BP 2010 Annual Report Download - page 158

Notesonnancialstatements
1.Signicantaccountingpoliciescontinued
Cash-settled transactions
Thecostofcash-settledtransactionsismeasuredatfairvalueand
recognizedasanexpenseoverthevestingperiod,withacorresponding
liabilityrecognizedonthebalancesheet.
Pensions and other post-retirement benets
Thecostofprovidingbenetsunderthedenedbenetplansis
determinedseparatelyforeachplanusingtheprojectedunitcreditmethod,
whichattributesentitlementtobenetstothecurrentperiod(todetermine
currentservicecost)andtothecurrentandpriorperiods(todeterminethe
presentvalueofthedenedbenetobligation).Pastservicecostsare
recognizedimmediatelywhenthecompanybecomescommittedtoa
changeinpensionplandesign.Whenasettlement(eliminatingall
obligationsforbenetsalreadyaccrued)oracurtailment(reducingfuture
obligationsasaresultofamaterialreductionintheschememembershipor
areductioninfutureentitlement)occurs,theobligationandrelatedplan
assetsareremeasuredusingcurrentactuarialassumptionsandthe
resultantgainorlossisrecognizedintheincomestatementduringthe
periodinwhichthesettlementorcurtailmentoccurs.
Theinterestelementofthedenedbenetcostrepresentsthe
changeinpresentvalueofschemeobligationsresultingfromthepassage
oftime,andisdeterminedbyapplyingthediscountratetotheopening
presentvalueofthebenetobligation,takingintoaccountmaterialchanges
intheobligationduringtheyear.Theexpectedreturnonplanassetsis
basedonanassessmentmadeatthebeginningoftheyearoflong-term
marketreturnsonplanassets,adjustedfortheeffectonthefairvalueof
planassetsofcontributionsreceivedandbenetspaidduringtheyear.
Thedifferencebetweentheexpectedreturnonplanassetsandthe
interestcostisrecognizedintheincomestatementasothernance
incomeorexpense.
Actuarialgainsandlossesarerecognizedinfullwithinother
comprehensiveincomeintheyearinwhichtheyoccur.
Thedenedbenetpensionplansurplusordecitinthebalance
sheetcomprisesthetotalforeachplanofthepresentvalueofthedened
benetobligation(usingadiscountratebasedonhighqualitycorporate
bonds),lessthefairvalueofplanassetsoutofwhichtheobligationsareto
besettleddirectly.Fairvalueisbasedonmarketpriceinformationand,in
thecaseofquotedsecurities,isthepublishedbidprice.
Contributionstodenedcontributionschemesarerecognizedinthe
incomestatementintheperiodinwhichtheybecomepayable.
Corporate taxes
Incometaxexpenserepresentsthesumofthetaxcurrentlypayableand
deferredtax.Interestandpenaltiesrelatingtotaxarealsoincludedin
incometaxexpense.
Thetaxcurrentlypayableisbasedonthetaxableprotsforthe
period.Taxableprotdiffersfromnetprotasreportedintheincome
statementbecauseitexcludesitemsofincomeorexpensethataretaxable
ordeductibleinotherperiodsanditfurtherexcludesitemsthatarenever
taxableordeductible.Thegroup’sliabilityforcurrenttaxiscalculatedusing
taxratesthathavebeenenactedorsubstantivelyenactedbythebalance
sheetdate.
Deferredtaxisprovided,usingtheliabilitymethod,onalltemporary
differencesatthebalancesheetdatebetweenthetaxbasesofassetsand
liabilitiesandtheircarryingamountsfornancialreportingpurposes.
Deferredtaxliabilitiesarerecognizedforalltaxabletemporary
differences:
• Exceptwherethedeferredtaxliabilityarisesongoodwillthatisnottax
deductibleortheinitialrecognitionofanassetorliabilityina
transactionthatisnotabusinesscombinationand,atthetimeof
thetransaction,affectsneithertheaccountingprotnortaxableprot
orloss.
• Inrespectoftaxabletemporarydifferencesassociatedwith
investmentsinsubsidiaries,jointlycontrolledentitiesandassociates,
exceptwherethegroupisabletocontrolthetimingofthereversalof
thetemporarydifferencesanditisprobablethatthetemporary
differenceswillnotreverseintheforeseeablefuture.
Deferredtaxassetsarerecognizedforalldeductibletemporarydifferences,
carry-forwardofunusedtaxcreditsandunusedtaxlosses,totheextent
thatitisprobablethattaxableprotwillbeavailableagainstwhichthe
deductibletemporarydifferencesandthecarry-forwardofunusedtax
creditsandunusedtaxlossescanbeutilized:
• Exceptwherethedeferredincometaxassetrelatingtothedeductible
temporarydifferencearisesfromtheinitialrecognitionofanassetor
liabilityinatransactionthatisnotabusinesscombinationand,atthe
timeofthetransaction,affectsneithertheaccountingprotnor
taxableprotorloss.
• Inrespectofdeductibletemporarydifferencesassociatedwith
investmentsinsubsidiaries,jointlycontrolledentitiesandassociates,
deferredtaxassetsarerecognizedonlytotheextentthatitisprobable
thatthetemporarydifferenceswillreverseintheforeseeablefuture
andtaxableprotwillbeavailableagainstwhichthetemporary
differencescanbeutilized.
Thecarryingamountofdeferredtaxassetsisreviewedateachbalance
sheetdateandreducedtotheextentthatitisnolongerprobablethat
sufcienttaxableprotwillbeavailabletoallowallorpartofthedeferred
incometaxassettobeutilized.
Deferredtaxassetsandliabilitiesaremeasuredatthetaxratesthat
areexpectedtoapplytotheyearwhentheassetisrealizedortheliabilityis
settled,basedontaxrates(andtaxlaws)thathavebeenenactedor
substantivelyenactedatthebalancesheetdate.
Taxrelatingtoitemsrecognizedinothercomprehensiveincome
isrecognizedinothercomprehensiveincomeandtaxrelatingtoitems
recognizedinequityisrecognizeddirectlyinequityandnotinthe
incomestatement.
Customs duties and sales taxes
Revenues,expensesandassetsarerecognizednetoftheamountof
customsdutiesorsalestaxexcept:
• Wherethecustomsdutyorsalestaxincurredonapurchaseofgoods
andservicesisnotrecoverablefromthetaxationauthority,inwhich
casethecustomsdutyorsalestaxisrecognizedaspartofthecostof
acquisitionoftheassetoraspartoftheexpenseitemasapplicable.
• Receivablesandpayablesarestatedwiththeamountofcustomsduty
orsalestaxincluded.
Thenetamountofsalestaxrecoverablefrom,orpayableto,thetaxation
authorityisincludedaspartofreceivablesorpayablesinthebalancesheet.
Own equity instruments
Thegroup’sholdingsinitsownequityinstruments,includingordinary
sharesheldbyEmployeeShareOwnershipPlans(ESOPs),areclassiedas
‘treasuryshares’,or‘ownshares’fortheESOPs,andareshownas
deductionsfromshareholders’equityatcost.Considerationreceivedfor
thesaleofsuchsharesisalsorecognizedinequity,withanydifference
betweentheproceedsfromsaleandtheoriginalcostbeingtakentothe
protandlossaccountreserve.Nogainorlossisrecognizedintheincome
statementonthepurchase,sale,issueorcancellationofequityshares.
156BPAnnualReportandForm20-F2010