Page 178 - Annual Report 2020

Basis of preparation Principles of consolidation
The Group’s Financial Statements as at and for the year ended In preparing the Financial Statements the effects of all intragroup
30 June 2020: balances and transactions have been eliminated.
• are a consolidated general purpose financial report; A list of significant entities in the Group, including subsidiaries, joint
• have been prepared in accordance with the requirements of the: arrangements and associates at year-end is contained in note 29
– Australian Corporations Act 2001; ‘Subsidiaries’, note 30 ‘Investments accounted for using the equity
– UK Companies Act 2006; method’ and note 31 ‘Interests in joint operations’.
• have been prepared in accordance with accounting standards and Subsidiaries: The Financial Statements of the Group include the
interpretations collectively referred to as ‘IFRS’ in this report, which consolidation of BHP Group Limited, BHP Group Plc and their
encompass the: respective subsidiaries, being the entities controlled by the parent
– International Financial Reporting Standards and interpretations entities during the year. Control exists where the Group:
as issued by the International Accounting Standards Board; • is exposed to, or has rights to, variable returns from its involvement
– Australian Accounting Standards, being Australian equivalents with the entity;
to International Financial Reporting Standards and interpretations • has the ability to affect those returns through its power to direct
as issued by the Australian Accounting Standards Board (AASB); the activities of the entity.
– International Financial Reporting Standards and interpretations The ability to approve the operating and capital budget of a subsidiary
adopted by the European Union (EU); and the ability to appoint key management personnel are decisions
• are prepared on a going concern basis; that demonstrate that the Group has the existing rights to direct the
• measure items on the basis of historical cost principles, except relevant activities of a subsidiary. Where the Group’s interest is less
for the following items: than 100 per cent, the interest attributable to outside shareholders
– derivative financial instruments and certain other financial is reflected in non-controlling interests. The Financial Statements of
assets and liabilities, which are carried at fair value; subsidiaries are prepared for the same reporting period as the Group.
– non-current assets or disposal groups that are classified The acquisition method of accounting is used to account for the
as held-for-sale or held-for-distribution, which are measured Group’s business combinations.
at the lower of carrying amount and fair value less costs to sell; Joint arrangements: The Group undertakes a number of business
• include significant accounting policies in the notes to the activities through joint arrangements, which exist when two or more
Financial Statements that summarise the recognition and parties have joint control. Joint arrangements are classified as either
measurement basis used and are relevant to an understanding joint operations or joint ventures, based on the contractual rights
of the Financial Statements; and obligations between the parties to the arrangement:
• include selected financial information of the BHP Group Limited • Joint operations: A joint operation is an arrangement in which the
parent entity in note 36 ‘BHP Group Limited’. Financial Statements Group shares joint control, primarily via contractual arrangements
of the BHP Group Plc parent entity are presented in section 5.2 with other parties. In a joint operation, the Group has rights to the
‘BHP Group Plc’; assets and obligations for the liabilities relating to the arrangement.
• apply a presentation currency of US dollars, consistent with the This includes situations where the parties benefit from the joint
predominant functional currency of the Group’s operations. Amounts activity through a share of the output, rather than by receiving
are rounded to the nearest million dollars, unless otherwise stated, a share of the results of trading. In relation to the Group’s interest
in accordance with ASIC (Rounding in Financial/Directors’ Reports) in a joint operation, the Group recognises: its assets and liabilities,
Instrument 2016/191; including its share of any assets and liabilities held or incurred
• present reclassified comparative information where required jointly; revenue from the sale of its share of the output and its share
for consistency with the current year’s presentation; of any revenue generated from the sale of the output by the joint
• adopt all new and amended standards and interpretations under operation; and its expenses including its share of expenses incurred
IFRS issued by the relevant bodies (listed above), that are mandatory jointly. All such amounts are measured in accordance with the
for application in periods beginning on 1 July 2019; terms of the arrangement, which is usually in proportion to the
• early adopt amendments to IFRS 9/AASB 9 ‘Financial Instruments’ Group’s interest in the joint operation.
(IFRS 9) and IFRS 7/AASB 7 ‘Financial Instruments: Disclosures’ • Joint ventures: A joint venture is a joint arrangement in which
(IFRS 7) in relation to Interest Rate Benchmark Reform; the parties that share joint control have rights to the net assets
• apply accounting policies consistently in all prior years presented of the arrangement. A separate vehicle, not the parties, will have
with the exception of the new standards and amendments adopted the rights to the assets and obligations to the liabilities relating
from 1 July 2019 and 1 July 2018. Refer to note 38 ‘New and to the arrangement. More than an insignificant share of output
amended accounting standards and interpretations’ for the impact from a joint venture is sold to third parties, which indicates the
on the Financial Statements; joint venture is not dependent on the parties to the arrangement
• have not early adopted any other standards and interpretations that for funding, nor do the parties have an obligation for the liabilities
have been issued or amended but are not yet effective. of the arrangement. Joint ventures are accounted for using the
The accounting policies are consistently applied by all entities equity accounting method.
included in the Financial Statements. 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 but less than 50 per cent of the voting rights
of an entity, unless it can be clearly demonstrated that this is not
the case; or
• 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.

176 BHP Annual Report 2020