Where the fair value of consideration paid for a business combination exceeds the fair value of BHP Billiton's share of the identifiable net assets acquired, the difference is treated as purchased goodwill. Where the fair value of BHP Billiton's share of the identifiable net assets acquired exceeds the cost of acquisition, the difference is immediately recognised in the income statement. The recognition and measurement of goodwill attributable to a non-controlling interest in a business combination is determined on a transaction by transaction basis. Goodwill is not amortised, however its carrying amount is assessed annually against its recoverable amount. On the subsequent disposal or termination of a previously acquired business, any remaining balance of associated goodwill is included in the determination of the profit or loss on disposal or termination.

Intangible assets

Amounts paid for the acquisition of identifiable intangible assets, such as software and licences, are capitalised at the fair value of consideration paid and are recorded at cost less accumulated amortisation and impairment charges. Identifiable intangible assets with a finite life are amortised on a straight-line basis over their expected useful life, which is typically no greater than eight years. BHP Billiton has no identifiable intangible assets for which the expected useful life is indefinite.

Source: BHP Billiton Ltd., Annual Report

Goodwill and Intangible Assets Disclosure

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BHP Billiton Ltd., Statement of Financial Position, Goodwill and Intangible Assets

USD $ in millions

		Jun 30, 2011	Jun 30, 2010	Jun 30, 2009	Jun 30, 2008	Jun 30, 2007	Jun 30, 2006
	Other intangibles, cost
	Accumulated amortisation and impairments
	Other intangibles, net
	Goodwill
	Intangible assets

Source: Based on data from BHP Billiton Ltd. Annual Reports

Item	Description	The company
Other intangibles, net	Sum of the carrying amounts of all intangible assets, excluding goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges.	BHP Billiton Ltd.'s other intangibles, net increased from 2009 to 2010 and from 2010 to 2011.
Goodwill	Carrying amount as of the balance sheet date, which is the cumulative amount paid and (if applicable) the fair value of any noncontrolling interest in the acquiree, adjusted for any amortization recognized prior to the adoption of any changes in generally accepted accounting principles (as applicable) and for any impairment charges, in excess of the fair value of net assets acquired in one or more business combination transactions.
Intangible assets	Sum of the carrying amounts of all intangible assets, including goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges.	BHP Billiton Ltd.'s intangible assets increased from 2009 to 2010 and from 2010 to 2011.

Analyst Adjustments: Removal of Goodwill

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BHP Billiton Ltd., adjustments to financial data

USD $ in millions

		Jun 30, 2011	Jun 30, 2010	Jun 30, 2009	Jun 30, 2008	Jun 30, 2007	Jun 30, 2006
	Adjustment to Total Assets
	Total assets (as reported)
	Less: Goodwill
	Total assets (adjusted)
	Adjustment to Equity Attributable To Members Of BHP Billiton Group
	Equity attributable to members of BHP Billiton Group (as reported)
	Less: Goodwill
	Equity attributable to members of BHP Billiton Group (adjusted)
	Adjustment to Profit After Taxation Attributable To Members Of BHP Billiton Group
	Profit after taxation attributable to members of BHP Billiton Group (as reported)
	Add: Goodwill impairments for the year
	Profit after taxation attributable to members of BHP Billiton Group (adjusted)

Adjusted Ratios: Removal of Goodwill (Summary)

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BHP Billiton Ltd., adjusted ratios

	Jun 30, 2011	Jun 30, 2010	Jun 30, 2009	Jun 30, 2008	Jun 30, 2007	Jun 30, 2006
Net Profit Margin
Reported net profit margin	%	%	%	%	%	%
Adjusted net profit margin	%	%	%	%	%	%
Total Asset Turnover
Reported total asset turnover
Adjusted total asset turnover
Financial Leverage
Reported financial leverage
Adjusted financial leverage
Return on Equity (ROE)
Reported ROE	%	%	%	%	%	%
Adjusted ROE	%	%	%	%	%	%
Return on Assets (ROA)
Reported ROA	%	%	%	%	%	%
Adjusted ROA	%	%	%	%	%	%

Ratio	Description	The company
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by revenue.	BHP Billiton Ltd.'s adjusted net profit margin improved from 2009 to 2010 and from 2010 to 2011.
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	BHP Billiton Ltd.'s adjusted total asset turnover deteriorated from 2009 to 2010 but then improved from 2010 to 2011 exceeding 2009 level.
Adjusted financial leverage	A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.	BHP Billiton Ltd.'s adjusted financial leverage declined from 2009 to 2010 and from 2010 to 2011.
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by adjusted shareholders' equity.	BHP Billiton Ltd.'s adjusted ROE improved from 2009 to 2010 and from 2010 to 2011.
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by adjusted total assets.	BHP Billiton Ltd.'s adjusted ROA improved from 2009 to 2010 and from 2010 to 2011.

Adjusted Net Profit Margin

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	Jun 30, 2011	Jun 30, 2010	Jun 30, 2009	Jun 30, 2008	Jun 30, 2007	Jun 30, 2006
As Reported
Profit after taxation attributable to members of BHP Billiton Group (USD $ in millions)
Revenue (USD $ in millions)

Net profit margin¹	%	%	%	%	%	%
Adjusted for Goodwill
Adjusted profit after taxation attributable to members of BHP Billiton Group (USD $ in millions)
Revenue (USD $ in millions)

Adjusted net profit margin²	%	%	%	%	%	%

2011 Calculations

¹ Net profit margin = 100 × Profit after taxation attributable to members of BHP Billiton Group ÷ Revenue
= 100 × ÷ = %

² Adjusted net profit margin = 100 × Adjusted profit after taxation attributable to members of BHP Billiton Group ÷ Revenue
= 100 × ÷ = %

Ratio	Description	The company
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by revenue.	BHP Billiton Ltd.'s adjusted net profit margin improved from 2009 to 2010 and from 2010 to 2011.

Adjusted Total Asset Turnover

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		Jun 30, 2011	Jun 30, 2010	Jun 30, 2009	Jun 30, 2008	Jun 30, 2007	Jun 30, 2006
	As Reported
	Revenue (USD $ in millions)
	Total assets (USD $ in millions)

	Total asset turnover¹
	Adjusted for Goodwill
	Revenue (USD $ in millions)
	Adjusted total assets (USD $ in millions)

	Adjusted total asset turnover²

2011 Calculations

¹ Total asset turnover = Revenue ÷ Total assets
= ÷ =

² Adjusted total asset turnover = Revenue ÷ Adjusted total assets
= ÷ =

Ratio	Description	The company
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	BHP Billiton Ltd.'s adjusted total asset turnover deteriorated from 2009 to 2010 but then improved from 2010 to 2011 exceeding 2009 level.

Adjusted Financial Leverage

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		Jun 30, 2011	Jun 30, 2010	Jun 30, 2009	Jun 30, 2008	Jun 30, 2007	Jun 30, 2006
	As Reported
	Total assets (USD $ in millions)
	Equity attributable to members of BHP Billiton Group (USD $ in millions)

	Financial leverage¹
	Adjusted for Goodwill
	Adjusted total assets (USD $ in millions)
	Adjusted equity attributable to members of BHP Billiton Group (USD $ in millions)

	Adjusted financial leverage²

2011 Calculations

¹ Financial leverage = Total assets ÷ Equity attributable to members of BHP Billiton Group
= ÷ =

² Adjusted financial leverage = Adjusted total assets ÷ Adjusted equity attributable to members of BHP Billiton Group
= ÷ =

Ratio	Description	The company
Adjusted financial leverage	A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.	BHP Billiton Ltd.'s adjusted financial leverage declined from 2009 to 2010 and from 2010 to 2011.

Adjusted Return On Equity (ROE)

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	Jun 30, 2011	Jun 30, 2010	Jun 30, 2009	Jun 30, 2008	Jun 30, 2007	Jun 30, 2006
As Reported
Profit after taxation attributable to members of BHP Billiton Group (USD $ in millions)
Equity attributable to members of BHP Billiton Group (USD $ in millions)

ROE¹	%	%	%	%	%	%
Adjusted for Goodwill
Adjusted profit after taxation attributable to members of BHP Billiton Group (USD $ in millions)
Adjusted equity attributable to members of BHP Billiton Group (USD $ in millions)

Adjusted ROE²	%	%	%	%	%	%

2011 Calculations

¹ ROE = 100 × Profit after taxation attributable to members of BHP Billiton Group ÷ Equity attributable to members of BHP Billiton Group
= 100 × ÷ = %

² Adjusted ROE = 100 × Adjusted profit after taxation attributable to members of BHP Billiton Group ÷ Adjusted equity attributable to members of BHP Billiton Group
= 100 × ÷ = %

Ratio	Description	The company
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by adjusted shareholders' equity.	BHP Billiton Ltd.'s adjusted ROE improved from 2009 to 2010 and from 2010 to 2011.

Adjusted Return On Assets (ROA)

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	Jun 30, 2011	Jun 30, 2010	Jun 30, 2009	Jun 30, 2008	Jun 30, 2007	Jun 30, 2006
As Reported
Profit after taxation attributable to members of BHP Billiton Group (USD $ in millions)
Total assets (USD $ in millions)

ROA¹	%	%	%	%	%	%
Adjusted for Goodwill
Adjusted profit after taxation attributable to members of BHP Billiton Group (USD $ in millions)
Adjusted total assets (USD $ in millions)

Adjusted ROA²	%	%	%	%	%	%

2011 Calculations

¹ ROA = 100 × Profit after taxation attributable to members of BHP Billiton Group ÷ Total assets
= 100 × ÷ = %

² Adjusted ROA = 100 × Adjusted profit after taxation attributable to members of BHP Billiton Group ÷ Adjusted total assets
= 100 × ÷ = %

Ratio	Description	The company
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by adjusted total assets.	BHP Billiton Ltd.'s adjusted ROA improved from 2009 to 2010 and from 2010 to 2011.

BHP Billiton Ltd. (BHP) | Analysis of Goodwill and Intangible Assets

Goodwill and Intangible Assets Accounting Policy

Goodwill

Intangible assets

Goodwill and Intangible Assets Disclosure

Analyst Adjustments: Removal of Goodwill

Adjusted Ratios: Removal of Goodwill (Summary)

Adjusted Net Profit Margin

Adjusted Total Asset Turnover

Adjusted Financial Leverage

Adjusted Return On Equity (ROE)

Adjusted Return On Assets (ROA)

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