Page 234 - Annual Report 2020

1 Principal accounting policies

BHP Group Plc company information Foreign currencies
BHP Group Plc is a public company limited by shares, registered The accounting policy is consistent with the Group’s policy
in England and Wales and with a registered office located at Nova on ‘Foreign currencies’ as set out in section 5.1.
South, 160 Victoria Street, London SW1E 5LB, United Kingdom.
BHP Group Plc has a premium listing on the UK Listing Authority’s Investments in subsidiaries (Group undertakings)
Official List and its ordinary shares are admitted to trading on the Investments in subsidiaries are stated at cost less provisions for
London Stock Exchange in the United Kingdom and have a secondary impairments. Investments in subsidiaries are reviewed for impairment
listing on the Johannesburg Stock Exchange in South Africa. where events or changes in circumstances indicate that the carrying
amount of the investment may not be recoverable.
Basis of preparation
BHP Group Plc meets the definition of a qualifying entity under If any such indication exists, BHP Group Plc makes an assessment
Financial Reporting Standard 100 ‘Application of Financial Reporting of the recoverable amount. If the asset is determined to be impaired,
Requirements’ (FRS 100) as issued by the Financial Reporting Council. an impairment loss will be recorded and the asset written down
based on the amount by which the asset carrying amount exceeds
The BHP Group Plc Parent company Financial Statements are: the higher of fair value less cost of disposal and value in use. An
• unconsolidated Financial Statements of the stand-alone company; impairment loss is recognised immediately in the income statement.
• prepared in accordance with the provisions of the UK Companies Taxation
Act 2006; The accounting policy is consistent with the Group’s policy set out
• presented in accordance with Financial Reporting Standard 101 in note 6 ‘Income tax expense’ in section 5.1.
‘Reduced Disclosure Framework’ (FRS 101);
• prepared on a going concern basis;
• using historical cost principles as modified by the revaluation Key judgements and estimates
of certain financial assets and liabilities in accordance with
the UK Companies Act 2006; Judgements: Judgement is required to determine the
• presented in US dollars, which is the functional currency amount of deferred tax assets that are recognised based
of BHP Group Plc. Amounts are rounded to the nearest million on the likely timing and the level of future taxable profits.
dollars, unless otherwise stated. Estimates: The Group assesses the recoverability
The principal accounting policies applied in the preparation of these of recognised and unrecognised deferred taxes on
Parent company Financial Statements are set out below. These have a consistent basis, using estimates and assumptions
been applied consistently to all periods presented. The following relating to projected cash flows as applied in the
disclosure exemptions have been applied under FRS 101: Group impairment reviews for associated operations.
• paragraphs 45(b) and 46-52 of IFRS 2 ‘Share-based Payment’
(details of number and weighted average exercise price of share
options, and how the fair value of goods or services received Share-based payments
was determined); The accounting policy is consistent with the Group’s policy set out
• the requirements of IFRS 7 ‘Financial Instruments: Disclosures’; in note 24 ‘Employee share ownership plans’ in section 5.1 and is
• paragraphs 91–99 of IFRS 13 ‘Fair Value Measurement’ (disclosure applied with respect to all rights and options granted over BHP
of valuation techniques and inputs used for fair value measurement Group Plc shares, including those granted to employees of other
of assets and liabilities); Group companies. However, the cost of rights and options granted
• paragraph 38 of IAS 1 ‘Presentation of Financial Statements’ is recovered from subsidiaries of the Group where the participants
(comparative financial information in respect of paragraph 79(a)(iv) are employed.
of IAS 1); BHP Group Plc is the Billiton Employee Share Ownership Trust’s
• disclosure of the following requirements of IAS 1 ‘Presentation sponsoring company and so the Parent company Financial
of Financial Statements’: Statements of BHP Group Plc represent the combined Financial
– 10(d) – A statement of cash flows for the period; Statements of BHP Group Plc and the Trust.
– 16 – A statement that the Financial Statements are in compliance Disclosures related to the share-based payment plans are in note 24
with all IFRSs; ‘Employee share ownership plans’ in section 5.1, including a
– 38A – Requirement for a minimum of two primary statements description of the schemes.
including cash flow statements;
– 38 B-D – Comparative information; Revenue recognition
– 111 – Cash flow statement information; Interest income is recognised on an accruals basis using the effective
interest method. Dividend income is recognised when the right
– 134-136 – Capital management disclosures; to receive payment is established, typically on declaration
• IAS 7 ‘Statement of Cash Flows’; by subsidiaries.
• paragraphs 30 and 31 of IAS 8 ‘Accounting Policies and Changes
in Accounting Estimates and Errors’ (disclosure of information Treasury shares
when an entity has not applied a new IFRS that has been issued The consideration paid for the repurchase of BHP Group Plc shares that
and is not yet effective); are held as treasury shares is recognised as a reduction in shareholders’
• paragraphs 17 and 18A of IAS 24 ‘Related Party Disclosures’ funds and represents a reduction in distributable reserves.
(key management compensation); Pension costs and other post-retirement benefits
• the requirements of IAS 24 ‘Related Party Disclosures’ (disclosure The accounting policy is consistent with the Group’s policy set out in
of related party transactions entered into between two or more note 26 ‘Pension and other post-retirement obligations’ in section 5.1.
members of a group).
Judgements in applying accounting policies and key sources Financial guarantees
of estimation uncertainties Financial guarantees issued by BHP Group Plc are contracts that
require a payment to be made to reimburse the holder for a loss
The preparation of Financial Statements in conformity with FRS 101 it incurs because the specified debtor fails to comply with the terms
requires the use of critical accounting estimates, and requires the of the debt instrument. Financial guarantees are recognised initially
application of judgement in applying BHP Group Plc’s accounting as a liability at fair value less transaction costs as appropriate.
policies. Significant judgements and estimates applied in the Subsequently, the liability is measured at the higher of the amount
preparation of these Parent company Financial Statements have of expected credit losses (ECL) and the amount initially recognised
been identified and disclosed throughout. less cumulative amortisation.

232 BHP Annual Report 2020