Income Tax Accounting Policy
Taxation on the profit or loss for the year comprises current and deferred tax. Taxation is recognized in the income statement except to the extent that it relates to items recognized directly in equity, in which case the tax is recognized in equity.
Current tax is the expected tax payable on the taxable income for the year using rates enacted or substantively enacted at the year end, and includes any adjustment to tax payable in respect of previous years.
Deferred tax is provided using the balance sheet liability method, providing for the tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for tax assessment or deduction purposes. Where an asset has no deductible or depreciable amount for income tax purposes, but has a deductible amount on sale or abandonment for capital gains tax purposes, that amount is included in the determination of temporary differences. The tax effect of certain temporary differences is not recognized, principally with respect to goodwill; temporary differences arising on the initial recognition of assets or liabilities (other than those arising in a business combination or in a manner that initially impacted accounting or taxable profit); and temporary differences relating to investments in subsidiaries, jointly controlled entities and associates to the extent that BHP Billiton is able to control the reversal of the temporary difference and the temporary difference is not expected to reverse in the foreseeable future. The amount of deferred tax recognized is based on the expected manner and timing of realization or settlement of the carrying amount of assets and liabilities, with the exception of items that have a tax base solely derived under capital gains tax legislation, using tax rates enacted or substantively enacted at period end. To the extent that an item’s tax base is solely derived from the amount deductible under capital gains tax legislation, deferred tax is determined as if such amounts are deductible in determining future assessable income.
A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized. Deferred tax assets are reviewed at each balance sheet date and amended to the extent that it is no longer probable that the related tax benefit will be realized. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and BHP Billiton has both the right and the intention to settle its current tax assets and liabilities on a net or simultaneous basis.
Royalties and resource rent taxes are treated as taxation arrangements when they have the characteristics of a tax. This is considered to be the case 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. For such arrangements, current and deferred tax is provided on the same basis as described above for other forms of taxation. Obligations arising from royalty arrangements that do not satisfy these criteria are recognized as current provisions and included in expenses.
Source: BHP Billiton Ltd., Annual Report
Income Tax Expense (Benefit)
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BHP Billiton Ltd., income tax expense (benefit), continuing operations
Source: Based on data from BHP Billiton Ltd. Annual Reports
| Item |
Description |
The company |
| Current tax expense |
The component of income tax expense for the period representing amounts of income taxes paid or payable (or refundable) for the period for all income tax obligations as determined by applying the provisions of relevant enacted tax laws to relevant amounts of taxable income (loss) from continuing operations. |
BHP Billiton Ltd.'s current tax expense declined from 2009 to 2010 but then increased from 2010 to 2011 exceeding 2009 level.
|
| Deferred tax expense |
The component of income tax expense for the period representing the net change in the entity's deferred tax assets and liabilities pertaining to continuing operations. |
BHP Billiton Ltd.'s deferred tax expense increased from 2009 to 2010 but then declined significantly from 2010 to 2011.
|
| Taxation expense |
The sum of the current income tax expense (benefit) and the deferred income tax expense (benefit) pertaining to pretax income (loss) from continuing operations; income tax expense (benefit) may include interest and penalties on tax uncertainties based on the entity's accounting policy. |
BHP Billiton Ltd.'s taxation expense increased from 2009 to 2010 and from 2010 to 2011.
|
Effective Income Tax Rate (EITR)
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BHP Billiton Ltd., effective income tax rate (EITR) reconciliation
Source: Based on data from BHP Billiton Ltd. Annual Reports
| Item |
Description |
The company |
| Taxation expense |
A ratio calculated by dividing the reported amount of income tax expense attributable to continuing operations for the period by GAAP-basis pretax income from continuing operations. |
BHP Billiton Ltd.'s taxation expense declined from 2009 to 2010 and from 2010 to 2011.
|
Deferred Tax Assets (Liabilities), Net
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BHP Billiton Ltd., deferred tax assets (liabilities), net
Source: Based on data from BHP Billiton Ltd. Annual Reports
| Item |
Description |
The company |
| Deferred tax assets |
The aggregate tax effects as of the balance sheet date of all future tax deductions arising from temporary differences between tax basis and generally accepted accounting principles basis recognition of assets, liabilities, revenues and expenses, which can only be deducted for tax purposes when permitted under enacted tax laws; net of deducting the allocated valuation allowance, if any, to reduce such amount to net realizable value. |
BHP Billiton Ltd.'s deferred tax assets increased from 2009 to 2010 but then slightly declined from 2010 to 2011.
|
| Net deferred tax asset and liability |
For entities that net deferred tax assets and tax liabilities, represents the unclassified net amount of deferred tax assets and liabilities as of the balance sheet date, which result from applying the applicable enacted tax rate to net temporary differences and carryforwards pertaining to assets or liabilities. A temporary difference is a difference between the tax basis of an asset or liability and its carrying amount in the financial statements prepared in accordance with generally accepted accounting principles that will reverse in ensuing periods. |
BHP Billiton Ltd.'s net deferred tax asset and liability declined from 2009 to 2010 but then increased from 2010 to 2011 exceeding 2009 level.
|
