BP 2007 Annual Report Download - page 110

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1 Significant accounting policies continued
Impact of new International Financial Reporting Standards
Adopted for 2007
The following new IFRS, amendment to IFRS and IFRIC interpretations have been adopted by the group with effect from 1 January 2007.
IFRS 7 ‘Financial Instruments: Disclosures’ was issued in August 2005 and replaced the disclosure requirements previously contained in IAS 32
‘Financial Instruments: Presentation and Disclosure’. The group has disclosed in its annual report additional information about its financial instruments,
their significance and the nature and extent of risks to which they give rise. More specifically, the group has also made specified disclosures about
market risk, credit risk and liquidity risk. There was no effect on the group’s reported income or net assets as a result of adoption of this new
standard.
Also in August 2005, the IASB issued Amendment to IAS 1 ‘Presentation of Financial Statements’ – Capital Disclosures, which requires disclosures
of an entity’s objectives, policies and processes for managing capital, quantitative data about what the entity regards as capital, whether the entity has
complied with any capital requirements, and the consequences of any non-compliance. The group has included the required disclosures in its annual
report. There was no effect on the group’s reported income or net assets as a result of adoption of this amendment.
In addition, in 2007 BP has adopted IFRIC 10 ‘Interim Financial Reporting and Impairment’ and early adopted IFRIC 11 ‘IFRS 2 – Group and Treasury
Share Transactions’. There were no changes in the group’s accounting policies and no restatement of financial information consequent upon adoption
of these interpretations.
Not yet adopted
The following pronouncements from the IASB will become effective for future financial reporting periods and have not yet been adopted by the group.
IFRS 8 ‘Operating Segments’ was issued in October 2006 and defines operating segments as components of an entity about which separate
financial information is available and is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing
performance. The new standard sets out the required disclosures for operating segments and is effective for annual periods beginning on or after
1 January 2009. BP has not yet completed its evaluation of the impact on its disclosures of adopting IFRS 8. There will be no effect on the group’s
reported income or net assets. IFRS 8 has been adopted by the EU.
In September 2007, the IASB issued Amendments to IAS 1 ‘Presentation of Financial Statements’ – A Revised Presentation, which requires
separate presentation of owner and non-owner changes in equity by introducing the statement of comprehensive income. The statement of
recognized income and expense will no longer be presented. Whenever there is a restatement or reclassification, an additional balance sheet, as at
the beginning of the earliest period presented, will be required to be published. The revised standard is effective for annual periods beginning on or
after 1 January 2009. There will be no effect on the group’s reported income or net assets. IAS 1 revised has not yet been adopted by the EU.
An amendment to IAS 23 ‘Borrowing Costs’ was issued by the IASB in March 2007 and eliminates the option of recognizing borrowing costs
immediately as an expense if they are directly attributable to the acquisition, construction or production of a qualifying asset. The amended standard is
effective for annual periods beginning on or after 1 January 2009. There will be no effect on the group’s reported income or net assets. This
amendment has not yet been adopted by the EU.
In January 2008, the IASB issued a revised version of IFRS 3 ‘Business Combinations’. The revised standard still requires the purchase method of
accounting to be applied to business combinations but will introduce some changes to existing accounting treatment. For example, contingent
consideration should be measured at fair value at the date of acquisition and subsequently remeasured to fair value with changes recognized in profit
or loss. Goodwill may be calculated based on the parent’s share of net assets or it may include goodwill related to the minority interest. All transaction
costs will be expensed. The standard is applicable to business combinations occurring in accounting periods beginning on or after 1 July 2009. Assets
and liabilities arising from business combinations occurring before the date of adoption by the group will not be restated and thus there will be no
effect on the group’s reported income or net assets on adoption. The revised standard has not yet been adopted by the EU.
Also in January 2008, the IASB issued an amended version of IAS 27 ‘Consolidated and Separate Financial Statements’. This requires the effects of
all transactions with non-controlling interests to be recorded in equity if there is no change in control. Such transactions will no longer result in goodwill
or gains or losses. When control is lost, any remaining interest in the entity is remeasured to fair value and a gain or loss recognized in profit or loss.
The amendments are effective for annual periods beginning on or after 1 July 2009 and are to be applied retrospectively, with certain exceptions. BP
has not yet completed its evaluation of the effect of adopting this amendment. The revised standard has not yet been adopted by the EU.
An amendment to IFRS 2 ‘Share-based Payment’ was issued in January 2008, clarifying that only service conditions and performance conditions are
vesting conditions, and other features of a share-based payment are not vesting conditions. In addition, it specifies that all cancellations, whetherby
the entity or by other parties, should receive the same accounting treatment. The amendment is effective for annual periods beginning on or after
1 January 2009 and has not yet been adopted by the EU. BP has not yet completed its evaluation of the effect of adopting this amendment.
In February 2008, the IASB issued Amendments to IAS 32 ‘Financial Instruments: Presentation’ and IAS 1 ‘Presentation of Financial Statements’ –
Puttable Financial Instruments and Obligations Arising on Liquidation. The amended standards require entities to classify as equity certain financial
instruments provided certain criteria are met. The instruments to be classified as equity are puttable financial instruments and those instruments that
impose an obligation on the entity to deliver to another party a pro rata share of the net assets of the entity only on liquidation. The amendments are
effective for annual periods beginning on or after 1 January 2009 and have not yet been adopted by the EU. BP has not yet completed its evaluation of
the effect of adopting these amendments.
Three IFRIC interpretations have been issued but are not yet effective and have not yet been adopted by the EU.
IFRIC 12 ‘Service Concession Arrangements’ gives guidance on the accounting by operators for public-to-private service concession arrangements.
The directors do not anticipate that the adoption of this interpretation will have a material effect on the reported income or net assets of the group. We
plan to adopt this interpretation with effect from 1 January 2008.
IFRIC 13 ‘Customer Loyalty Programmes’ addresses the accounting by entities that grant loyalty award credits (e.g. ‘points’ or travel miles) to
customers who buy other goods or services. The directors do not anticipate that the adoption of this interpretation will have a material effect on the
reported income or net assets of the group. We plan to adopt this interpretation with effect from 1 January 2009.
IFRIC 14 ‘IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements, and their Interaction’ provides clarification regarding how
to determine whether a surplus may be recognized on the balance sheet in relation to a retirement benefit plan. The directors do not anticipate that
the adoption of this interpretation will have a material effect on the reported income or net assets of the group. We plan to adopt this interpretation
with effect from 1 January 2008.