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Notesonnancialstatements
Financial statements
1.Signicantaccountingpoliciescontinued
Revenue
Revenuearisingfromthesaleofgoodsisrecognizedwhenthesignicant
risksandrewardsofownershiphavepassedtothebuyeranditcanbe
reliablymeasured.
Revenueismeasuredatthefairvalueoftheconsiderationreceived
orreceivableandrepresentsamountsreceivableforgoodsprovided
inthenormalcourseofbusiness,netofdiscounts,customsdutiesand
salestaxes.
Revenuesassociatedwiththesaleofoil,naturalgas,naturalgas
liquids,liqueednaturalgas,petroleumandpetrochemicalsproductsandall
otheritemsarerecognizedwhenthetitlepassestothecustomer.Physical
exchangesarereportednet,asaresalesandpurchasesmadewitha
commoncounterparty,aspartofanarrangementsimilartoaphysical
exchange.Similarly,wherethegroupactsasagentonbehalfofathird
partytoprocureormarketenergycommodities,anyassociatedfeeincome
isrecognizedbutnopurchaseorsaleisrecorded.Additionally,where
forwardsaleandpurchasecontractsforoil,naturalgasorpowerhavebeen
determinedtobefortradingpurposes,theassociatedsalesandpurchases
arereportednetwithinsalesandotheroperatingrevenueswhetherornot
physicaldeliveryhasoccurred.
Generally,revenuesfromtheproductionofoilandnaturalgas
propertiesinwhichthegrouphasaninterestwithjointventurepartnersare
recognizedonthebasisofthegroup’sworkinginterestinthoseproperties
(theentitlementmethod).Differencesbetweentheproductionsoldandthe
group’sshareofproductionarenotsignicant.
Interestincomeisrecognizedastheinterestaccrues(usingthe
effectiveinterestratethatistheratethatexactlydiscountsestimated
futurecashreceiptsthroughtheexpectedlifeofthenancialinstrumentto
thenetcarryingamountofthenancialasset).
Dividendincomefrominvestmentsisrecognizedwhenthe
shareholders’righttoreceivethepaymentisestablished.
Research
Researchcostsareexpensedasincurred.
Finance costs
Financecostsdirectlyattributabletotheacquisition,constructionor
productionofqualifyingassets,whichareassetsthatnecessarilytakea
substantialperiodoftimetogetreadyfortheirintendeduse,areaddedto
thecostofthoseassets,untilsuchtimeastheassetsaresubstantially
readyfortheirintendeduse.Allothernancecostsarerecognizedinthe
incomestatementintheperiodinwhichtheyareincurred.
Use of estimates
Thepreparationofnancialstatementsrequiresmanagementtomake
estimatesandassumptionsthataffectthereportedamountsofassets
andliabilitiesaswellasthedisclosureofcontingentassetsandliabilitiesat
thebalancesheetdateandthereportedamountsofrevenuesand
expensesduringthereportingperiod.Actualoutcomescoulddifferfrom
thoseestimates.
Impact of new International Financial Reporting Standards
Adopted for 2010
ThefollowingrevisedoramendedIFRSswereadoptedbythegroupwith
effectfrom1January2010.
InJanuary2008,theIASBissuedarevisedversionofIFRS3
‘BusinessCombinations’.Therevisedstandardstillrequiresthepurchase
methodofaccountingtobeappliedtobusinesscombinationsbut
introducessomechangestotheaccountingtreatment.Forexample,
contingentconsiderationismeasuredatfairvalueatthedateofacquisition
andsubsequentlyremeasuredtofairvaluewithchangesrecognizedin
protorloss.Goodwillmaybecalculatedbasedontheparent’sshareof
netassetsoritmayincludegoodwillrelatedtotheminorityinterest.All
transactioncostsareexpensed.Assetsandliabilitiesarisingfrombusiness
combinationsthatoccurredbefore1January2010werenotrequiredtobe
restatedandthus,onadoptiontherewasnoeffectonthegroup’sreported
incomeornetassets.
InJanuary2008,theIASBissuedarevisedversionofIAS27
‘ConsolidatedandSeparateFinancialStatements’,whichrequiresthe
effectsofalltransactionswithminorityintereststoberecordedinequityif
thereisnochangeincontrol.Whencontrolislost,anyremaininginterestin
theentityisremeasuredtofairvalueandagainorlossrecognizedinprot
orloss.Therewasnoeffectonthegroup’sreportedincomeornetassets
onadoption.
Inaddition,severalotherstandardsandinterpretationswere
adoptedintheyearwhichhadnosignicantimpactonthenancial
statements.
Not yet adopted
ThefollowingpronouncementsfromtheIASBwillbecomeeffective
forfuturenancialreportingperiodsandhavenotyetbeenadoptedby
thegroup.
AspartoftheIASB’sprojecttoreplaceIAS39‘Financial
Instruments:RecognitionandMeasurement’,inNovember2009,theIASB
issuedtherstphaseofIFRS9‘FinancialInstruments’,dealingwiththe
classicationandmeasurementofnancialassets.InOctober2010,the
IASBupdatedIFRS9byincorporatingtherequirementsfortheaccounting
fornancialliabilities.Thenewstandardiseffectiveforannualperiods
beginningonorafter1January2013withtransitionalarrangements
dependinguponthedateofinitialapplication.BPhasnotyetdecidedthe
dateofinitialapplicationforthegroupandhasnotyetcompletedits
evaluationoftheeffectofadoption.Thenewstandardhasnotyetbeen
adoptedbytheEU.
Therearenootherstandardsandinterpretationsinissuebutnotyet
adoptedthatthedirectorsanticipatewillhaveamaterialeffectonthe
reportedincomeornetassetsofthegroup.
BPAnnualReportandForm20-F2010 157