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11.Impairmentreviewofgoodwillcontinued
Thekeyassumptionsrequiredforthevalue-in-useestimationaretheoilandnaturalgasprices,productionvolumesandthediscountrate.Totestthe
sensitivityoftheheadroomtochangesinproductionvolumesandoilandnaturalgasprices,managementhasdeveloped‘rulesofthumb’forkey
assumptions.Applyingthesegivesanindicationoftheimpactontheheadroomofpossiblechangesinthekeyassumptions.Duetothenon-linear
relationshipofdifferentvariables,thecalculationsweredoneusinganumberofsimpliedassumptions,thereforeadetailedcalculationatanygivenprice
mayproduceadifferentresult.
Itwasestimatedthatiftheoilpriceassumptionfor2016andbeyondwasaround20%lowerfortheUKandUS,andaroundone-thirdlowerfor
RestofWorld,thiswouldcausetherecoverableamounttobeequaltothecarryingamountofgoodwillandrelatednon-currentassetsforeach
cash-generatingunit.Itwasestimatedthatnoreasonablypossiblechangeinthelong-termpriceofgaswouldcausetheheadroomintheUK,USorRest
ofWorldtobereducedtozero.
Estimatedproductionvolumesarebasedondetaileddatafortheeldsandtakeintoaccountdevelopmentplansfortheeldsagreedby
managementaspartofthelong-termplanningprocess.In2010,itwasestimatedthat,ifallourproductionweretobereducedby10%forthewholeof
thenext15years,thiswouldnotbesufcienttoreducetheexcessofrecoverableamountoverthecarryingamountsofeachcash-generatingunittozero.
Consequently,managementbelievesnoreasonablypossiblechangeintheproductionassumptionwouldcausethecarryingamountstoexceedthe
recoverableamounts.
ManagementalsobelievesthatcurrentlythereisnoreasonablypossiblechangeindiscountratethatwouldcausethecarryingamountsintheUK,
USorRestofWorldtoexceedtherecoverableamounts.
Rening and Marketing
$million
2010 2009
Rhine FVC Lubricants Other Total RhineFVC Lubricants Other Total
Goodwill 629 3,285 160 4,074 655 3,416 174 4,245
Excessofrecoverableamountover
carryingamount 4,091 n/a n/a n/a 2,034 n/a n/a n/a
Cashowsforeachcash-generatingunitarederivedfromthebusinesssegmentplan.Todeterminethevalueinuseforeachofthecash-generatingunits,
cashowsforaperiodof10yearsarediscountedandaggregatedwithaterminalvalue.
RhineFVC
ThekeyassumptionstowhichthecalculationofvalueinusefortheRhineFVCismostsensitivearerenerygrossmargins,productionvolumes,and
discountrate.In2010themethodusedtocalculatethemarginperbarrelpresentedhasbeenupdatedandcomparativegurespresentedhavealsobeen
updated.Therevisedmarginmeasure,theregionalReneryMarkerMargin(RMM),isbasedonasinglerepresentativecrudewithproductyields
characteristicofthetypicallevelofupgradingcomplexityavailableintheregion.GrossmarginassumptionsusedintheRhineFVCplanareconsistentwith
thoseusedtodeveloptheregionalRMM.TheaveragevaluesassignedtotheregionalRMMandreneryproductionvolumeovertheplanperiodare
$11.05perbarreland248mmbblayear(2009$10.60perbarreland254mmbblayear).Thesevaluesreectpastexperienceandareconsistentwith
externalsources.Cashowsbeyondtheve-yearplanperiodareextrapolatedusinganominal4%growthrate(2009cashowsbeyondtheve-yearplan
periodwereextrapolatedusinganominal2.4%growthrate).
2010
Sensitivityanalysis
Sensitivityofvalueinusetoachangeinrenerymarginsof$1perbarrel($billion) 1.6
Adversechangeinrenerymarginstoreducerecoverableamounttocarryingamount($perbarrel) 2.6
Sensitivityofvalueinusetoa5%changeinproductionvolume($billion) 0.9
Adversechangeinproductionvolumetoreducerecoverableamounttocarryingamount(mmbblperyear) 54
Sensitivityofvalueinusetoachangeinthediscountrateof1%($billion) 0.8
Discountratetoreducerecoverableamounttocarryingamount 19%
Lubricants
AspermittedbyIAS36,thedetailedcalculationsofrecoverableamountperformedin2009wereusedforthe2010impairmenttestasthecriteriainthat
standardwereconsideredtobesatised:theheadroomwassubstantialin2009;therehadbeennosignicantchangeintheassetsandliabilities;andthe
likelihoodthattherecoverableamountwouldbelessthanthecarryingamountatthetimeofthetestwasremote.
ThekeyassumptionstowhichthecalculationofvalueinusefortheLubricantsunitismostsensitiveareoperatingunitmargins,sales
volumes,anddiscountrate.Thevaluesassignedtothesekeyassumptionsreectpastexperience.Noreasonablypossiblechangeinanyofthesekey
assumptionswouldcausetheunit’scarryingamounttoexceeditsrecoverableamount.Cashowsbeyondthetwo-yearplanperiodwereextrapolated
usinganominal3%growthrate.
USWestCoastFVC
AsdisclosedinNote5,theimpairmentreviewofgoodwillallocatedtotheUSWestCoastFVCresultedintherecognitionofanimpairmentlossin2009to
writeofftheentirebalanceof$1,579million.
174BPAnnualReportandForm20-F2010