BP 2010 Annual Report Download - page 192

Notes on financial statements
27. Financial instruments and financial risk factors continued
The group manages liquidity risk associated with derivative contracts, other than derivative hedging instruments, based on the expected maturities of both
derivative assets and liabilities as indicated in Note 34. Management does not currently anticipate any cash flows that could be of a significantly different
amount, or could occur earlier than the expected maturity analysis provided.
The table below shows cash outflows for derivative hedging instruments based upon contractual payment dates. The amounts reflect the maturity
profile of the fair value liability where the instruments will be settled net, and the gross settlement amount where the pay leg of a derivative will be settled
separately from the receive leg, as in the case of cross-currency interest rate swaps hedging non-US dollar finance debt. The swaps are with high
investment-grade counterparties and therefore the settlement day risk exposure is considered to be negligible. Not shown in the table are the gross
settlement amounts for the receive leg of derivatives that are settled separately from the pay leg, which amount to $6,725 million at 31 December 2010
(2009 $7,999 million) to be received on the same day as the related cash outflows.
$ million
2010 2009
Within one year 986 2,826
1 to 2 years 1,682 1,395
2 to 3 years 1,358 1,669
3 to 4 years 1,124 1,349
4 to 5 years 295 1,104
5 to 10 years 947 322
6,392 8,665
The group has issued third-party guarantees, as described above under credit risk. These amounts represent the maximum exposure of the group,
substantially all of which could be called within one year.
28. Other investments
$ million
2010 2009
Current Non-current Non-current
Listed – 953 1,296
Unlisted 1,532 238 271
1,532 1,191 1,567
Other non-current investments comprise equity investments that have no fixed maturity date or coupon rate. These investments are classified as
available-for-sale financial assets and as such are recorded at fair value with the gain or loss arising as a result of changes in fair value recorded directly in
equity. Accumulated fair value changes are recycled to the income statement on disposal, or when the investment is impaired.
The fair value of listed investments has been determined by reference to quoted market bid prices and as such are in level 1 of the fair value
hierarchy. Unlisted investments are stated at cost less accumulated impairment losses and are in level 3 of the fair value hierarchy.
At 31 December 2010, current unlisted investments relate to repurchased gas pre-paid bonds – see Note 35 for further information.
In 2010, no impairment losses were incurred relating to either unlisted investments or other listed investments. In 2009, impairment losses were
incurred of $13 million relating to unlisted investments and nil relating to other listed investments.
BP has pledged listed equity investments with a carrying value of $948 million as part of a financing arrangement. As BP has retained substantially
all the risks and rewards associated with the shares they continue to be reflected as an asset on the balance sheet, with a liability being reflected within
finance debt. BP can request to have the shares returned at any time with 20 days notice, up to the date of maturity (in three tranches, up to December
2013), subject to repayment of the outstanding loan.
29. Inventories
$ million
2010 2009
Crude oil 8,969 6,237
Natural gas 112 105
Refined petroleum and petrochemical products 13,997 12,337
23,078 18,679
Supplies 1,669 1,661
24,747 20,340
Trading inventories 1,471 2,265
26,218 22,605
Cost of inventories expensed in the income statement 216,211 163,772
The inventory valuation at 31 December 2010 is stated net of a provision of $41 million (2009 $46 million) to write inventories down to their net realizable
value. The net movement in the year in respect of inventory net realizable value provisions was $5 million credit (2009 $1,366 million credit).
190 BP Annual Report and Form 20-F 2010