Page 253 - Annual Report 2020

5. Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the audit
and in forming our audit opinions.
Materiality Strategic Report
What we mean The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected
to influence the economic decisions of the users of the financial statements. Materiality provides a basis for
determining the nature and extent of our audit procedures.
Basis of Materiality We determined materiality for the Group to be US$700 million, which is approximately 5% of Group profit before
and determination tax and exceptional items from continuing operations. We believe that profit before tax and exceptional items from
continuing operations provides the most relevant measure to the users to assess the financial performance of the
Group. In 2019, the previous auditor used a materiality threshold of US$650 million, which was approximately 5%
of the three-year average of Group profit before tax and exceptional items from continuing operations. Exceptional
items are defined in Note 3 to the financial statements.
We determined materiality for the Parent Company to be US$95 million, which is 1% of total assets. Total assets is an Governance at BHP
appropriate basis to determine materiality for an investment holding company, and 1% is a typical percentage of total
assets to use to determine materiality. In 2019, the previous auditor used a materiality of US$113 million, which was
1% of total assets.
During the course of our audit, we reassessed initial materiality and considered it to still be appropriate based
on the final profit before tax and exceptional items from continuing operations.

Performance Materiality
What we mean The application of materiality at the individual account or balance level. It is set at an amount to reduce to
an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements
exceeds materiality. Remuneration Report
Determination On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, our
of Performance judgement was that performance materiality was 75% of our planning materiality, namely US$525 million. In assessing
Materiality the appropriate level, we consider the nature, the number and impact of the audit differences identified by the
previous auditor.
Allocation of The level of materiality that we applied in undertaking our audit work at each location was determined by applying
Performance a percentage of our total performance materiality. This percentage is based on the significance of the location relative
Materiality to BHP as a whole and our assessment of the risk of material misstatement at that location. The locations selected,
to in-scope together with the ranges of materiality applied, were:
locations
Commodity/ Performance Directors’ Report
Location Function Country Scope materiality (US$M)
WAIO Iron Ore Australia Full 394
Escondida Copper Chile Full 200
BMA Coal Australia Full 158
Group Functions Treasury Australia Full 394
Marketing (Freight) Marketing Singapore Specific 394
Marketing (Revenue) Marketing Singapore Specific 236 5
Samarco Iron Ore Brazil Specific 263
Olympic Dam Copper Australia Specific 158
Australian JIU Petroleum Australia Specific 158
Gulf of Mexico Petroleum United States Specific 158 Financial Statements

Reporting Threshold
What we mean An amount below which identified misstatements are considered as being clearly trivial.
Level set We agreed with the Risk and Audit Committee that we would report to them all uncorrected audit differences in
excess of US$35 million, which is set at 5% of planning materiality, as well as differences below that threshold that,
in our view, warranted reporting on qualitative grounds. In 2019, the previous auditor reported differences in excess
of US$30 million. Additional information
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above
and in light of other relevant qualitative considerations in forming our opinion. Shareholder information

BHP Annual Report 2020 251