BP 2010 Annual Report Download - page 154
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Please find page 154 of the 2010 BP annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.Notesonnancialstatements
1.Signicantaccountingpoliciescontinued
Exploration and appraisal expenditure
Geologicalandgeophysicalexplorationcostsarechargedagainstincomeas
incurred.Costsdirectlyassociatedwithanexplorationwellareinitially
capitalizedasanintangibleassetuntilthedrillingofthewelliscomplete
andtheresultshavebeenevaluated.Thesecostsincludeemployee
remuneration,materialsandfuelused,rigcostsandpaymentsmadeto
contractors.Ifpotentiallycommercialquantitiesofhydrocarbonsarenot
found,theexplorationwelliswrittenoffasadryhole.Ifhydrocarbonsare
foundand,subjecttofurtherappraisalactivity,arelikelytobecapableof
commercialdevelopment,thecostscontinuetobecarriedasanasset.
Costsdirectlyassociatedwithappraisalactivity,undertakento
determinethesize,characteristicsandcommercialpotentialofareservoir
followingtheinitialdiscoveryofhydrocarbons,includingthecostsof
appraisalwellswherehydrocarbonswerenotfound,areinitiallycapitalized
asanintangibleasset.
Allsuchcarriedcostsaresubjecttotechnical,commercialand
managementreviewatleastonceayeartoconrmthecontinuedintentto
developorotherwiseextractvaluefromthediscovery.Whenthisisno
longerthecase,thecostsarewrittenoff.Whenprovedreservesofoiland
naturalgasaredeterminedanddevelopmentisapprovedbymanagement,
therelevantexpenditureistransferredtoproperty,plantandequipment.
Development expenditure
Expenditureontheconstruction,installationandcompletionof
infrastructurefacilitiessuchasplatforms,pipelinesandthedrillingof
developmentwells,includingserviceandunsuccessfuldevelopmentor
delineationwells,iscapitalizedwithinproperty,plantandequipmentandis
depreciatedfromthecommencementofproductionasdescribedbelowin
theaccountingpolicyforproperty,plantandequipment.
Property, plant and equipment
Property,plantandequipmentisstatedatcost,lessaccumulated
depreciationandaccumulatedimpairmentlosses.
Theinitialcostofanassetcomprisesitspurchasepriceor
constructioncost,anycostsdirectlyattributabletobringingtheassetinto
operation,theinitialestimateofanydecommissioningobligation,ifany,
and,forqualifyingassets,borrowingcosts.Thepurchasepriceor
constructioncostistheaggregateamountpaidandthefairvalueofany
otherconsiderationgiventoacquiretheasset.Thecapitalizedvalueofa
nanceleaseisalsoincludedwithinproperty,plantandequipment.
Exchangesofassetsaremeasuredatfairvalueunlesstheexchange
transactionlackscommercialsubstanceorthefairvalueofneitherthe
assetreceivednortheassetgivenupisreliablymeasurable.Thecostofthe
acquiredassetismeasuredatthefairvalueoftheassetgivenup,unless
thefairvalueoftheassetreceivedismoreclearlyevident.Wherefairvalue
isnotused,thecostoftheacquiredassetismeasuredatthecarrying
amountoftheassetgivenup.Thegainorlossonderecognitionofthe
assetgivenupisrecognizedinprotorloss.
Expenditureonmajormaintenanceretsorrepairscomprisesthe
costofreplacementassetsorpartsofassets,inspectioncostsand
overhaulcosts.Whereanassetorpartofanassetthatwasseparately
depreciatedisreplacedanditisprobablethatfutureeconomicbenets
associatedwiththeitemwillowtothegroup,theexpenditureis
capitalizedandthecarryingamountofthereplacedassetisderecognized.
Inspectioncostsassociatedwithmajormaintenanceprogrammesare
capitalizedandamortizedovertheperiodtothenextinspection.Overhaul
costsformajormaintenanceprogrammes,andallothermaintenancecosts
areexpensedasincurred.
Oilandnaturalgasproperties,includingrelatedpipelines,are
depreciatedusingaunit-of-productionmethod.Thecostofproducingwells
isamortizedoverproveddevelopedreserves.Licenceacquisition,common
facilitiesandfuturedecommissioningcostsareamortizedovertotalproved
reserves.Theunit-of-productionratefortheamortizationofcommon
facilitiescoststakesintoaccountexpendituresincurredtodate,together
withthefuturecapitalexpenditureexpectedtobeincurredinrelationto
thesecommonfacilitiesandexcludingfuturedrillingcosts.
Otherproperty,plantandequipmentisdepreciatedonastraightlinebasis
overitsexpectedusefullife.Theusefullivesofthegroup’sotherproperty,
plantandequipmentareasfollows:
Landimprovements 15to25years
Buildings 20to50years
Reneries 20to30years
Petrochemicals 20to30years
Pipelines 10to50years
Servicestations 15years
Ofceequipment 3to7years
Fixturesandttings 5to15years
Theexpectedusefullivesofproperty,plantandequipmentarereviewedon
anannualbasisand,ifnecessary,changesinusefullivesareaccountedfor
prospectively.
Thecarryingvalueofproperty,plantandequipmentisreviewedfor
impairmentwhenevereventsorchangesincircumstancesindicatethe
carryingvaluemaynotberecoverable.
Anitemofproperty,plantandequipmentisderecognizedupon
disposalorwhennofutureeconomicbenetsareexpectedtoarisefrom
thecontinueduseoftheasset.Anygainorlossarisingonderecognitionof
theasset(calculatedasthedifferencebetweenthenetdisposalproceeds
andthecarryingamountoftheitem)isincludedintheincomestatementin
theperiodinwhichtheitemisderecognized.
Impairment of intangible assets and property, plant and equipment
Thegroupassessesassetsorgroupsofassetsforimpairmentwhenever
eventsorchangesincircumstancesindicatethatthecarryingvalueofan
assetmaynotberecoverable,forexample,lowpricesormarginsforan
extendedperiodor,foroilandgasassets,signicantdownwardrevisions
ofestimatedvolumesorincreasesinestimatedfuturedevelopment
expenditure.Ifanysuchindicationofimpairmentexists,thegroupmakes
anestimateoftheasset’srecoverableamount.Individualassetsare
groupedforimpairmentassessmentpurposesatthelowestlevelatwhich
thereareidentiablecashowsthatarelargelyindependentofthecash
owsofothergroupsofassets.Anassetgroup’srecoverableamountis
thehigherofitsfairvaluelesscoststosellanditsvalueinuse.Wherethe
carryingamountofanassetgroupexceedsitsrecoverableamount,the
assetgroupisconsideredimpairedandiswrittendowntoitsrecoverable
amount.Inassessingvalueinuse,theestimatedfuturecashowsare
adjustedfortherisksspecictotheassetgroupandarediscountedtotheir
presentvalueusingapre-taxdiscountratethatreectscurrentmarket
assessmentsofthetimevalueofmoney.
Anassessmentismadeateachreportingdateastowhetherthere
isanyindicationthatpreviouslyrecognizedimpairmentlossesmayno
longerexistormayhavedecreased.Ifsuchindicationexists,the
recoverableamountisestimated.Apreviouslyrecognizedimpairmentloss
isreversedonlyiftherehasbeenachangeintheestimatesusedto
determinetheasset’srecoverableamountsincethelastimpairmentloss
wasrecognized.Ifthatisthecase,thecarryingamountoftheassetis
increasedtoitsrecoverableamount.Thatincreasedamountcannotexceed
thecarryingamountthatwouldhavebeendetermined,netofdepreciation,
hadnoimpairmentlossbeenrecognizedfortheassetinprioryears.Such
reversalisrecognizedinprotorloss.Aftersuchareversal,the
depreciationchargeisadjustedinfutureperiodstoallocatetheasset’s
revisedcarryingamount,lessanyresidualvalue,onasystematicbasisover
itsremainingusefullife.
152BPAnnualReportandForm20-F2010