Page 179 - Annual Report 2020

Foreign currencies
Transactions related to the Group’s worldwide operations are On consolidation, the assets, liabilities, income and expenses of
conducted in a number of foreign currencies. The majority of the non-US dollar denominated functional currency entities are translated
subsidiaries, joint arrangements and associates within each of the into US dollars using the following applicable exchange rates: Strategic Report
operations have assessed US dollars as the functional currency,
however, some subsidiaries, joint arrangements and associates Foreign currency amount Applicable exchange rate
have functional currencies other than US dollars. Income and expenses Date of underlying transaction
Transactions and monetary items denominated in foreign currencies Assets and liabilities Period-end rate
are translated into US dollars as follows:
Equity Historical rate
Foreign currency item Applicable exchange rate Reserves Historical rate
Transactions Date of underlying transaction Foreign exchange differences resulting from translation are initially
Monetary assets and liabilities Period-end rate recognised in the foreign currency translation reserve and
subsequently transferred to the income statement on disposal
Foreign exchange gains and losses resulting from translation are of a foreign operation. Governance at BHP
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).

Critical accounting policies, judgements Reserve estimates
and estimates Reserves are estimates of the amount of product that can be
The Group has identified a number of critical accounting demonstrated to be able to be economically and legally extracted
policies under which significant judgements, estimates from the Group’s properties. In order to estimate reserves, Remuneration Report
and assumptions are made. All judgements, estimates assumptions are required about a range of technical and economic
and assumptions are based on most current facts and factors, including quantities, qualities, production techniques,
circumstances and are reassessed on an ongoing basis. recovery efficiency, production and transport costs, commodity
Actual results may differ for these estimates under different supply and demand, commodity prices and exchange rates.
assumptions and conditions. This may materially affect Estimating the quantity and/or quality of reserves requires the size,
financial results and the carrying amount of assets and shape and depth of ore bodies or oil and gas reservoirs to be
liabilities to be reported in the next and future periods. determined by analysing geological data, such as drilling samples
Significant judgements and key estimates and assumptions and geophysical survey interpretations. Economic assumptions
made in applying these critical accounting policies are used to estimate reserves change from period to period as
embedded within the following notes: additional technical and operational data is generated. This Directors’ Report
process may require complex and difficult geological judgements
Note to interpret the data.
4 Significant events – Samarco dam failure Additional information on the Group’s mineral and oil and gas
reserves and resources can be viewed within section 6.4.
6 Taxation
Section 6.4 is unaudited and does not form part of these
10 Inventories Financial Statements.
11 Exploration and evaluation Reserve impact on financial reporting 5
Estimates of reserves may change from period-to-period
11 Development expenditure as the economic assumptions used to estimate reserves change
11 Overburden removal costs and additional geological data is generated during the course of
operations. Changes in reserves may affect the Group’s financial
11 Depreciation of property, plant and equipment results and financial position in a number of ways, including:
11 and 12 Impairments of non-current assets – • asset carrying values may be affected due to changes Financial Statements
recoverable amount in estimated future production levels;
• depreciation, depletion and amortisation charged in the income
14 Closure and rehabilitation provisions
statement may change where such charges are determined on
20 Leases the units of production basis, or where the useful economic lives
30 Impairments of investments accounted of assets change;
for using the equity method • overburden removal costs recorded on the balance sheet or
charged to the income statement may change due to changes
in stripping ratios or the units of production basis of depreciation;
• closure and rehabilitation provisions may change where changes Additional information
in estimated reserves affect expectations about the timing or
cost of these activities;
• the carrying amount of deferred tax assets may change due to
changes in estimates of the likely recovery of the tax benefits.

Impact of COVID-19 pandemic
The Group continues to actively monitor the impact of the COVID-19 made by the Group, including those relating to assessing
pandemic, including the impact on economic activity and financial collectability of receivables and determining the recoverable values
reporting. During FY2020, the Group experienced lower volumes of the Group’s non-current assets as outlined in notes 8 ‘Trade and
at certain operated assets, temporary shutdowns at non-operated other receivables’ and 11 ‘Property, plant and equipment’, respectively. Shareholder information
equity accounted investments (Antamina and Cerrejón) and incurred The ongoing uncertainty has also been considered in the Group’s
incremental directly attributable costs including those associated assessment of the appropriateness of adopting the going concern
with the increased provision of health and hygiene services and basis of preparation of the Consolidated Financial Statements. The
the impacts of maintaining social distancing requirements. These Group’s financial forecasts, including downside commodity price and
incremental costs have been classified as an exceptional item, production scenarios that include the potential impact of COVID-19,
as outlined in note 3 ‘Exceptional items’. demonstrate that the Group believes that it has sufficient financial
As the pandemic continues to progress and evolve, it is difficult resources to meet its obligations as they fall due throughout the
to predict the full extent and duration of resulting operational and going concern period. As such, the Consolidated Financial
economic impacts for the Group, which are expected to impact a Statements continue to be prepared on the going concern basis.
number of reporting periods. This uncertainty impacts judgements

BHP Annual Report 2020 177