Page 250 - Annual Report 2020

Closure and Rehabilitation Provisions
• Closure and Rehabilitation Provisions: US$8.8 billion (2019: US$7.0 billion)
• Expenses excluding net finance costs: US$0.7 billion (2019: US$0.3 billion)
Why significant How our audit addressed the key audit matter
Refer to Note 14 ‘Closure and rehabilitation provisions’ The primary audit procedures we performed, amongst others, included
The Group has rehabilitation obligations to restore and the following:
rehabilitate land, offshore and environmental disturbances • We evaluated the design of and tested the operating effectiveness of internal
created by its operations and related sites. controls related to the Group’s Closure and Rehabilitation provision estimates.
These obligations arise from regulatory and legislative • Our procedures involved evaluation of the Group’s legal and regulatory
obligations for Closure and Rehabilitation, life of operation, future
requirements across multiple jurisdictions in addition rehabilitation costs, discount rates and timing of future cashflows.
to policies and processes set by the Group. • We tested the mathematical accuracy of the Closure and Rehabilitation
The evaluation of Closure and Rehabilitation provisions provision calculations.
was a key audit matter due to the highly complex and • With the assistance of our subject matter specialists we evaluated a sample
judgemental nature of the estimates representing key of closure and rehabilitation provisions for operating and closed sites within
inputs to the provision, such as: the Group. Our audit procedures included:
• Life of the operation or site; – Evaluation of the Closure and Rehabilitation plan with regard to applicable
• Estimated cost of future closure and rehabilitation regulatory and legislative requirements;
activities; – Evaluation of the methodology used by mine closure engineers against
• Timing of the activities; industry practice and our understanding of the business; and
• Discount rates; and – Assessment of the reasonableness of the timing of cash flows and cost
• Regulatory and legislative requirements. estimates against the Closure and Rehabilitation plan and industry practice.
As a result of these inputs closure and rehabilitation • The Group has used internal and external experts to support the estimation
provisions have a high degree of estimation uncertainty of the mine rehabilitation provisions. With the assistance of our subject
with a wide potential range of reasonable outcomes. matter specialists, we assessed the qualifications, competence and
objectivity of the internal and external experts and that the information
provided by the Group’s internal and external experts has been appropriately
reflected in the calculation of the Closure and Rehabilitation provisions.
• We assessed the discount rates adopted to calculate the Closure and
Rehabilitation provisions, including benchmarking to comparable market
data (risk-free rates).
• With the assistance of our climate change and subject matter specialists,
we evaluated how the Group’s response to climate change had been
reflected in Closure and Rehabilitation provision estimates.
The Group engagement team and our component teams in Australia, Chile
and USA performed audit procedures which covered 91% of the Closure and
Rehabilitation provision.
Key observations communicated to the Risk and Audit Committee
• We reported that we have evaluated the rationale for the material changes in the Closure and Rehabilitation Provisions and that we were
satisfied this reflected new information for the year ended 30 June 2020.
• We reported that we considered the decrease in the closure and rehabilitation discount rates as at 30 June 2020 to be appropriate.
• We are satisfied with how management have reflected the impact of climate change in their estimates and with the climate change
disclosure in the financial statements.
The previous auditor included key audit matters in respect of the Samarco dam failure, the impairment of non-current assets, closure and
rehabilitation provisions and taxation for the year ended 30 June 2019. As would be expected in the case of any audit, key audit matters will
inevitably differ from year to year as significant events, transactions and judgements differ. Taxation is no longer a key audit matter due to the
settlement with relevant taxation authorities in 2019 of significant uncertain tax positions.

248 BHP Annual Report 2020