With the increasing taxation complexity and compliance framework of the company for preparing the financial statement has been becoming complex throughout the time. In this report, BHP Billiton Company has been selected to prepare this report. This company is having it’s headquarter in Melbourne, Australia and indulged in operating the iron, Silver, steel and copper busienss around the globe.

The cash flow statement is the statement which reflects the inflow and outflow in the present year irrespective of the fact that whether it belongs to the current year or not. The cash flow statement is accompanied with the three main activities such as operating activities’, investing activities and financial activities (Wang, Butterfield, and Campbell, 2016).

The cash inflow from the operating activities has been dominated by the dividend received amount. There are several expenses have been recorded in the operating activities such as interest, net taxation, and other operating items. The dividend received of the BHP Billion has been US $ 636 million in financial year 207 which is 18% higher as compared to last year data. The financial activities shows the reduction in its cash flow due to the decrease in its dividend payment to US $ 4130 in 2017 (Ladas, Negkakis, and Samara, 2017).

US$ IN MILLION	2016-17	2015-16	2014-15
Net cash provided or used by operating activities	16,804	10,625	19,296
Net cash provided or used in investing activities	(4,161)	(7,245)	(13,154)
Net cash provided or used in financing activities	(9,133)	284	(8,276)

Source: BHP Billiton Company, 2018).

It is analyzed that net cash flow from operating activities is  US$ 16804 million in financial year 2017 which is 12% higher as compared to last year data (Sözbilir, Kula, and Baykut, 2015).

The outflow off investing activities has shown 18% increment due to its investment in the research and development department.

The financial activities cash inflow has been increased due to downfall in the dividend payment and increased share capital inflow.

BHP Billiton Company has increased its cash outflow due to the reduction in its interest payment also redeemed its debt portion (Gao, Givoly, and Laux, 2015). 

There has been increased in its cash flow to US$ 3510 million and US$ 3664 million in financial year 2017 and 2016 respectively (Johnston, and Kutcher, 2015).

This table reflects the recording of the items in the comprehensive income statement.

US$ in million	2016-2017	2015-16	2014-15
Profit/(Loss) for the period from both continuing and discontinuing operations	6,222	(6,207)	2,878
Other comprehensive income
Items that may be reclassified to profit or loss (net of tax)	(59)	60	(91)
Items that will not be reclassified to profit or loss (net of tax)	10	(37)	(45)
Other comprehensive income (net of tax)	(49)	23	(136)
Total comprehensive income/(loss) for the period	6,173	(6,184)	2,742
Total comprehensive income/(loss) attributable to:
Equity holders of the parent entity	332	176	973
Non-controlling interests	5,841	(6,360)	1,769
TOTAL	6,173	(6,184)	2,742

Source: BHP Billiton Company, 2018).

As per the IFRS reporting standards certain items are recorded in the Comprehensive Income Statement.

Comprehensive Income Statement records two specific categories. One first is related to subsequent reclassification to income statement and those items which cannot be classified into other income statement (Morris, 2017).

The first account includes transaction of the foreign exchange gain, increased loss and other items which have direct and indirect items on the profit (Kim, 2017).

The second account includes non-controlling interest of the investors and shareholders details and their investment (Okenwa, Francis, and Abiahu, 2017). These items cannot be reclassified in the books of account.

It is analyzed that recording of the business transactions in the books of account of coapny is done by using the proper accounting standards and rules. As per the IFRS rules proper recording of the data and presentation of the data should be done by following separate accounting standards each and every items recording in the books of account should be done by following proper IFRS rules and standards (Gao, Givoly, and Laux, 2015).

Tax is the legal obligation of Company which they need to pay on their profit. The total tax payment of BHP Billiton is US $ 4100 million.

US$ IN MILLION	2016-17	2015-16
Total taxation expense/(benefit) comprises:
Current tax expense	4288	2456
Deferred tax (benefit)/expense	(188)	(3508)
	4100	(1052)
Income tax paid	2084	1645

Source: BHP Billiton Company, 2018).

The figure of tax expense shown in the profit and loss account is computed by following the tax rate charged on the taxable income as per the AASB 112 (Rubinstein, & Vettori, 2018).

Accounting income multiplied by BHP Billiton’s effective tax rate is done by using the accounting income computed as per the accounting rules.

US$ IN MILLION	2016-17	2015-16
Income tax expense differs to the standard rate of corporation tax as follows:
Profit/(loss) before taxation	10322	(7259)
Tax on profit/(loss) at Australian prima facie tax rate of 30 per cent	3097	(2178)
Tax on remitted and unremitted foreign earnings	478	(376)
Non-tax effected operating losses and capital gains	259	671
Amounts under/(over) provided in prior years	199	(28)
Foreign exchange adjustments	88	125
Tax rate changes	25	14
Investment and development allowance	(53)	(36)
Tax effect of profit/(loss) from equity accounted investments, related impairments and expenses	(82)	631
Recognition of previously unrecognised tax assets	(106)	(36)
Impact of tax rates applicable outside of Australia	(189)	(620)
Other	217	536
Income tax expense/(benefit)	3933	(1297)
Royalty-related taxation (net of income tax benefit)	167	245
Total taxation expense/(benefit)	4100	(1052)

Source: BHP Billiton Company. 2018).

The main reason of differences between the both tax amounts is recording of the items in the financial statement.

The recording of bad debts, provision for the doubtful debts and other accounts are differently recorded as per the accounting and taxation rules

The deferred tax assets is the amount of assets arise due to the excess payment of tax by company (Sansing, 2018).

The balance of deferred tax assets in both the financial year 2017 and 2016 have being US$ 5788 million and US$ 6147 million respectively (Watson, 2018).

The deferred tax arises when the tax payment as per the taxation rule and regulation is more than the tax payment liabilities as per the accounting rules and regulation.

US$ IN MILLION	2016-17	2015-16
Current tax asset	195	567
Income tax expense/(benefit)	4100	(1052)

Source: BHP Billiton Company. 2018).

The current tax assets are the amount of tax overpaid or paid in advance by Company (BHP Billiton Company. 2018).

An income tax expense is the amount charged on the profit and loss account. It is related to the current year and deducted from the profit and loss with a view to identify the true and fair view of assets.

The income tax shown in the profit and loss account is not same with the income tax paid

Reason

The income tax paid is the total amount of tax payment made by company irrespective of the fact that whether it relates to this year or not.

The income tax expenses are the current legal liability of company which is deducted from the profit and loss (Chen, et al. 2018).

Interesting

Taxation rules and regulation consistently changes with the changes in economic factor

Difficult

It is hard to follow accounting and income tax rules at the same time.

Confusing

It is very confusing to determine the right amount of tax which company needs to pay.

Surprising

We cannot record the deferred tax assets and deferred tax libiliteis in the books of account at the same time (De Franco, Kothari, and Verdi, 2011).

Conclusion

The cash flow statement is the statement which reflects the inflow and outflow in the present year irrespective of the fact that whether it belongs to the current year or not. The recording of the tax is done by company by following the income tax rules and AASB 112.

References

BHP Billiton Company. (2018). Annual report. Available at https://www.bhp.com/media-and-insights/reports-and-presentations?q0_r=category%3DAnnual%2BReports., Accessed on 222^nd May 2018

Chen, C.W., Collins, D.W., Kravet, T.D. and Mergenthaler, R.D., 2018. Financial statement comparability and the efficiency of acquisition decisions. Contemporary Accounting Research, 35(1), pp.164-202.

De Franco, G., Kothari, S.P. and Verdi, R.S., 2011. The benefits of financial statement comparability. Journal of Accounting Research, 49(4), pp.895-931.

Gao, Z., Givoly, D. and Laux, R., 2015. Assessing the Relation between Taxes and Stock Returns: The Critical Role of Choosing the Tax Variable.

Johnston, D. and Kutcher, L., 2015. Do stock-based compensation deferred tax assets provide incremental information about future tax payments?. The Journal of the American Taxation Association, 38(1), pp.79-102.

Kim, J.H., 2017. What Really Determines the Information Content of Tax Expense and Deferred Tax?. ?????, 42(2), pp.1-44.

Ladas, A.C., Negkakis, C.I. and Samara, A.D., 2017. Accounting quality deferred tax and risk in the banking industry. International Journal of Banking, Accounting and Finance, 8(1), pp.1-19.

Miller, G.S. and Skinner, D.J., 2012. Determinants of the valuation allowance for deferred tax assets under SFAS No. 109. Accounting Review, pp.213-233.

Morris, J.L., 2017. Classification of Deferred Tax Assets and Deferred Tax Liabilities: An Evaluation of FASB's Attempt at Standards Simplication. Journal of Accounting and Finance, 17(8), pp.198-208.

Okenwa, O.C., Francis, E. and Abiahu, M.F., 2017. Assessment of Deferred Tax Recognition and Measurement under IFRS and Nigeria-SAS: An Empirical Examination.

Oxner, K.M., Oxner, T.H. and Phillips, A.D., 2018. Impact of the Tax Cuts and Jobs Act on Accounting for Deferred Income Taxes. Journal of Corporate Accounting & Finance, 29(2), pp.12-21.

Rubinstein, F., & Vettori, G. G. (2018). Taxation of Investments in Bitcoins and Other Virtual Currencies: International Trends and the Brazilian Approach.

Sansing, R., 2018. Valuing the deferred tax liability. Journal of Accounting Research, 36(2), pp.357-363.

Sözbilir, H., Kula, V. and Baykut, L.E., 2015. A Research on Deferred Taxes: A Case Study of BIST Listed Banks in Turkey. European Journal of Business and Management, 7(2), pp.1-10.

Wang, Y., Butterfield, S. and Campbell, M., 2016. Deferred tax items as earnings management indicators. International Management Review, 12(2), p.37.

Watson, L., 2018. The Deferred Tax Asset Valuation Allowance and Firm Creditworthiness. The Journal of the American Taxation Association, 40(1), pp.81-85.